For many people heading into retirement, there are a number of factors to consider when it comes to outlining their Retirement plan. But with the recent economic downturn due to the COVID-19 outbreak, a lot of soon-to-be retirees are having to rethink how they will plan the rest of their lives.
What’s more, some retirees nearing the end of their careers simply haven’t sat down and written out their goals and expectations. In fact, only 12% of retirees currently have a written plan, according to a 2018 survey from the Transamerica Center for Retirement Studies. An additional 42% have a plan, but it’s not documented.
Fortunately, it’s never really too late to start asking, What is the best retirement plan? Do I need to adjust my 401k? Taking steps to be proactive can help retirees plan better and avoid costly mistakes.
Here are some of those costly retirement plan mistakes and how to avoid them.
Retiring Too Soon
Working even a few years past what is planned can pay out a major bonus in retirement security. Most people consider 66 to be the age of retirement, yet about half of all Americans don’t wait that long. Retirees can avoid the early-filing benefit reductions imposed by Social Security by working until their full retirement age. And at the same time, retirees-to-be can keep contributing to their retirement-savings plan, which can help build additional balances that can be put to use in the market.
Underestimating the Cost of Health Care
Health care is one the most expensive and polarizing topics for retirees. Even for those on Medicare, health care costs can end up chipping away a big chunk of their spending power and economic security. Out-of-pocket expenses for people in retirement have risen year over year for the last two decades, and that doesn’t include the possibility of needing long-term health care coverage.
Costs related to health care pose a major risk to retirement security, so it’s important to understand how to forecast and plan for this expense while also managing spending.
Not Diversifying Portfolios
It’s common for a retiree who has worked at the same company for many years to gather a large amount of stock in that company. Some retirees choose to not pursue diversification to their portfolios. A retiree’s investment portfolio should hold no more than 5-10 percent of any one stock, so that someone’s portfolio can be protected in case an investment ends up going in the wrong direction.
Having Outdated Ideas on Retirement Planning
Most people who are near retirement age have an idea of how much they have accumulated over the years, as well as how much they will need to spend in retirement and how long their money will last. As long as the economy continues to struggle–most economists give the U.S. the rest of the year to level out–retirees need to look at wisdom around the expected annual rate of return, inflation rate, GDP growth, and more. Any one of these variables can break someone’s retirement plans. Potential retirees should consider updating their retirement plans using a number of market returns assumptions and rate of inflation.
About The Hilb Group
Deciding what coverage you need and what limits and deductibles make the most sense can be tricky. Founded in 2009, the Hilb Group has been helping clients to make sense of their options and make the smartest choices for their circumstances. Whether you need Warehouse Insurance or any other type of business or personal coverage, we encourage you to contact our friendly, experienced, and capable team today. Call us at (800) 776-3078 for a consultation.