3 Deadly Sins of Retirement Planning

Filed under Common Mistakes, Elderly, Estate Planning, Estate Planning Blog, Healthcare, Retirement, Taxes | By

Retirement planning is one of life’s most important financial goals. Indeed, funding retirement is one of the primary reasons many people put money aside in the first place. Yet many of us put more effort into planning for our vacations than we do to prepare for a time when we may no longer earn an income.

Whether you’ve put off planning for retirement altogether or failed to create a truly comprehensive plan, you’re putting yourself at risk for a future of poverty, penny pinching, and dependence. The stakes could hardly be higher.

When preparing for your final years, it’s not enough to simply hope for the best. You should treat retirement planning as if your life depended on it—because it does. To this end, even well-thought-out plans can contain fatal flaws you might not be aware of until it’s too late.

Have you committed any of the following three deadly sins of retirement planning?

1. Not having an actual plan
Even if you’ve been diligent about saving for retirement, without a detailed, goal-oriented plan, you’ll have no clear idea whether your savings strategies are working adequately or not. And such plans aren’t just about calculating a retirement savings number, funding your 401(k), and then setting things on auto-pilot.

Once you know how much you’ll need for retirement, you must plan for exactly how you’ll accumulate that money and monitor your success. The plan should include clear-cut methods for increasing income, reducing spending, maximizing tax savings, and managing investments when and where needed.

What’s more, you should regularly review and update your asset allocation, investment performance, and savings goals to ensure you’re still on track to hit your target figure. With each new decade of your life (at least), you should adjust your savings strategies to match the specific needs of your new income level and age.

Failing to plan, as they say, is planning to fail.

2. Not maximizing the use of tax-saving retirement accounts
One way or another, the money you put aside for retirement is going to be taxed. However, by investing in tax-saving retirement accounts, you can significantly reduce the amount of taxes you’ll pay.

Depending on your employment and financial situation, there are numerous different plans available. From traditional IRAs and 401(k)s to Roth IRAs and SEP Plans, you should consider using one or more of these investment vehicles to ensure you achieve the most tax savings possible.

What’s more, many employers will match your contributions to these accounts, which is basically free money. If your employer offers matching funds, you should not only use these accounts, but contribute the maximum amount allowed—and begin doing so as early as possible.

Since figuring out which of these plans will offer the most tax savings can be tricky—and because tax laws are constantly changing—you should consult with a professional financial advisor to find the one(s) best suited for your particular situation. Paying taxes is unavoidable, but there’s no reason you should pay any more than you absolutely must.

3. Underestimating health-care costs
It’s an inescapable fact that our health naturally declines with age, so one of the riskiest things you can do is not plan for increased health-care expenses.

With many employers eliminating retiree health-care coverage, Medicare premiums rising, and the extremely volatile nature of health insurance law, planning for your future health-care expenses is critical. And it’s even more important seeing that we’re now living longer than ever before.

Plus, these considerations are assuming that you don’t fall victim to a catastrophic illness or accident. The natural aging process is expensive enough to manage, but a serious health-care emergency can wipe out even the most financially well off.

Start preparing for retirement now
The best way to maximize your retirement funding is to start planning (and saving) as soon as possible. In fact, your retirement savings can be exponentially increased simply by starting to plan at an early age.

Let us know if we can help. We’ll be glad to review what you have in place now, advise you about what you need, introduce you to advisors you can trust, and ensure you and your family are well-protected and planned for, no matter what.

Dedicated to empowering your family, building your wealth and defining your legacy,