Saving for retirement throughout your working life is extremely important. Every person does it a little differently, depending on income, hobbies, family situations, and more. Without proper savings, you will likely feel restricted or unprepared during your life after work. Client 1st Financial is here to help you avoid these common mistakes in retirement planning, no matter how you save.
Account for Increased Cost of Living
With inevitable inflation, the cost of living continues to rise; this won’t stop when you retire. Food, rent, entertainment, travel costs, and more will be affected by heightened prices and be more expensive by the time you turn 65. Saving more than what you think you need, even if it’s just a little, will help cover the difference.
Don’t Overestimate Medicare
Medicare will likely not cover all of your healthcare costs, so you should be accounting for paying this difference. Depending on your health, you may live for a couple of decades or more after you retire, which means tens of years of this extra expense. Third-party insurance plans are always available as a supplement to medicare, so if you’re interested in that, account for it when you’re saving.
Long-term care is another health-related factor that you must account for the cost of. You will probably have sticker shock when you or a loved one require long-term care; the average yearly cost for assisted living in Pennsylvania is $49,200 per year, and prices increase for varying amenities and private rooms.
Remember Company Matches
Sign up and maximize your 401(k) contributions with your employer if your company offers matches. Not taking advantage of an employer match program would be a huge oversight; it’s essentially free money and can make a huge difference in your total saved for retirement, years down the line.
Prioritize Debt Before Retirement
It’s important to attempt to pay off debt before you retire or dedicate extra savings to paying it off. No one wants to worry about a huge credit card balance or a home equity loan payment in retirement, especially if most of your money is already delegated to living costs.
Remember Your Family Members
While you’re saving, remember that you might need to support your loved ones throughout your retirement. Maybe your child is starting their first year of college the year after you retire. If you plan to support them through their education, this cost must be accounted for. The same stands for parents and siblings who may need assistance with medical expenses. There is absolutely nothing wrong with reserving some of your retirement funds for those loved ones who need your help, but it’s important first to understand how much you are saving and if that amount will account for your costs first.
Save For Your Free Time
Failing to plan how you will fill your free time will make your retirement a lot tougher. You’ve probably dreamed up what you want to do during retirement — if you want to go visit your distant relatives in Italy, get a new degree, or take on a new hobby, that’s great! Those things will become possible if you start saving for those extra costs now. Budget for anything that’s important to you that goes beyond the basic costs of living.
This might seem like a lot to account for, and that’s okay. Client 1st Financial is here to help you start saving for retirement and build a watertight plan so that, when you retire, you can feel confident in what you’ve prepared. If you read through this list and thought, “maybe I haven’t been saving for retirement in the right way,” that’s okay, too. There is always time to recover from these sorts of mistakes and build a strong retirement plan. Client 1st is ready to lend a hand no matter what stage you're at — contact us here.