Last year certainly had its challenges. For instance, your job or career may have been affected, perhaps requiring you to work from home, stop all your usual travel, and forcing you to learn new online technologies to keep in touch with your clients and customers.
These changes may have invigorated you or, alternatively, made you want to hang up your hat sooner than when you had planned before 2020 came and went. Recent events, however, should not cloud your thoughts about your long-term future. You spend a lot of time and effort getting prepared for retirement, including saving and investing, paying off your debts, researching where you want to live, and successfully raising independent children.
Retirement should be that time where you reap the rewards of all your hard work. Staying true to your financial plan will help prevent you from making mistakes like the following that can destroy a perfectly nice retirement.
Quitting too soon – Do not turn in your resignation papers because of a tough year. Once you are out of the work force, it is much harder to get back in or reclaim the nice position you had previously. Know how big your retirement fund needs to be to supplement any other income you will have, such as Social Security and pensions.
Not considering inflation and longevity – For some reason, most people think they are going to die much sooner than they probably will. If you and/or your spouse live to age 95, you do not want to run out of assets at age 85. Later in life you may not be taking frequent cruises or playing golf every day, but you may need that money (or more) to pay for long-term care or other housing needs.
Inflation is a fact of life. To maintain your lifestyle – i.e., buy the same goods and services, such as food, utilities, travel, clothes and medical expenses – you will need more dollars in the future than you currently spend.
Investing too conservatively – The ups and downs of the stock market cause many investors to become skittish about leaving funds in stocks and turn risk adverse. But avoiding growth-type assets may create the bigger risk of running out of money prematurely. Most people need their money to continue to grow and work for them.
Fixed income securities such as CDs and bonds will provide a certain level of income or return, but they are not meant to drive the growth of your portfolio.
Overspending – The excitement of retiring can cause you to overspend in the first few years. You want to make your funds last once you have retired. If you are tired of working now, just think about how difficult it will be to go back to work in five or 10 years because you do not have enough money. At 75 or 80 you may still have the desire to travel, eat out and socialize, and you’ll want to have sufficient resources.
No health care or long-term care coverage – Be sure to include adequate insurance and other health-care costs in your retirement budget. If you retire before you are eligible for Medicare, know where you will get coverage and what the cost will be.
After you are used to a certain lifestyle and type of living environment, you will be very disappointed if you end up having to settle for a not-so-nice assisted living or nursing home facility. Additionally, consider that one spouse may use up significant assets for his or her care and deplete the money needed for the other spouse to continue their lifestyle.
Despite last year’s challenges, keep your eye on the prize to make sure you give yourself the best odds of retiring right.
A version of this article originally appeared December 6 in the Casper Star-Tribune.
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