31 Major Retirement Issues You Need To Address Before Retiring
It’s of great value to plan and build your retirement nest egg if you want to have a happy retirement, in order to achieve this, you need to avoid these retirement issues which are major threats to retirement. Saving for retirement is very difficult enough, once everything goes accordingly, however, individuals often encounter serious problems on the way to retirement nest. Even though one of these issues on its own might not spell disaster on pre and post retirement, but altogether, these issues with retirement can derail even the soundest retirement plans you have. By knowing the threats that could ruin your retirement plans and how to avoid them, you might be able to retire happier. Read also The Definitive Guide To Choosing The Best High Interest Bearing Savings Account
The Biggest Threat To Retirement
If you want to avoid the biggest retirement issues, you need to be realistic of your future plans and think ahead. But unfortunately, it’s quite too easy to make the wrong financial plans when preparing for retirement.
√ Once you realize that your retirement savings aren’t on track, make changes while you are still working and create afinancial plan.
√ Save as much as you can by contributing to a 401(k) and if your employer offers a 401(k) match, take advantage of it as well.
√ Make your investment wisely and find a trusted financial advisor to help you with investment choices and keep your portfolio balanced.
Keep taxes and penalties in mind too if you are considering withdrawing money from your retirement accounts.
√ Plan for healthcare costs in retirement, pay off debt and delay your Social Security until age 70 to help maximize your profits. Read also 21 Woeful Budgeting Mistakes To Avoid Right Now
Retirement Issues To Avoid – Retire Comfortably
Be aware of the below retirement-saving setbacks if you hope to build a robust bank account in the coming years.
1. Having Grown Kids drawing Your Retirement Money
A lot of people want to help their children succeed in life, but you should be cautious against sharing too much of your retirement money with grown kids. You wouldn’t be stay forever and children needs to stand on their own. It’s vital to teach your kids to be financially independent and they will perhaps thank you later. Read also 10 Best Ways To Build Wealth Quickly With Or Without Money
2. Saving In the Wrong Way
Not saving in the best way is of the worst retirement issues. Unless you are fortunate enough to inherit a large sum of money or win a lottery, you will likely need to save a great deal of cash during your working years in order to retire comfortably when time calls out. Plan ahead to ensure that you are putting enough aside for whatever the future will bring. While there are many ways to save for retirement including SSNIT contributions, a 401(k) or an IRA, all your money may not be in all the above accounts but at least, you should have one or two accounts active. You should also make sure any money in a standard savings account is earning as much as possible for you.
3. Keeping Too Much Mortgages and House Rent
An “oversized house” can be a serious financial burden for individuals trying to save for retirement and it’s a bigger part of retirement issues. A house that is too large for your needs can become a liability, between the cost of keeping it up and serving property taxes. Even though it is normal to feel quite sentimental towards a home or you want to avoid the stress of moving from home to home. If you are trying to save for retirement, you should consider relocating to a more appropriately sized home which you can manage with minimal cost. Read also 20 Creative Strategies To Save Money In Daily Life – The Smart Guide To Gain Control Of Your Financial Future
4. Mortgage in Retirement Period
Actually, depending on your situation, having mortgage in retirement could be a blessing or a curse. If your mortgage payments are low, keeping that large property might not be retirement issues. Otherwise, if high house payments are preventing you from adding to your retirement savings and contributions, then you need to consider selling that high-cost property and move to one that is more affordable and easier to accommodate you without any retirement issues.
5. Giving Too Much Money Too Early
You might be tempted to give some away to family members or a favorite charity if you have extra funds. There are some serious tax benefits to donating your retirement assets to charity, but you need to be mindful of timing too. People who give their money away too early risk outliving it too later, so think twice while donating your retirement property. Read also 8 Simple Ways To Grow Your Bank Account In A Month
6. Huge Medical Bills
Saving enough for retirement is difficult, but when you add the burden of paying for healthcare during your retirement years, the goal can seem unreachable. Annually, retiree healthcare cost estimates that, couples in their mid-60s can expect to spend huge sums of retirement funds on medical expenses during retirement.
Large, debilitating medical expenses can decimate your savings. It is advisable that soon-to-be retirees who are still working to contribute money to a health savings account or health insurance plans whenever possible to avoid retirement issues in the retiring years.
7. Long-Term Care Expenses
A medical situation that leads to the need for long-term care can deplete your retirement nest egg quickly. Long-term care costs can be staggering and have gradually increased over the years. Furthermore, a research revealed that one in seven adults will one day have a disability requiring care for more than five years. But unfortunately, only a small fraction of people have long-term care insurance as it stands.
8. Finding Yourself Part of the Sandwich Generation
Aspiring retirees often find themselves caring for both adult children and aging parents(worst retirement issues). Family members can be a drain when on a fixed income and resources. With that, instead of saving for holidays, vacations and larger expenses, your resources are set on the older and younger generations.
