Will you ease into retirement with plenty of resources, or will you be punching a time clock well after you expected to be out of the workforce? The answer depends on your ability to avoid common roadblocks to successful retirement, such as the examples listed below.
1. Lack of Planning – As the old saying goes, “If you don’t know where you’re going, how will you know when you get there?” Take a few minutes to think about your retirement goals and whether you are on track to pay for them.
2. Starting Too Late – If you want to retire at age 67, don’t start thinking about it at 65. Start saving early and take advantage of the power of compound interest.
3. Not Making Retirement Saving a Priority – If you do make a financial plan, does saving for retirement have the appropriate importance in your plan? It takes discipline not to divert your savings to other needs and wants — everything from fully funding your children’s college education to buying a larger home than you really need. Don’t look at your retirement funds as discretionary funds, unless you also consider your retirement to be discretionary.
4. Poor Investment Strategy – Generally, it’s best to invest for the long run with a balanced portfolio, tilted toward higher risk and growth investment in the early years and toward lower risk as retirement approaches. You can harm your retirement funds by being either too aggressive or too passive, or trying to maximise your funds by overtrading while looking for bargains.
5. Too Much Debt – An increase in cash and assets does not help if it corresponds to an increase in debt. Resist the urge to take on larger debt loads just because you now have the salary to afford a higher monthly payment. Circumstances can change rapidly and unpleasantly.
6. Poor Health – Health problems are a double-edged sword when it comes to retirement planning. Not only can health problems in later life soak up an enormous amount of money, but they can also force you to retire and draw from your savings efore you reach full retirement age, reducing your benefits.
7. Expectations Versus Budgets – Do you want to buy a second home in a resort area? Retire to Paris? Travel the world crossing things off your bucket list? If so, you need to estimate your costs realistically and compare them to your savings plan. (You did make one, didn’t you?) Don’t forget to take inflation into account, and after you do that, add a healthy contingency for unexpected expenses — perhaps double. There’s nothing wrong with high expectations, but be realistic about how you can achieve them.
You worked hard all your life, and earned a comfortable and satisfying retirement without financial worries. Steer around these and other retirement roadblocks with care and planning, and you are likely to achieve those retirement goals — without having to work extra years to do so.