The retirement planning process has many “moving parts.” It includes calculations to determine required savings, selecting savings plan investment products, “finding” money to invest in a retirement savings plan, and managing income withdrawals in later life so that savings lasts a lifetime. Whew!
The planning process is even more difficult if errors and misinformation seep in. Below are five common retirement planning errors to avoid:
RPS (a.k.a., Retirement Postponement Syndrome)- Save as much as you can as early as you can to maximize the awesome power of compound interest. That being said, the next best time to plan for retirement is today. Get with an online Social Security benefit estimate and the Ballpark Estimate online retirement savings calculator.
Banking On Unsure Things- Do not plan on “guaranteed” retirement savings that may or may not materialize when calculating retirement savings needs. Examples include a certain amount of profit on the sale of a home or business, having a certain investment account balance, and receiving an inheritance.
Counting On an “Econo-Retirement”- Prepare a post-retirement spending plan with anticipated income and expenses. Spending on travel, entertainment, and health care often increases in later life and routine household expenses such as property taxes and utilities will probably continue to increase.
Forgoing Retirement Saving Resources- Aim to take maximum advantage of retirement saving supports including auto escalation (where employer retirement plan savings increases with a pay increases), employer plan matching, and tax-deferred savings plan contributions.
Not Getting Help When Needed- Seek information and guidance, when needed, from employer human resources staff, government agencies (e.g., Social Security and Medicare and SHIP for health insurance questions) and financial services professionals such as a certified financial planner.