The best solution this retirement issues is to plan ahead by creating a system to grow your assets as you save for retirement and to protect them once you have stopped working and heads for retirement. Read also How To Practically Reward Yourself With Ten Percent Paycheck Savings Every Month
9. Unexpected Major Expenses
Because you have stopped working doesn’t mean life stands still. Expenses can’t always be predicted at the outset and even the most unexpected costs can threaten your financial health in retirement. Putting expenses like roof repairs and new cars. It is very essential that in your day-to-day budget, you still save for these expenses. On fixed incomes, not only might it be harder to qualify for a loan to cover the costs, the loan payments could cause issues to your budget.
10. Pension Crises
Social Security and healthcare costs might dominate the headlines, but the pension crisis that many are confronting is just as worrisome. In most cases unfunded pension debt rises more significantly, jeopardizing the retirement plans of many who are currently working. As state finances become further stretched, the health of the pension system is likely to suffer in kind, another big retirement issues to address. Read also 8 Simple Ways To Grow Your Bank Account In A Month
11. The Myth of Spending Less in Retirement
Many people assume that they will spend significantly less money in retirement than they do during their working lives, which isn’t possible. This is usually a mistake because other expenses may increase, such as travel and healthcare costs. You should also be realistic with your retirement spending instead of just assuming that it will be less. Budget appropriately for retirement now to make sure your retirement years are comfortable and profitable.
12. Taking 401(k) and Retirement Contribution Loans
Taking a loan from your 401(k) or retirement contributions can seem like a good idea when times are tough. If an employer terminates you while you have an outstanding loan, however, you could wind up taking an unwanted distribution from the plan, owing taxes and a penalty if you can’t pay it back immediately. Borrowing from your 401(k) and other retirement savings can get costly and will put a significant dent in your retirement nest egg, this usually cause retirement issues. Read also Financial Literacy Strategy To Build Sustainable Wealth
13. Sticking to Minimum Default Contribution to 401(k)
Putting your 401(k) contributions on autopilot can cause serious retirement issues when it is time to retire. Some employers make all employees contribute a minimum amount to their 401(k) unless they opt out of the benefit. If your mandatory contribution is too small, for instance, 2% of your pay, you will likely miss out on your savings goals. In an era of pension and Social Security crises, employees must take greater control of their financial destiny by contributing more to their 401(k) retirement savings.
14. Investing Too Conservatively for Retirement
It goes without saying that nobody wants to lose money on their investments. Being too conservative with your portfolio could cause you to come up short with regard to retirement savings, though. By taking a few calculated risks, you can build a better nest egg and ensure that unexpected expenses don’t leave you down. Read also 3 Best Salary Negotiation Tips To Help Secure A Higher Salary
15. Withdrawing Your 401(k) Money When Leaving a Job
It’s not uncommon these days for workers to switch jobs multiple times over the course of their careers. But unfortunately, many people make the mistake of withdrawing their 401(k) money when they switch jobs. Not only does withdrawing prior to retirement reduce the size of your savings account, but it also causes you to lose growth and face a potentially hectic tax bill as well. This causes big retirement issues during the golden years.
16. Going on Retirement Too Early
While everyone has fantasies about retiring at age 40 or 50, the reality is that few people can afford this luxury, in part to longer life expectancies. No matter how large your retirement savings might be or how frugal your lifestyle may be, retiring too early can ruin your well-laid financial plans and affect your quality of life down the line or early retirement. This is one of the issues of retirement you should necessarily avoid. Read also 15 Simple Budgeting and Debt Management Strategies To Become More Financially Stable
17. Inability to Get Full Employer Matching Contributions
retirement issues – If you are not taking advantage of your employer’s 401(k) matching contributions, you are missing out on a valuable opportunity to grow your nest egg for retirement. This is a part of your compensation package and should always be utilized to the fullest extent. If you can’t afford to contribute enough, you should adjust your spending habits and lifestyles to take advantage of this “free” money relatively.
18. Heavy Company Stock Investments
Yet to retire individuals might be tempted to invest in their own companies but be cautioned against putting too much of your money in one place. However, even if your company’s stock has performed well in the past, it’s only wiser to diversify your retirement portfolio so that your livelihood is protected against serious retirement issues.
19. Inadequate Life Insurance
Paying too little for life insurance now can affect your plans for your family in retirement. Life insurance gives breadwinners the peace of mind that comes with knowing surviving spouses will be protected after they are no more. When saving for retirement, don’t forget to invest sufficiently in your life insurance plan. Read also 4 Important Steps To Take Right Now To Cut Down Debt And Secure Your Financial Future
20. Lack of Disability Coverage
Yes! It’s not enough to save for healthcare costs in retirement, of course, individuals should also purchase disability coverage to pay for unexpected costs including sicknesses or injuries. It typically constitute 60% of your former earnings, disability payments let workers maintain their previous lifestyles after an injury and prevent them from having to withdraw from retirement funds to afford basic necessaries of life.
