Retirement decisions can be confusing and complicated.
Many people make too many mistakes when it comes to decisions that can affect their important retirement period. Listed below are 7 retirement mistakes, possibly you can avoid them.
- Searching for jobs later in life:
Many people forgo proper retirement planning thinking they’ll be able to offset retirement money shortages by picking up a part-time or even full-time job later in life. Don’t count on this. Employers tend to hire younger people. It’s much more difficult to land even a mediocre job at an older age.
Ageism is real. Plus, technology and business trends change so fast your skills qualifications may not match new job skills the job market demands.
- Not saving enough money
We live in the biggest consumer culture in the world, and most of us overspend on the latest products and services. Americans lag behind the global average of total money saved for retirement, with the average American only having $60,000 in savings for retirement. Americans average only save 7.5% of annual income.
This is not enough to retire comfortably. You must understand the recommended saving percentages to have enough funds to retire comfortably.
- Health expense risks
Few account for potential healthcare costs that may occur in the future. Health costs continue to escalate drastically. Not setting enough money aside for sudden healthcare emergencies could cause financial strain, even financial disaster.
- Not understanding life expectancy
68% of Americans live longer than life expectancy tables report. A 65-year-old woman can be statically calculated to live to age 86. A male about age 82.
It’s vital to understand accurate life expectancy rates to plan for your retirement needs properly.
Remember: the longer you live, the longer you live.
- Not understanding risk
A younger person can expose themselves to more financial risk such as stock investments because they have plenty of time to recover should they lose money.
As you grow older, your risk tolerance should be less. It’s become important to reallocate funds to safe financial products.
About 1 in 3 investors approaching retirement age have 80% of their funds in the wrong assets, according to a recent study by the U.S. Investing Index.
- Premature use of qualified money
An estimated 45% of workplace retirement plan participants withdraw their 401 (k) funds when they switch jobs rather than rolling them over into a self-directed IRAs.
This can cause unforeseen tax consequences and fees that could hurt growing important retirement funds.
- Not understanding annuities
There are many different types of annuities. Some are better at a younger age; some are better for people approaching retirement.
Stockbrokers often demonize annuities because they make their living selling you stocks. Don’t let them turn you into a cynic. Annuities are the only available financial product that can provide income for any period of time, even for life. It’s essential to understand the different types of annuities and which ones could fit your retirement goals.
Many people become overwhelmed by retirement planning and therefore procrastinate, putting together a plan. It’s not as hard as you may think because there are professionals to assist you in developing a sound plan.