Common Retirement Planning Mistakes and How to Avoid Them

| December 10, 2013

Retirement planning is a task that should be done by everyone. You may think that retirement planning just requires setting aside some money for the future, but there is more to it than just that. There are a lot to consider while you choose a retirement plan and common planning mistakes can be made. The last thing you want is to have money issues while you are at your twilight years. You would want to live well in your life at the end, and a better retirement plan can ensure that.

Forgetting to establish a budget

The first that most people don’t do is not establishing a budget for their retirement. For an efficient retirement plan, you need to know the sum of money you need when reach the age of retirement. To be worry free you need to establish a budget and calculate what you need accordingly. You will need to save up to plan till your retirement age, for the plan to be executed. If you have your own reserves, this will guarantee your financial safety as well as your home, diet and other everyday expenditures. That is why it’s best to start on saving for this plan as early as possible.

Avoid aggressive investments

More often, people have the impulse to invest quite heavily in stocks as they start to growing older. Purchasing stocks as you grow old can be a big mistake for retirement planning, especially in times when stock markets are crashing any day. It is advisable to divide your funds and investments in various sources; so that one fails you can always count on your other source of investment. Try to invest wisely and try not to look at the fast cash earning sources, as they can crash any time and leave you penny less or striving at a sensitive age.

Ignoring inflations

The most common mistake is to ignore the risk of inflation, people calculate their retirement savings abut forget about inflation or price rise. You may be proud of the savings you have for now but what is worth 10 dollars now might get 17 dollars by the time you retire. It is advisable to plan your savings accordingly so that you are able to bear the expenses of the age. You should shift from the rule of saving 4 % of income and to save more for avoiding market inflation.

Wrong calculation of life expectancy

People tend to estimate the amount of investments and savings required for retirement on the basis average life expectancy. Though this approach seems genuine, it is advisable to remember the fact that there is a great chance that you can surpass the regular life expectancy. In other words, as you calculate the appropriate sum of savings you need when you are retired, it is best that you add 5 or 10 years more to your calculation to be on the safer side. Planning it right can ensure that you sleep in peace till the time you pass away.

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