By Edward “Ed” V. O’Neal, Senior Vice President and Manager, Retirement PlansPrint This Post
As we get closer to Halloween, it’s natural to think about the things that scare us. For many, it’s something very specific like spiders, ghosts or even clowns! For others, it’s simply the fear of the unknown. And for those that are planning for and nearing retirement, ensuring that the correct preparation and steps are in place to meet their retirement goals can be a downright frightening thought. Ultimately, an effective retirement planning strategy is based on having clear goals and a plan of attack for accumulating the assets and/or income stream to meet those goals. But on the way to achieving all of this, there are some common missteps that can lead to disastrous and scary consequences.
Believing it’s too late to start a retirement planning strategy
Fortunately, it’s never too late to build good financial and savings habits. Every little bit helps and given the tax advantages inherent with most retirement accounts (i.e. potential tax deductions, tax deferred growth, etc.) even small levels of contributions can accumulate into sizable nest eggs sooner than expected. Start with a realistic savings goal and budget your spending to help stay on track.
Not taking advantage of key provisions within an employer-sponsored retirement plan
While developing consistent savings habits are always helpful, individuals may also experience periods in their working lives when they have more disposable income than normal (for example, once kids are out of college). During these periods, those who have access to an employer sponsored retirement plan – like a 401(k) – should consider maximizing salary deferrals and taking advantage of key plan provisions including employer matching, catch-up contributions for employees age 50 and older, and Roth 401(k) deferrals. Taking advantage of these type of plan features and provisions can help supercharge progress toward your retirement goals.
Forgetting to consider the impact of long-term care
If there’s anything that scares people more than running out of money in retirement, it’s the prospect of suffering a prolonged physical illness or health crisis during retirement. Yet the data suggest that 70% of people over the age of 65 will require long-term care, with 20% requiring care for longer than 5 years.* Preparing for this contingency is an important consideration when creating your retirement planning strategy and thinking about your retirement goals and income needs.
Not Having a Plan
As the saying goes “failing to plan is planning to fail,” and this particularly rings true with financial and retirement planning. The process of creating a plan requires a discussion of retirement goals and the key factors that could impact those goals (i.e. monthly income needs, cost of healthcare, caring for aging parents, kid’s college expenses, etc.). This can ultimately lead to a more refined retirement planning strategy and greater confidence for success.
Despite the unknowns and uncertainties with retirement planning that can cause nightmares for many individuals, the process of developing a comprehensive plan – while eliminating the pitfalls that can derail that plan – can lead you to a successful retirement planning outcome and more peace of mind. Contact your Benjamin F. Edwards financial advisor for help or questions with initiating a retirement planning process.
Benjamin F. Edwards & Co. does not provide tax advice, therefore it is also important to consult with your tax professional for additional guidance tailored to your specific situation.