At WealthVisory, we begin our planning process with the SmartMethod, which focuses on a holistic approach to creating a financial plan that supports your goals and adapts to changes over time. While much financial advice focuses on what people should do to succeed in retirement, it’s just as important – if not more – to understand what not to do. There are mistakes that can have long-lasting consequences, affecting your financial stability and peace of mind. These blunders, if avoided, can protect the retirement you’ve worked so hard for.
When considering your retirement future, begin by avoiding these three potentially devastating mistakes:
- Not Having an Emergency Fund
An emergency fund is a cornerstone of any comprehensive retirement plan. It’s money you can access quickly if unexpected events occur, such as a health crisis or a family emergency. Without one, you risk derailing your retirement plans when life throws an inevitable curveball.
In fact, a Bankrate survey found that just 37% of Americans had enough savings to cover an emergency expense of $500 to $1,000. Financial planners typically suggest having at least three to six months’ worth of living expenses set aside.
As part of a well-rounded retirement strategy, it’s important to include flexibility for life’s challenges. Just as you’re briefed on emergency exits before a flight or a lifeboat drill before a cruise, preparing for the unexpected in your retirement journey can help protect your plans.
- Not Planning for Longevity
While living a long life is not a “mistake” in itself, failing to plan for it is a significant one. Many people don’t account for the possibility of living longer than expected, and others may avoid planning for the future altogether, assuming their lifespan will be limited.
The fear of outliving your savings is a common concern. Transitioning from the accumulation phase (saving) to the distribution phase (taking income) can be daunting for many retirees. However, it’s essential to prepare for the long term.
Creating a strategy that ensures your retirement income lasts throughout your life is key. Budgeting for inflation, healthcare, and changes in living conditions as you age can help secure your financial future, no matter how long it lasts.
- Not Preparing for the Unexpected (Including Early Death)
While we can’t predict when or how we’ll pass, failing to prepare for the financial consequences of death or disability is a serious oversight. The emotional toll on loved ones is undeniable, but the financial strain can be just as devastating. For example, when a spouse dies, Social Security, pensions, and other benefits are often lost or reduced.
Having a comprehensive plan in place to care for your loved ones financially in the event of your passing or disability is essential. Life insurance policies with accelerated benefits can offer peace of mind, providing financial protection if you become ill or need long-term care while preserving your estate for future generations.
A solid retirement plan addresses these potential pitfalls, ensuring that your retirement journey remains on course, no matter what challenges arise. By considering these factors, you can build the safety nets needed for a confident and secure retirement.
