Planning for Retirement? Avoid these common mistakes.

According to Northwestern Mutual’s 2018 Planning & Progress Study, 21% of Americans do not have any retirement savings at all. Many of us simply put this off, thinking we do not have the extra cash flow or ability, or that it is too difficult at this point in our lives. But taking the first step is critical. No matter what your age is, planning for the future is not as painstakingly overwhelming as most of us think. Setting up goals and avoiding a few common pitfalls can help to ensure that you’ll have enough money to comfortably cover your expenses during retirement.

It’s hard to measure your success if you don’t know how much you will need. Many people who begin saving for retirement do so without crunching the numbers and creating a plan. You need to prepare to live a long time, track your finances and forecast your future with strategic financial planning. Some experts suggest aiming for 80% of your income saved for each year you are retired. This means if you make $100,000/year you would want $80,000 saved and available per year you are retired. This amount can seem daunting to many of us but failing to plan and avoiding the conversation is not the answer. Working with a professional financial advisor can help you find new ways to save and grow your money to achieve long-term retirement goals.

Healthcare costs are rising every year. Many Americans simply do not expect the costs associated with doctor visits, injuries and illnesses that are often necessary later in life. According to Fidelity Retiree Health Care Cost Estimate, an average retired couple age 65 in 2019 may need approximately $285,000 saved to cover healthcare expenses in retirement. Medicaid and Medicare do not cover many of these expenses and failing to plan for them can be detrimental to your retirement goals.

When life brings unexpected expenses or opportunities, it may be tempting to pull from your hard-earned retirement money. According to the Insured Retirement Institute, 17% of Boomers initially saved for retirement, but had to withdraw the money for various reasons.

IRAs and 401(k)s contribute pre-tax money, reduce taxable income and help make savings more affordable. The 2018 contribution limits for 401(k)’s are $18,500 for those under 50 and $19,100 for those 50 and up. If you start taking advantage of these opportunities early, you can accumulate interest that will vastly help your retirement goals. For an example, contributing $5,000 annually to a 401(k) that grows an average of 8% annually would result in $247,115 in just 20 years. Granted, these numbers are estimates based on a consistent return, but understanding the benefits of these investments can help make retirement goals considerably more attainable.

We’d all like to believe we can stay healthy and at home forever. Though that may be the case for some of us, an estimated 5% of us will end up needing long-term assistance of a nursing home, assisted living center or congregate care. 25% of us will require nursing-home care at some point in time. Long-term care and medical expenses essentially pose the greatest threat to your retirement goals. According to a Genworth survey in 2017, the national median cost of assisted living is $45,000/year, a private room in a nursing home averages $97,455/year.

Medicare is critically important. You are eligible for Medicare at age 65 and can sign up anytime within three months leading up to your 65^thbirthday and three months after. Not enrolling on time could result in a 10% penalty for every 12-month period you were eligible for Part B and didn’t enroll. This means if you waited three years to sign up, your penalty could be 30% of the premium.

Though you are entitled to Social Security Benefits at age 62, taking advantage of delayed retirement credits can provide you with a significant annual increase when you do decide to claim. Because of these credits, waiting until the age of 70 can provide you an 8% boost in Social Security benefits each year.