Four Common Retirement Mistakes You Could Be Making
Practice makes perfect, but unfortunately, retirement isn’t something you can practice. It typically happens one time, and there may not be many opportunities to learn from your mistakes. The best way to avoid making mistakes in the first place is to educate yourself and create a plan. Here are some common retirement mistakes you could be making.
Wishing for the Best Instead of Preparing for the Worst
We saw record highs in 2021, but 2022 may turn out to be an entirely different story. The market may continue to react poorly to the prospect of slow economic growth, rising interest rates, and high inflation. When you’re nearing or in retirement, market ups and downs can definitely be a source of worry. But rather than making hasty decisions driven by emotion, talk to us about creating a solid investment strategy that takes your risk tolerance into account.
Forgetting About Old 401(k)s
If you have a 401(k) still with a former employer, consider your options. You can roll your old 401(k) into your current one, roll it into an IRA, or convert part or all of it into a Roth IRA. Know how your investment options can expand, how to avoid tax traps, and what you’ll do with any company stock in your old 401(k). Find out how much you’re paying in 401(k) fees and if rolling it over into an IRA could mean lower investment fees and more investment options.
Failing to Account for Inflation
No one knows when inflation will return to normal levels, and in the meantime, your lifestyle could become more expensive. We’ve already seen the price of gas, food, and other essential goods and services rise in price. After 10 years of 7% inflation, $1 million would be worth about half – $508,350. How much you’ll be left with after inflation depends on many factors, including your investment strategy and your retirement lifestyle goals. Make a plan now – not after – inflation takes its toll.
Ignoring the Reality of Long-Term Care
An estimated 70% of today’s 65-year-olds will need long-term care later in life, and it can be expensive. The average monthly cost of care in 2022 is $4,000. Medicare and Medicaid will only cover costs in very specific circumstances. Rather than ignoring the possibility that you could need long-term care later in life, you can learn about financial strategies to cover costs and consider how you would like to receive long-term care. For example, you might prefer to age in place, but this may take some planning in advance during your younger years in terms of home renovations and financial planning.
When it comes to planning for retirement, you don’t know what you don’t know. There are many potential pitfalls you may not think to look out for, as well as many planning strategies you may not know about. At Barnett Financial and Tax, we can help you map out a path forward, even in uncertain times. Click HERE to sign up for a time to speak with us about your biggest concerns.