Unfortunately, planning for retirement isn’t an exact science. There’s no one-size-fits-all when it comes to saving the right amount for your golden years--which is part of what makes retirement planning so nerve-wracking for a lot of us.
Although there is no exact equation for retirement planning, there are some common blunders to avoid in the process. A recent NBC News article breaks down these mistakes:
1. Don’t be overly optimistic
While optimism is usually a welcomed attribute, when it comes to retirement, a more pessimistic view may be more appropriate. According to Tami Simpson, CFP and president of Wealth Financial Group West, a retirement management services and financial consulting firm in Southern California, “too much positive thinking isn’t the best recipe for saving…a healthy dose of pessimism is actually a good thing for your retirement planning.” Simpson says that some people put off saving money because they “hope” things will simply fall into place down the road. People imagine the best case scenarios and don’t account for unexpected events that could occur.
2. Don’t underestimate your spending
Many people underestimate how much they’ll be spending once they hit retirement. Wells Fargo financial adviser Fay Sheppard reminds her clients that “retirees often take more vacations, make more home improvements, and dine out more frequently than they did before they left the workforce.”
When planning for retirement, people need to be realistic and look at income, inflation, long-term care needs and emergencies.
3. Don’t focus only on investments
According to Jeff Yeager, author of How To Retire The Cheapskate Way: The Ultimate Cheapskate’s Guide to a Better, Earlier, Happier Retirement, “paying off all of your debt before you retire is as central to a good long-term plan as the size of your retirement fund.” He believes that the greatest retirement asset is something you don’t have: debt.
4. Don’t worry about being “selfish”
When it comes to preparing for retirement, experts says we must concentrate on our own financial well-being. This means that we stop paying for our children or helping friends or relatives. “It’s important to leave your retirement funds intact for yourself, no matter how hard it may seem to turn somebody down if they ask for money.”
5. Don’t put off your financial physical
Similar to our yearly health physical, Jack Keeter, CFS, and president of Jack Keeter and Associates, advises that a periodic “financial physical” is the key to a healthy retirement. He insists that everyone meet with a financial professional before there’s a problem and review your financial health.
References: NBC News (December 6, 2012) “5 retirement-planning mistakes to avoid”