March 8 2019
We all want to have an easy and successful transition into retirement and to do that; it's essential to understand some of the more common mistakes that are often made during this time in a person's life.
Never Underestimate Your Needs
One of the biggest mistakes when planning for your upcoming retirement is underestimating your needs. You want to make sure you will have enough to live on comfortably, and that means replacing a good portion of your pre-retirement income during retirement.
The Mistake of Overestimating
Another mistake is overestimating how long you can continue to work up until your retirement. Sometimes there are more pressing issues that need to be addressed, and these reasons often mean that you can't continue to work for as long as you initially thought you could.
From health problems to taking care of your elderly spouse, several reasons can cause you to have to leave the workforce a bit earlier than you originally planned. For this reason, there should be contingencies in place for your retirement, and this should include some kind of disability insurance.
Making the Wrong Investments
If you have a pension without inflation adjustment, then you may find that the investments you previously made might have been too safe and your return is eaten away with the inflation. For a better and more long-term option, you should consider stocks.
Inflation is known to increase once you enter the retirement phase of your life. You will also find rising medical care costs.
You also can't forget about taxes during retirement either. Just because you are retired, doesn't mean that your tax rate will be lower. Underestimating your tax rate can turn into a much bigger problem in the future.
Making the Wrong Withdrawals
Finally, you need to find a better way to withdraw your retirement earnings. First, draw from the taxable accounts and then use your Individual Retirement Account and 401(k)or the tax-deferred accounts, followed by the non-taxable accounts like your Roth IRA.
As you can see, it is important that you start planning for retirement early so you can avoid some of these prevalent financial mistakes along the way. Having a safe and comfortable retirement is imperative and accomplishing this means educating yourself on the steps that you need to take and analyzing what your needs will be in the future.