A major concern for most people, when it comes to retirement is whether they will have enough savings to be able to enjoy a comfortable retirement. They wonder when to start saving and what retirement planning strategies should be used. Your golden years should be relaxing – not stressful. So, if you need help getting started with your retirement plan, discuss your goals with your estate planning attorney in order to avoid some of the most common mistakes.
Don’t wait too late to start saving for retirement
In order to make sure you have sufficient savings put aside, you need to start now. While it might seem obvious, the sooner you start saving the more you can accumulate for retirement. It is basic math. The longer you can transfer money to an interest-bearing savings account, the more compound interest you can earn by the time you decide to retire.
For example, a 25-year-old who plans to retire at age 65 with $1 million, would need to set aside at least $345 every month for the next 20 years, with investments earning 8% per year over the next 40 years. On the other hand, a 45-year-old with the same retirement goal of $1 million needs to save at $1,698 per month (nearly 5 times as much) for the next 20 years.
Be sure to update your retirement plan
It is important that you review your retirement plan regularly so you can make all necessary modifications as your circumstances change over time. For instance, modifications may be needed to account for significant fluctuations in the market that will affect your investments. Changes may also be necessary if there has been an adjustment in your income or expenses.
Typically, when there are important changes in your family circumstances changes to the terms of your retirement plan are required. For instance, the birth of a new child or grandchild, marriage, divorce, or the death of a spouse or other beneficiary normally require revisions. These events could change how much you have available to save for retirement.
Factor in the potential need for long-term care during retirement
Taking care of an aging parent requires a great amount of time and money. The reality is, if you don’t plan ahead your savings could quickly be exhausted by medical expenses alone. According to some reports, nearly 70% of retired individuals need long term health care at some point during their retirement, if not before. Therefore, it is critical that you consider, not only your long term care options, but also how the need for that care will impact your retirement plan. If you have a retirement plan, you can be certain to have sufficient funds to cover your health care expenses. If you never need long term care, then you will simply have more money to enjoy your retirement.
Plan for a potential increase in health care expenses
Long-term care expenses are not the only thing you must consider. Routine health care expenses can also be an issue, particularly if you fail to consider the fact that those costs will rise by the time you actually retire. While you may not necessarily need a nursing home, you could still require more frequent trips to the doctor as you age. One of the main goals of a retirement plan is to be prepared for handling the increased costs of health care. However, if you fail to take into consideration the potential increased costs when creating your retirement plan, you will likely face financial issues during your retirement.
Keep your retirement goals reasonable
A common concern for most clients is knowing exactly how much income or assets you will need to retire. It is certainly a challenge trying to determine what you will need to maintain your current lifestyle 25 or 30 years in the future. If you don’t get it right, you run the risk of having insufficient financial resources for retirement. Alternatively, if your goal is unreachable because you believe you need much more money than you really do, then you will be discouraged and likely accomplish nothing.
Planning ahead and saving consistently are the best ways to secure a comfortable retirement.