Retirement planning is one of the most important financial goals for your future. When done right, you’ll be assured freedom and financial independence for later in life.
When done wrong, you’re facing a future full of stress and worry. To avoid this outcome, consider the ten worst retirement planning mistakes below, and make moves now to avoid them!
#1. Not Having a Retirement Plan in Place
The primary mistake that a majority of people make is not having a retirement plan in place. Have you figured out just how much money you’re going to need when you retire?
There are many considerations at play when designing a retirement plan that’s right for you, including the time you have until retirement, your retirement location, your desired lifestyle and your general health.
#2. Not Saving Money Now
No matter what sum you need for retirement, the sooner you start saving and investing, the more secure you’ll be in the future. The money that you put away now will continue to grow over time, and thanks to compound interest, the longer your savings accumulate, the better.
It’s a good idea to designate at least 10 – 15% of your income now into a retirement account, but once you’ve mapped out how much you’ll need to save for your desired lifestyle after retirement, that percentage may need to be adjusted.
#3. Not Investing Wisely
For most people retirement investment choices come with a steep learning curve and are best made with the help and advice of a trusted financial advisor. This ensures you make the right investments into your retirement accounts.
#4. Not Taking Advantage of Employer 401(k) Matching
If you’re offered a 401(k) with an employer matching incentive, it’s a big mistake not to take advantage of that! Maximize the amount that you and your employer contributes now, so that you get the extra boost to your retirement savings that will continue to compound over time.
#5. Not Planning for Tax Implications
When implementing retirement planning it’s important to consider tax implications and what works best with your financial situation now and in the future.
What tax bracket will you fall into after you retire? Is it best to pay taxes on the front-end or when you withdraw? These are questions to consider and discuss with a tax advisor.
#6. Not Letting Your Retirement Savings Accumulate
It’s common for employees to cash out of their 401(k) when switching jobs. This is not a good idea! It’s hard to recoup those funds once they’re spent.
Plus, if you cash out early on your retirement fund, you’ll pay more in penalty fees and taxes. This means you end up with less in the long run.
#7. Not Planning for Health Issues & Long-Term Care Costs
The high cost of long-term care is something that adds up quickly. The average cost of a nursing home in California is over $9,000 a month.
Not considering these costs in your retirement plan now, means you could be like many families who run out of money within a year of entering a nursing home.
We can help you design a comprehensive plan to protect your assets and/or help you qualify for assistance from Medi-Cal to offset the cost of long-term care. Learn more about Medi-Cal planning here.
#8. Not Planning for Retirement Surprises
It’s possible that you end up retiring earlier than you planned to, because of health issues or a disability that makes it so you can no longer work.
There’s also the potential for loss of your job, and resulting struggle to find employment at an older age. It’s best to plan for the worst, so you have extra funds in case you do have to stop working at an earlier age.
#9. Not Being Strategic About Social Security
You may start collecting retirement benefits from Social Security at age 62, but thanks to delayed retirement credits, the longer you wait to collect, the better. The government gives retirees an extra 8% for every year you wait to claim benefits, up to the age of 70.
So, if you can afford to hold out on receiving Social Security benefits, the more you’ll receive in the long run. Weigh your options and consult a professional if you need help.
#10. Not Implementing Estate Planning
While estate planning is an ongoing strategy, there are common documents that are part of it: a Will, Living Trust, Powers of Attorney for your assets and healthcare directives, customized tax planning and other more complex components of a customized Trust.
The overarching goal is to protect your assets on the journey to retirement and to make sure that your wishes are carried out after you die, so that your loved ones have an easier process and your assets are maximized.
What Do We Do as California Estate Planning Attorney Specialists?
The lawyers and staff at CunninghamLegal help people plan for some of the most difficult times in their lives; then we guide them when those times come.
Make an appointment to meet with CunninghamLegal for California Estate Planning and Trust Administration. We have offices throughout California, and we offer in-person, phone, and Zoom appointments. Just call (866) 988-3956 or book an appointment online.
Please also consider joining one of our free online Estate Planning Webinars.
We look forward to working with you!
James Cunningham Jr., Esq.
At CunninghamLegal, we guide savvy, caring families in the protection and transfer of multi-generational wealth.