What do you dream about when you think of retirement? Travel? Pursuing a new passion? Spending time with family? Retirement is the time to live life on your terms and spend your time doing what you love the most.
Unfortunately, there could be some roadblocks in the way of you turning your dream retirement into reality. Retirement is a major financial goal, and there are a number of planning mistakes that could leave you unprepared to fund your desired lifestyle.
Below are five obstacles to avoid while you prepare for retirement. By avoiding these roadblocks, you can improve your odds of achieving retirement success and living the kind of retirement you’ve always imagined.
Assuming you will pass away at the same age your parents did.
Many retirees assume they won’t live beyond a certain age because their parents or other family members passed away around that age. While life expectancy can be based on family history, it’s also based on a number of other factors. Advances in medicine have helped to extend life expectancies for retirees. It’s not uncommon for today’s retirees to live into their 80s, 90s or beyond.
While retirees are now living longer than ever, many are still continuing to leave the workforce at the traditional retirement age of 65. Some are forced into retirement even earlier because of disability or job loss.
If you retire in your early to mid-60s, there’s a chance you could be retired for 30 years or more. It’s possible your retirement could last longer than the amount of time you’ve actually spent saving.
You can prepare for a long retirement by continuing to grow your money even after you retire and by maximizing your guaranteed income. Consider tools like annuities, which may offer growth potential along with income that’s guaranteed to last for life.
Not budgeting for inflation.
It’s easy to overlook inflation during the planning process, but it’s too important to ignore. Inflation is the gradual, incremental increase in the price of goods and services from year to year. While inflation may not be noticeable in the short term, it can be corrosive to your spending power in the long term.
Inflation is usually modest, but even a modest level of annual inflation can have a big impact, especially if it’s compounded over a long period of time. You can plan for inflation by factoring it into your budget and developing a strategy that generates increasing retirement income.
Assuming Medicare covers all your health care costs.
Medicare is a valuable resource for retirees because it covers a broad range of medical expenses. It doesn’t cover everything, though. In fact, it only covers a portion of most services, and there are other services and treatments that aren’t covered at all.
Be sure to remember that you will likely face substantial out-of-pocket health care costs as you get older. You may have to pay for things like deductibles, premiums, copays and much more. Develop a funding strategy, perhaps one that includes a health savings account (HSA) or a supplemental Medicare policy.
Not maximizing your guaranteed* income.
Most retirees will have some source of guaranteed income in the form of Social Security. You may even be fortunate enough to have an employer pension. However, it’s very possible that your Social Security and pension benefits may not be enough to fund your lifestyle. In that case, you may have to fund any gaps with distributions from your savings, which may not be guaranteed for life.
However, you can use tools to increase your level of guaranteed lifetime income. Annuities offer a variety of ways in which you can convert a portion of your savings into a guaranteed income stream. Some may even offer growth potential and limited downside risk.
Failing to plan.
Nearly all of these roadblocks and more can be identified and avoided with solid planning. Take time to think about your ideal retirement, and then document the expenses that may come with your desired lifestyle. Also, map out your projected income and develop a strategy to overcome any potential savings gap. A detailed, comprehensive plan can help you stay on track.
Ready to overcome your retirement obstacles? Contact us today at Grand Canyon Planning Associates. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.