Everyone is likely to make financial mistakes and retirement is no exception. Whether it is not knowing your budget to detail or overspending in things you don’t need, here is a list of common mistakes for you to avoid. Plus, learn how to accurately calculate your retirement savings
After spending your entire working life saving for retirement, of course you want to relax once you reach that age. And the best way to do that is by knowing what your retirement money is and how to make the most out of it. To do so, there are certain common mistakes you should avoid. Let's take a look at them:
1. Retiring too soon
As life expectancy increases, so do your retirement years. And this basically means that your savings are meant to last longer than decades ago. If you work for more years, you will also increase your Social Security benefit.
2. Not accounting for potential future medical bills
We know nobody wants to think about this because we all want to believe we’ll stay healthy forever, but it is really important to make sure you plan ahead so you can afford your medical bills if it was necessary. Medicare is a great option if you’re over 65, but it does not cover everything and co-pays and additional charges become really expensive. Consider getting additional insurance to avoid huge bills.
3. Not investing appropriately
Investing is always a smart idea if you do so in the correct way. You can get professional advice if you need help assessing how much you have and how much can afford to “risk” in the market.
4. Spending too much
Don’t underestimate the cost of retirement. Keep in mind that you will have a lot of free time and this means you are probably not staying in your house all day, but you will probably engage in a lot more activities that will cost you money. Keep track of your expenses. Financial mistakes are common, regardless of age. Be cautious with your money so it lasts a long time. Plan a budget and know your expenses so you know where your money is going and see if you need to make any adjustments. This will help you enjoy a relaxed retirement!
HOW TO CALCULATE YOUR RETIREMENT SAVINGS
It's always best to be prepared for life's twists. It's also sensible to plan more controlled events, such as retirement. In order to check that you'll be able to cover your expenses, calculate your retirement savings!
The first thing to look at is your current savings. You could've earned them through work or investment, it doesn't matter the source. What's important is that you know how much you already have and you avoid spending this amount earlier than planned. If you haven't started to save money for your retirement, don't worry! You still have time. Here are 7 tips to catch up on your retirement savings!
Next, you need to calculate your future earnings that'll go to this fund. Look at your annual contributions to retirement savings and multiply that amount by the number of years left until you retire. This will give you a number, which is the approximate amount of money you'll have after that many years. When considering your annual contributions to retirement savings you can include what you personally put aside for this. Additionally, you can take into account your 401(k) contributions and other investments.
Once you made these calculations, add all amounts to other guaranteed sources of income. This will give you the total amount of money that you'll have when you retire. You can divide this by the approximate number of years you think you'll live after your retirement in order to see how much money you'll have to spend each year. Here’s an article on how to manage your retirement funds.
If you also calculate your future expenses, you'll be able to check if you'll have enough money to cover them. This can be a scary step, but the sooner you know if you'll be well, financially, after you retire, the better. If you find that you could use some more money, you'll have time to save some extra bucks.
In order to estimate whether you’ll be able to cover your expenses after your retirement, you can make similar calculations for your current living expenses and use the results to make projections. If what you determine is lower than your future savings, you can stop worrying about it. If not, you may want to learn how to manage your living expenses and save money in them!
Keep in mind that there are certain factors that can't be predicted with total accuracy, such as the growth rate of inflation and your investments. You can do more detailed calculations to better predict these numbers, but they aren't as necessary for a first, more general approach. You can also find another way to calculate your retirement ideal number in this article!