Planning for your retirement is no easy task. It requires a lot of careful thought and consideration. You go from having a regular paycheck every week to living on what you have saved over the years and your pension, if you are lucky enough to have one. Because of how complex the whole process is, there are bound to be some mistakes made along the way. Don't fall prey to one of the common mistakes below.
Living above your means.
One of the hardest things to plan for when you retire is how much money you need to live comfortably. Overestimating can make you feel like there is no way to get the income you need to be able to survive. If you underestimate, you find yourself struggling to make ends meet. Before you know it, you are having to alter your lifestyle significantly. Think about what you are making right now and plan on needing close to that same amount in retirement.
You are going to have a lot more free time on your hands being retired, which means you are probably going to be traveling more, eating out more and going to a few more Broadway shows and plays than what you were able to when working.
Waiting too long to start saving.
How many times have you put off something because you thought you had plenty of time to do something about it? You aren't alone. Many people end up waiting until their last few years of working before they start saving for retirement. However, you are making it harder on yourself in doing so. If you simply start off saving a few hundred per month when you are 25, the interest alone will help you build your retirement fund pretty quickly. Waiting until later on in life means your money doesn't have as much time to earn interest on it.
A financial planner can walk you through the process and help you set goals to ensure you have enough money to survive on when you get older. It's far better to save a little less per month now than it is to try and save an extreme amount of money later on in life, when you might not be able to afford it.
Not factoring in the key economic factors.
When looking at retirement, you need to consider inflation rates, personal expenses, investment returns and tax rates. The only thing you can control is the amount you spend on your personal expenses. Prices will continue to rise and taxes could go up at any point in time. Trying to plan for all the unexpected events that might come your way isn't all that easy.
While retirement is meant to be a time to relax and enjoy yourself, it can quickly become stressful if you don't have your finances in order to handle your monthly expenses properly. Work with a retirement planning professional to make sure you'll be taken care of.