Avoid These Retirement Planning Mistakes

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Apr 02, 2018

By Donna Sanders, Vice-President at World Trend Financial

Retirement can creep up on you. One day you are climbing the corporate ladder or building a client base for your business. Next thing you know, you are in your 50's or 60's. Thoughts of spending your days playing golf, pursuing a favorite hobby, or traveling to far-flung regions start calling you away from the daily grind. But without careful planning, your golden years may become tarnished. Before you take that gold watch at your farewell party, make sure you are avoiding these retirement planning mistakes:

Failure to plan. Ideally, you started planning for retirement early in your career and your investments have been growing. But maybe you have avoided such thoughts until now. Do not wait. Set up your online Social Security account at https://www.ssa.gov/site/signin/en/ to see your estimated retirement benefits and ensure your earnings history is correct. Use our financial calculator (see related article) to calculate how much you need to save each month to reach your goals. Financial advisors can also craft a plan to fit your circumstances. As the old saying goes, "Failure to plan is planning to fail."

Failure to save. If your employer offers a 401(k) or SIMPLE plan, take full advantage of the employer match, and sock away as much as you can, as early as you can. If you are self-employed, set up a SIMPLE retirement plan. Regardless of your place of employment, saving for retirement should be a priority.

Failure to consider inflation. No matter how much you save, expect inflation to eat away at the purchasing power of your money. At a 3% rate of inflation, expenses will double every 24 years. To cover that increase in expenses, your money needs to maintain its value. For most people, keeping up with inflation will require investing some portion of their nest egg in a diversified portfolio of stocks or stock mutual funds.

Failure to consider life expectancy. These days, a man reaching age 65 today can expect to live to age 84.3. A woman of the same age may live to age 86.6. These, of course, are averages. Depending on your health, family history, and other factors, you may live into your nineties or beyond. As a result, your nest egg (supplemented by pensions and social security benefits) may need to last 30 years or more. Take stock of these numbers and plan accordingly. Strive to ensure, as much as possible, that your retirement dreams come true.

To discuss your particular situation, reach out to Donna Sanders at dsanders@tld-inc.com, or any of the financial advisors or accountants at World Trend Financial and Terry Lockridge & Dunn. They can be reached at 319-364-3041 in Cedar Rapids or 319-339-4884 in Iowa City.