Jonesboro, AR – (JonesboroRightNow.com) – Dec. 15, 2024 – As the end of the year approaches, it’s a good time for everyone to review their retirement plans. Whether someone is just beginning their career or nearing retirement, Arvest Wealth Management is sharing some common retirement planning mistakes to watch for as they review their plans.
“Although most people recognize the importance of sound retirement planning, it can be challenging to navigate,” said Hannah Hosman, a client advisor with Arvest Wealth Management in Jonesboro. “Regardless of how much or how little retirement planning you have done, it’s never too late to start saving or planning for the later stages of life.”
Hosman shares seven retirement planning mistakes to avoid.
- Don’t underestimate how long retirement will last.
While the Social Security Administration’s normal retirement age has increased from 65 to 67 for individuals born after 1960, many people’s retirement years are lasting longer than before. According to the Social Security Administration, today’s 65-year-old can expect to live another 20 years. This means most people should plan for living to at least 85 or longer.
- Don’t miss retirement income opportunities.
Investing in an employer-sponsored retirement savings plan often means your employer will match your contributions to the plan, which makes it a great opportunity to earn additional retirement savings. If your employer is willing to match the first $1,000 you invest in retirement savings each year and you start investing when you’re 25 and continue for the next 40 years, you would receive an additional $40,000 contributed to your retirement savings. Assuming an 8% return over those 40 years, the employer match alone would be worth over $270,000.
- Don’t have unrealistic expectations of investment returns.
Since we spend most of our lives earning and receiving money from a job and a regular paycheck, it can be difficult to transition to spending money without a regular addition to your bank account. Before you invest, make sure you do your research to know what kind of returns you can expect on any investments you make. Budget and invest your money accordingly to avoid overspending.
- Don’t forget to factor in inflation.
While inflation is almost a certainty, the extent of it is unpredictable. As you plan, save and budget for retirement, remember to account for inflation. According to the Federal Reserve’s inflation calculator, $1 million dollars in 1994 is equal to $2,121,430 today, which means inflation has more than doubled prices in the last 30 years.
- Don’t fail to be strategic about Social Security benefits.
Social Security can be a major, inflation-protected income stream for many retirees, but it comes with a lot of choices. Is it worth retiring early if I receive fewer benefits? Should I work until I hit the full retirement age? Do I delay my benefits to get a boost? What happens to couples with two work records? Make sure you consider these questions and more to make the most of your Social Security benefits.
- Don’t haphazardly plan retirement income.
Planning for retirement spending now will help alleviate stress in the future, and it can be helpful to follow the 4% rule and view retirement spending as paying yourself instead of being paid by a company. Under the 4% rule’s guidelines, retirees can start by withdrawing 4% of their total savings to live on during the year they retire, then adjust for inflation each year over the next 30 years. While it’s debatable if the 4% rule is still a good rule of thumb, it can be a useful starting point. A financial planner can help with these decisions.
- Don’t assume Medicare will cover all healthcare expenses.
While Medicare and Medicare supplement plans reduce some healthcare costs as you age, you should not rely on them to completely cover any costs you incur from doctors’ visits, hospital stays or other medical situations. Consider setting aside some of your retirement savings to make your home more senior friendly, finding the right caregiver for your circumstances and covering any remaining healthcare costs.