As the latest generation of older workers begins to retire, there’s been a focus in the media on their lack of preparation when it comes to retirement planning. However, preparing for retirement in advance is an important part of making sure that your health, family, and life needs are met throughout retirement years.
To better understand this trend and why it’s happening in the first place, we’ve identified three mistakes workers are making when approaching saving for retirement (so that you can avoid making them yourself).
1. Poor financial planning.
Not all workers have a thorough understanding of the choices they should make when it comes to accumulating savings. It can be difficult to determine how much we need following retirement and how our retirement savings will pan out. Without the right planning it is hard to know how much to save, how much you need to change your spending habits when you retire, and when you can afford to retire.
According to a recent study, 68% of Baby Boomers lacking confidence in their retirement plans wish they would have saved more. This lack of financial retirement planning can contribute to an insufficient level of funds, which might not last throughout the rest of someone’s life following retirement.
2. Misaligned priorities.
The many responsibilities of everyday life can get in the way of preparing and saving. Competing priorities like housing, general family expenses, children’s education, transportation, and entertainment can end up taking precedence. However, saving monthly for retirement can really add up over the years. Even if the amount you can save is small, it’s important to get in a routine of saving. Many employers have programs (such as automatic enrollment) to make it easier to get into the habit of saving.
3. Consuming confusing information.
Complex information can make it difficult for most people to gain a true understanding of how to prepare for retirement. Everyone has his or her own needs, and it’s difficult to find advice that’s applicable to someone’s personalized situation. It’s entirely possible that a lack of preparation can be connected to a general lack of understanding.
The more educated a person is, the more likely he or she might be to make informed decisions when it comes to preparing for retirement. There are some resources out there that can help create a basis of understanding, like this.
Start preparing the right way
These mistakes might be common, but they are avoidable. Making smart financial retirement planning decisions now will impact you in the future. Here are some steps you should take to avoid headaches later.
1. Lay out your finances so that everything’s out on the table, and you understand where you’re spending the most and where you might be spending in the future.
2. Consider medical needs and expenses. As you get older, you’ll need to prepare for potential medical costs. Start thinking about Medicare and how it might apply to your needs.
3. Evaluate your home costs. If you’re going into retirement with a mortgage, you should be completely prepared from a financial standpoint.
4. Create a budget to start managing and setting your different priorities moving forward.
Simply taking advantage of helpful resources and understanding where your finances lie (and where they’re headed in the future) are a few of ways to avoid costly mistakes and remain ahead of the game when preparing for retirement. So get started now.