Retirement is a time for you to relax and enjoy the life that you worked hard for and to be able to spend quality time doing exactly what you want to do, but how do you get there?All too often, many of us make critical financial mistakes that can hinder our retirement living experience. We do not plan properly or take into consideration all of the variables that could serve as obstacles throughout our retirement journey.
Origin Active Lifestyle Communities, with locations throughout Alberta and British Columbia, Canada, understand that retirement planning can be an overwhelming process, but we are here to help. We have brought to attention a few common financial mistakes that individuals can make when they plan for retirement in the hopes that you are able to avoid them and start your retirement lifestyle with ease!
1. Lacking a Plan
The most critical step in retirement planning is, believe it or not, the plan itself. Without a plan, you are essentially setting yourself up for failure. You will not know what your expenses add up to or how much income you will need to support the lifestyle you are anticipating to maintain throughout your retirement.
According to BNN Bloomberg, a poll taken by the Canadian Imperial Bank of Commerce reports that 43 percent of women nearing retirement age (55 years and older) do not have a formal financial retirement plan.
Set realistic expectations, noting any and all expenses, and write them down. This way, you can see exactly what you need for your retirement living. Origin Active Lifestyle Communities offers a Cost of Living Calculator on our website to assist you in developing your retirement financial plan.
2. Saving Improperly
Even though many of us lack a formal plan, we are still saving for retirement; however, are we saving proactively or in the right ways? Just like with most things in life, there is a right way and a wrong way to do it.
Start Saving Too Late
Many of us neglect to start saving for retirement right away. When we are just beginning in our careers, retirement age seems far enough away to push aside thoughts of needing to save for when that day comes.
Jean Riddell, with Credit Canada, states, “…by starting early, your funds will have a chance to compound over time. This way, you’re not trying to play catch up in your later years…”
Not Saving Enough
It is recommended that you put 10 to 15 percent of your annual income toward your retirement funds. Many of us fail to do so because 10 percent would be too much to handle. The solution to this is to work your way up to 10 or 15 percent from wherever you are starting now. Increase your savings rate in small amounts. This way, you are still saving more money, but you will not feel a substantial hit.
Racking Up Debt
Debt is problematic at any age; however, when planning for retirement, it can be detrimental. Living off of your savings is hard enough, and to still be paying off debt can ruin your retirement planning. Pay off your debt as early as possible. “The average Canadian owes over $8,500 in consumer debt (non-mortgage), and it continues to grow…all this money could be going to your personal retirement fund instead of funding your creditor,” writes Jean Riddell.
3. Failure to Recognize Your Needs
It is up to you to determine a lifestyle that fits with your finances while also accommodating your wants and needs, but do not make the mistake of not factoring unexpected life events into your retirement plan.
Underestimating Your Lifespan
You do not know for absolute certainty how long you are going to live, and it is important to account for this variable in your retirement plan.
In fact, Jacqueline Nelson and Angelina Chapin, with Canadian Business, write, “This is one factor in your retirement plan where you want to be as optimistic as possible…The society of Actuaries reported in 2000 that there is an 81 percent chance that one or both members of a 65-year-old couple will live to age 85, and a 58 percent chance that one or both will make it to age 90.”
Overestimating Your Ability to Continue Working
At this point in your life, you may plan on working well into or through retirement. Do not rely on this idea to substitute for financial savings. Unexpected health problems or concerns may arise, causing you to stop working. If working through retirement was your only plan, you are left without a safety net to fall into. If you love your job and want to work, that is great. Just do not make it your only retirement plan.
Retirement planning takes a lot of long, diligent work, but you will be happy to have created and stuck to a plan when you are ready to retire.