If your idea of retirement means not working and enjoying a life of leisure, you’d better start crunching numbers and planning for the unexpected.
People like to daydream about their retirement. They imagine themselves traveling, playing with grandchildren, sleeping late and playing. But according to a recent article in Kiplinger, “5 Common Roadblocks That Can Shut Down Retirement Success,” most people are completely unprepared for retirement. That includes having no retirement savings, not understanding how much money they’ll need to live on during retirement and what kind of a lifestyle they’ll be able to afford during retirement. Even in the best of circumstances, people need to be aware that even the best retirement plans can be derailed by unexpected events.
Here are five of the most common obstacles to a successful retirement:
- Not defining how you want to live during your retirement years. You may believe that your expenses will decrease when you retire. However, many folks find out this isn’t true with travel, hobbies, and other pursuits that fill their free time. Calculate the costs of the things you want to do and factor in inflation. Before retiring, you should also figure out how you’ll want to spend your retirement years. By setting some specific personal goals, you can be more exact with financial planning.
- Not committing to financial success. Create a budget and track your monthly expenses. This is a critical part of planning for what your retirement income needs will be. You have to take this step for yourself. It’s not something that anyone else can do for you.
- Failing to plan for the unexpected. Everyone needs a Plan B—a contingency plan. Life happens, like disability, divorce, and unexpected death, any of which could throw a wrench into your savings and retirement plans. Consider insurance (life, disability, and long-term care) as a good base of your financial plan.
- Ignoring employer-sponsored plans. Some believe that they can’t afford to participate in their employer’s 401(k) plan or fail to review other benefits the company offers, like disability or life insurance. These employer-sponsored programs can be a very cost-effective way to help protect yourself and your family against the unexpected.
- Failing to create a comprehensive financial plan. Not having a financial plan is like going on a trip with a specific destination, but no GPS. How will you get there? Will you get there safely? A comprehensive financial plan will help guide your savings and investments, so that you reach clearly defined goals. Budgets, income sources and asset allocations all need to be addressed.
Reference: Kiplinger (March 2017) “5 Common Roadblocks That Can Shut Down Retirement Success”