21. Saving for Education Instead of Retirement
It’s no secret that college tuition fees have gone up in recent years. While it’s natural to wish paying for your Ward’s education, persons nearing retirement shouldn’t make the mistake of paying exorbitant college tuition bills at the cost of their own savings. If you opt so, the last thing you probably want is to become a burden on your kids in retirement because you neglected to save appropriately in your working days, hence, serious retirement issues.
22. Ignoring the Impact of Inflation
Actually, inflation is a major threat to retirement if ignored because it’s a hidden tax on savings. You have no control over it, it can’t be predicted and it has an insidiously compound, erosive effect, It takes away at an otherwise healthy retirement fund just like cancer is to a healthy body. Therefore, serious retirement issues if unchecked. You need to stay abreast off inflation costs to avoid unpleasant surprises down the line to your retirement savings. Read also 5 Important Good Credit Card Habits To Improve Your Credit Score Daily
23. Wrong Decision-Making
Bad decision-making by people saving for retirement is a significant risk. For example, putting your money in a well-performing mutual fund in the belief that it will continue to climb higher is a perilous choice that is often based on wishful thoughts and not reality. In the long run, making financial decisions based on bad assumptions and misinformation can result in serious retirement issues and keep you from enjoying the retirement of your dreams. Make good and informed decisions to avoid issues with your retirement.
24. Poor Allocation of Assets
Retirement issues of Poor asset allocation is a big threat to your retirement. Even though the traditional advice is to subtract your age from 100 and use this value as the percentage of bonds in your portfolio, a more cautious approach is required. The fact is that, investors can lose money in bonds or spend their time chasing yields since rates are low.
This is a mistake you should not make so close to your retirement. Read also 7 Practical Daily Financial Habits That Will Positively Improve Your Life
25. Neglecting Your Own Needs
Most people nearing retirement focus on the needs of others instead of their own self-interest. If you are too busy taking care of other people financially, you might find yourself excluded from your own retirement plans. For instance, when you loan money to family members or borrow for your Ward’s education, you are tying up precious funds that could be invested toward your future. You shouldn’t invest more on others financially when you are nearing retirement.
26. Unexpected Layoff
Unplanned job losses can be highly problematic and retirement issues for people planning for retirement, especially if they don’t have emergency funds set aside. For instance, individuals in might be on track with their retirement savings until they get a notice job lay off in 30 days. Because they might be unable to find a job that pays the same may cause them to dip into their savings to cover the gaps from old salary and unemployment benefits. In this case, may be, they saved money in their 401k but never set up savings for an emergency or similar situations, which could cause serious retirement issues. Read also How To Achieve Your Financial Goals Easily As Couple
27. Lifestyle Inflation
Most soon-to-be retirees need to be conscious of their spending habits and avoid buying more than they can afford. This can be a huge threat to your retirement, because it can cause you to buy stuff based on your income as it increases, instead of putting more of it toward retirement. Most times, when we get an increase in pay, people tend to think about the next thing they want to buy right now rather than thinking about the future and saving more.
28. Not Saving Now
With compound interest, every amount you save now will continue growing until you retire. There is no better friend to compound interest than time. The longer your money accumulates, the better. Instances of “spend now, save later” include remodeling or adding on to a home you will only live in for a fewu years or financially supporting adult children as said earlier, note that your children have longer to recover than you. Also, cut down on expenses and prioritize saving at least 10% to 15% of total income. It should go into retirement savings over your working life. Read also Between Age 20 And Retirement, Check Out How Much Money You Should Have in Your Savings At Every Stage Of Life
29. Not Having a Financial Plan
If you want to avoid sabotaging your retirement and running out of money, create a plan that considers your expected lifespan, planned retirement age, retirement location, general health and the lifestyle you would like to lead before deciding on how much to set aside. Try updating your plan regularly as your needs and lifestyle change, ensure that your plan makes sense for you.
30. Not Rebalancing Your Portfolio
Rebalance your portfolio quarterly or annually to maintain the asset mix you want as market conditions change or as you approach retirement. The closer you are to your last day of work, the more you will likely want to scale back your exposure to equities while increasing the percentage of bonds in your portfolio.
31. Poor Tax Planning
If you believe your tax bracket will be higher in retirement than during your working years, it may make sense to invest in a 401(k) as you will pay taxes on the front end and all withdrawals will be tax-free. Plus, you wouldn’t pay taxes not just on your investments, but on all the money those investments have earned.
On the other hand, if you think your taxes will be lower in retirement, a traditional 401(k) is better since you avoid high taxes on the front end and pay them when you withdraw. Taking a loan from your regular 401(k) could result in double taxation on the borrowed funds since you must repay the loan with after-tax cash and your withdrawals in retirement will be taxed too. Read also How To Save Money Every Month With These Simple Monthly Savings Tips