Editor’s Note: “Dollars and Sense” is a new column in the Quail Creek Crossing dedicated to financial issues. This column is designed to provide accurate and authoritative information on the subject of personal finances. The publisher shall not be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential or other damages. As each individual situation is unique, questions relevant to personal finances and specific to the individual should be addressed to an appropriate professional to ensure that the situation has been carefully and appropriately evaluated. Robson Publishing, a division of Robson Communities Inc., is not liable for information contained in these articles.
In your life, you will want to take many journeys. Some are physical; perhaps you’ll finally visit the French Riviera or the Caribbean. Others involve personal growth; one day, you’ll finally become fluent in that foreign language you’ve been studying. But of all the destinations you can identify, few will be as important as retirement – specifically, a comfortable retirement. And that’s why it’s so important to consider the roadblocks you might encounter on your road to the retirement lifestyle you’ve envisioned. If you’re interested in alternative investments for retirement savings then have a look into Self-directed IRA sites like questira.
Many people don’t take into account the many, many factors that go into retirement. Do they want to move? Are they going the be downsizing? Will they have enough money to redecorate, install outdoor home security cameras for extra protection, go on trips, etc?
There are multiple mistakes that people can make but here are five of the most common obstacles:
Very few of us have ever reported investing too much for their retirement. But a great many people regret that they saved and invested too little. Don’t make that mistake. Contribute as much as you can afford to your 401(k) or other employer-sponsored retirement plan and increase your contributions whenever your salary goes up. Even if you do participate in your retirement plan at work, you may also still be eligible to fund an IRA, so take advantage of that opportunity, too. And always look for other ways to cut expenses and direct this found money toward your retirement. You may be able to find some low income retirement homes that are very attractive for your needs, as one example.
Underestimating Your Longevity
You can’t predict how long you’ll live, but you can make some reasonable guesses and you might be surprised at your prospects. According to the Social Security Administration, men reaching age 65 today can expect to live, on average, until age 84.3, while women turning age 65 today can anticipate living, on average, until age 86.6. That’s a lot of years – and you’ll need to plan for them when you create long-term saving, investing and spending strategies. You could always take a look at something like this equity release blog to give you a better idea of what else is out there to help you when you go into retirement.
Not Establishing a Suitable Withdrawal Rate
Once you are retired you will likely need to start withdrawing money from your 401(k), IRA and other retirement accounts. It’s essential that you don’t withdraw too much each year; obviously, you don’t want to run the risk of outliving your resources. That’s why you need to establish an annual withdrawal rate that’s appropriate for your situation, incorporating variables such as your age, the value of your retirement accounts, your estimated lifestyle expenses and so on. Calculating such a withdrawal rate can be challenging so you may want to consult with a professional financial advisor.
Taking Social Security at the Wrong Time
You can start taking Social Security as early as age 62, but your checks will be bigger if you wait until your full retirement age which will probably be 66 or 67, or when your payments max out at 70. You might not be able to afford to wait until then, but by postponing the date you begin taking withdrawals, you could help yourself considerably.
It’s been low in recent years, but inflation hasn’t disappeared and it could rise at exactly the wrong time – when you’re retired. That’s why you’ll want your portfolio to include some investments with the potential to outpace inflation, even during your retirement years.
By being aware of these roadblocks and taking steps to overcome them you can help smooth your journey toward retirement and once you get there, you may enjoy it more.
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.