Happy senior couple cuddling and smiling

11 Retirement Planning Mistakes You Don’t Want to Make

Suppose you are hoping to be able to afford senior assisted living someday. In that case, you’ll want to know how to save up for retirement. Unfortunately, many retirement planning mistakes can significantly hinder your efforts. The more knowledge you’re armed with beforehand, the more money you can save for the best retirement, including senior assisted living.

Here are some of the most important things to keep in mind as you near retirement age.

1. No Plan for Retirement

Not even beginning the process of planning your retirement is a big mistake that people make. First, think about how you want your future to look Ė how much money will you be able to put aside? Next, search for a plan that will help take you there.

Some employers offer 401Ks and pensions, with the latter becoming rarer, however. An IRA account is also an option for those without employer sponsorship. An IRA can provide higher returns as well as better diversification compared to a traditional deposit account. Therefore, an IRA is a good choice for growing a nest egg of wealth.

2. No Plan for How Much to Save for Retirement

Suppose you’re nearing retirement. In that case, you should take your current salary, total up your expenses (including medical costs during retirement), and set up a meeting with a financial planner. They will help you calculate the amount of money you’ll need to survive and thrive during retirement.

However, if you’re still decades away from retiring, then come up with a savings rate now. Then, start putting away some money from your paycheck every month and into your retirement account.

 

3. Not Saving the Money You Earn From Pay Increases

Retirement savings rate refers to how much money you deduct from your paycheck every month for your retirement. For instance, suppose you deducted $400 every month for your $28,800 annual salary. In that case, your retirement savings rate would be 16%.

Always improve your rate whenever your salary increases – put in 100% of the gains towards your retirement. After all, you already know that you can live on your current salary.

4. Assigning Incorrect Beneficiary Designations

If/when you pass away, you don’t want to leave behind any financial burdens for your family. Avoid these problems by ensuring that your beneficiaries and those listed in your will all understand everything. This way, there will be no struggle over how to divide up your assets.

5. Not Checking the Performance of Your Retirement Account

Just sitting back and not checking in on your retirement plan probably isn’t a great idea. You should know how well your investments did over the past year or even over the past 5 years. Unless you’re already nearing retirement age, long-term performance should be a guide for what to invest your money into.

6. Just Relying on Social Security

Social security can indeed provide some financial security, but most people won’t be able to rely on it alone. According to the Social Security Administration, social security only funds about 39% of a retired person’s income. So, retiring with only Social Security can be risky, and there can be hidden costs as well.

Senior couple with financial advisor sitting at table going over expenses

 

7. Thinking That You’ll Never Retire

You may be a workaholic now and can’t imagine life without your 9 to 5 job. However, it’s more likely than not that your ability to keep pace with the future job market will start to wane at some point. So, don’t neglect your savings even if you think that you can work until your 90s.

8. Thinking That You’ll Want to Keep Working After Retirement

Even if you have the time to work full or part-time after retirement, you may come to realize that this isn’t realistic for you. For example, you could start experiencing health problems or desire a change in direction for your life. That might include traveling or spending more time with your grandchildren.

The best thing you can do is create a decent nest egg right now. That way, if you decide that you don’t want to work during your retirement, you won’t be left destitute as a result.

9. Thinking That You’ll Never Work Again After Retirement

On the flip side, you should not assume that you will not work at all during retirement. Plenty of retirees end up doing part-time or even full-time jobs to add to their retirement income. This also has the benefit of helping them stay more active in their older age.

If you think you may get bored during retirement or predict that you might have a difficult time handling the bills, then you should remain open to the possibility of working. There are actually many decent part-time jobs for seniors that have flexible hours as well.

10. Cashing Out Your Retirement Pension

Your financial advisor may advise you to cash out your pension from one of your former employers. Unless you happen to need the money now, this decision could be more for the benefit of your advisor, who stands to make tens of thousands in commissions.

You should only think about a one-time lump sum withdrawal from your employers if one of the following is true:

  • your life expectancy goes down dramatically
  • you’re faced with a life-threatening illness
  • or you won’t have a surviving spouse that would rely on your pension income.

However, in general, you should avoid trying to cash out your pension.

11. Going Through Your Retirement Savings Too Fast

You might be tempted to celebrate your retirement by quitting your job and immediately going on a spending spree. However, don’t let all of the money fool you into a false sense of security.

Of course, your first few years into retirement might be an excellent time to travel, work on projects at home and splurge on items that you could miss out on later on. However, remember to spend modestly, since you can’t know for sure how long you need that money to last.