For some, the thought of retirement is stressful. Clients often question whether they will have enough savings or income to be able to retire comfortably. Many wonder when they actually need to start saving and what is the best way to accumulate savings for retirement. While these concerns are reasonable, they should never be intimidating. Your estate planning attorney or financial advisor can help you with your retirement planning to make sure you reach your goals. When you begin the planning process you should be familiar with these five common mistakes clients often make in retirement planning.
Mistake No. 1. Establishing unreasonable retirement goals
It is not uncommon for clients to be unclear about how much income or savings they will ultimately need when they retire, especially when the goal is maintaining their current lifestyle 20 or 30 years down the line. In some cases, clients do not plan for sufficient financial resources in the future, which will result in financial issues later on. In others, clients believe they need much more money than they actually do, so their retirement goals become nearly impossible to reach.
Mistake No. 2. Overlooking the potential for higher health care costs
A primary concern in retirement planning is being able to handle the cost of health care at a time when the need for health care will likely increase. The reality is that seniors generally need more health care, and this factor needs to be a consideration in your retirement planning. The problem comes when clients overlook the likelihood that health care costs will increase over time. If you do not account for that increase as part of your plan, then you may still face financial problems during retirement.
According to some predictions, a 65-year-old couple retiring now will face nearly $300,000 in health care costs alone. What will those numbers look like in 20 or 30 years? Do not make the mistake of assuming that Medicare or Medicaid will be sufficient to cover your medical expenses when you retire. You need to be proactive and plan ahead as best you can.
Mistake No. 3. Disregarding the need for long-term care
It is no secret that the time and expense required to care for an aging parent can be substantial. Medical costs alone can exhaust all of your savings if you are not careful and fail to plan ahead. Some statistics show that nearly 70% of retired individuals will require some long-term health care. For this reason, it is important to consider possible long-term care options and make that a part of your retirement plan in order to be sure you have sufficient funds to cover the costs.
Mistake No. 4. Not setting aside sufficient savings
One of the reasons it is important to start your retirement planning as soon as possible is that the sooner you start saving, the more likely you are to have sufficient financial resources for retirement. The sooner you open your savings account and start making regular deposits, the more compound interest you can ultimately earn. For example, a 25-year-old with a retirement goal of $1 million at age 65 would need to save about $345 per month for 20 years, with investments earning 8% per year over 40 years. Now, a 45-year-old with the same retirement goal would need to save $1,698 per month for the next 20 years. The benefits of starting early are obvious.
Mistake No. 5. Forgetting to update your retirement plan
Just like with your estate plan, it is important to periodically review your retirement plan and make any necessary revisions. You may need to make adjustments to your plan to address changes in the market that will affect your investments. You may also need to modify your plan when there is a change in your income or expenses that will affect your overall plan. In addition, significant changes in your family dynamic may warrant modifications, such as the birth of a child or grandchild, divorce or the death of a spouse.
Retirement options available in Nevada
The attorneys at Anderson, Dorn & Rader, Ltd. are here to review retirement plans with you and explain the advantages and disadvantages of the available options. Basic retirement planning services that may be examined include:
- Preparing a financial plan and conducting financial modeling for various retirement scenarios
- Preparing customized beneficiary designations for IRAs and 401Ks
- Incorporating retirement planning goals into your estate plan
- Considering the tax and financial impact of early withdrawals from retirement plans
- Pension plans
One aspect of retirement planning also includes choosing who the beneficiaries of your retirement assets will be. These decisions may have significant tax consequences. Retirement planning and estate planning are best accomplished simultaneously.
Learn more from a free report! If you have questions regarding retirement planning, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.