The good news is that each of these challenges can be systematically and effectively resolved. However, when planning for retirement, you could have made a few missteps along your investment journey that could affect your plans in a different way.
Here are some common errors to avoid:
You think you’ll need less money in retirement. Think about what expenses you’ll have as a retired person: housing, utilities, clothing, health, groceries. None of these are items that are dependent on you having a job. Your expenses may even increase in retirement, depending on the plans you have for travel or entertainment. Most Americans will live 10 to 15 years longer than they anticipate.
You are not taking advantage of catch-up contributions. If you got a bit behind in your retirement savings while you were pursuing education or raising children during your 20s and 30s, don’t worry. Your 50s can be a time to shore up retirement funds, with the government allowing you to make catch-up contributions. This increases the maximum amount you can contribute; an extra $6,000 to a 401(k) or an extra $1,000 to an IRA.
You may feel that you can’t possibly put more away for retirement, but this is a prime opportunity to get your savings in line. Consider cutting expenses like eating out or take a more budget-friendly vacation, or you can take on a side job to maximize your contributions.
You could be under-thinking when it comes to taxes. Don’t forget to factor in taxes when planning for retirement. You may have saved well, and combined with your Social Security, you may be in good shape for a healthy income in retirement. But you can plan on the IRS claiming its share, as well. Unless you have a 401(k) or a Roth IRA, your income will be taxed as ordinary income.
Planning for retirement requires a long view of your financial situation. Contact us at Lawson Kroeker to get started on a vision for your retirement and what steps are necessary to make it a reality. We’re diligent, focused and consistent – and we can help you to be, also.