Your retirement years are a time to relax and enjoy the lifestyle you have worked hard to create. You should spend your days doing what you want to do, but the big question is, how do you make it happen?
Starting from a young age, you have likely been thinking about your ideal retirement, but having a vision and having a plan are two different things. Planning for retirement is a journey, and you must know how to plan so that you can create and enjoy the lifestyle you have been working toward.
Franklin Park® Senior Living features luxury senior living communities throughout Texas, and we help retirees live a life of comfort and convenience. Below, we’re sharing a few common retirement planning mistakes and some solutions to better prepare for the future.
Mistake #1: Not Having a Plan at All
Retirement planning mistake number one is not having a plan at all. Without a plan, you are setting yourself up for failure. You have no idea what types of expenses you will have, how they will add up, or what type of income you will need to support yourself.
To create your desired retirement, you have to plan out what it looks like. For example, where do you want to retire? Once you decide on that, you can figure out details such as the cost of living and what type of lifestyle you picture yourself leading (traveling, relaxing, or a combination of the two).
Also, consider what age you plan to be when you retire. By figuring out the details of your goal retirement lifestyle, you will have a better idea of how much you need to save and when.
Mistake #2: Saving Improperly
Not Saving Enough
“When saving for retirement, most experts recommend an annual retirement savings goal of 10% to 15% of your pre-tax income (NerdWallet).” Unfortunately, a common retirement planning mistake is not meeting this recommendation because 10 percent seems like too much to handle.
The solution to this is to slowly work your way up to this range from wherever you are starting now. For example, every time you get a raise or salary increase, increase the percentage of your retirement savings contribution. By doing so, you will likely not even notice that more money is being taken from your paycheck.
Not Taking Advantage of a Company Match
If your current company offers a 401(k) benefit with a company match, make sure you take advantage of the full amount. By neglecting to do so, you are essentially leaving behind free money that can go toward your retirement fund.
Thinking it is Too Late to Start Saving
It’s best to start saving and planning for your retirement as early as possible, but it is never too late to create a retirement plan. In fact, there are catch-up provisions in place for individuals over the age of 50 that allow additional contributions into retirement accounts.
These amounts change on a yearly basis, but for 2022, the IRS states, “you can make catch-up contributions to your traditional Roth IRA up to $1,000.” If your company offers a 401(k) plan, the annual catch-up contributions for 2022 are up to $6,500.
Mistake #3: Using Your Retirement Fund Early
If you have been planning and are fortunate to save a significant amount of money for your retirement, you may be tempted to dip into it before you retire. After all, it’s your money. This is another common retirement planning mistake.
According to Experian, “Not only is using retirement money to finance your pre-retirement life counter-productive, it’s also likely to generate a large tax bill as you pay income tax on tax-deferred withdrawals from 401(k)s or traditional IRAs, and a 10% penalty if you’re under 59½ when you make your withdrawal.”
Retirement planning is important to creating your desired future. Even though it can be confusing and even overwhelming at times, don’t let this discourage you. You will be glad you did when the time comes for you to retire. If you need help, it is always a good idea to seek the advice of a financial advisor.
To discover how our luxury senior living communities in Texas can enhance your retirement, we invite you to contact a member of Franklin Park® Senior Living today.