Retirements always seems to be a distant event especially to someone who has just started earning. But the best time to start investing for your retirement is when you have made your first penny. Even when it’s always better to start early, it’s better to be late than not. When making your retirement plans there are certain common mistakes that people make. Read on to make sure that you are not making these mistakes while planning your retirement.
1. Waiting to start
Different people have different idea about their retirement. The time they want to retire and the way that they are going to spend their retirement life varies. But the constant is that it is going to be a period of your where you are going to be living out of your savings and investment. So it is always better to start investing for your retirement early without waiting for the perfect time. You can start small and then over time add to it as your affordability goes up and figure out your retirement plans.
2. Not having a plan
Retirement is a long term financial goal and you have to have proper plan in place. Unlike your other financial needs retirement is not flexible that you can take a loan or extend. It is supposed to be a period where you can relax and live for things that you always wanted. So it is important to have a plan which has considered the entire variable.
3. Underestimating medical expenses
Growing age and health does not always go hand in hand. Though it is always better to invest in staying healthy you should always set aside provisions of medical expenses in your retirement plans. As you age your health is going to deteriorate and the medical expenses are bigger than you can imagine. It is one field that is highly affected by inflation. So keep medical expense in check while planning your retirement.
4. Dipping in early
Retirement savings are the often go to resources for contingencies. The belief that one has time to retire and hence can dip into retirement savings is a common trap. Realize that retirement savings are not a backup for other financial goals and emergencies. Have dedicated retirement savings and investments that are to be used only when you retire. By dipping into dedicated retirement savings and investments you deny these savings the power of compounding and long term wealth creation prospects.
5. Underestimating inflation
Inflation almost certainly will affect your future spending power. To be safe, your retirement planning should account for rising costs. Study up on how to invest when inflation is high and dedicate at least part of your retirement savings to investments that have the potential to grow. You should look for basic financial strategies that work against inflation. Saving even a little more than you think you’ll need can help you avoid running out of funds when things don’t as you have planned.
Reaching retirement with a solid plan and ample money is no small feat. For most, it requires years of saving, investing and strategizing. Even if you execute it perfectly, retirement planning can be a marathon, and it can sometimes be hard to meet your savings goals. A financial expert can educate you on better financial planning and strategize a solid retirement plan.
At SmartMoney Education, our goal is to motivate, inspire, and guide you in your journey towards financial well-being. To learn more, get in touch with us today and set up a one-on-one session