Ideally, retirement is a time someone anticipates eagerly - a reward for a lifetime of hard work and solid financial planning. But nearly half of workers who haven't reached retirement yet aren't that excited about the so-called golden years. In fact, they have big concerns.
A Gallup poll showed 46 percent of those not yet retired expect they'll be financially strapped when they do retire. Gallup's tracking of that metric has reflected persistent concerns with retirement through the early 21st century. Fifteen years ago, only 36 percent of workers said they wouldn't have enough money to be comfortable in retirement.
"A lack of sufficient retirement savings is a common problem, but there's a lot more to the pie chart of a comfortable retirement," says Chris Hobart, a financial professional and CEO of Hobart Financial Group. "Even people who have saved and invested wisely don't factor in enough of the costs in retirement, from health care to single living and taxes."
Hobart notes five common retirement-planning mistakes:
Underestimating health-care costs. It's estimated that the average 65-year-old couple will need $280,000 in today's dollars for health-care costs, and that number doesn't include long-term care. "Typically, we look at longevity as a blessing, but the longer we live, the more likely we are to have health-care issues," Hobart says. "The No. 1 solution is being intentional about segmenting a portion of money to address long-term health-care issues and studying the applicable insurance products. Many Americans ignore this problem and hope they don't have to deal with it, and then when they do, it's too late."
Not having a plan for the surviving spouse. On average, women outlive men. "But for either spouse, the main factors to consider for a surviving spouse plan are the potentially reduced income, taxes as a single filer, where they'll live, and paying for the deceased spouse's final expenses," Hobart says. "Another problem results if the surviving spouse was never engaged much in the couple's financial planning. It pays for both spouses to have a good working knowledge about it."
Counting on Social Security to cover expenses. The monthly Social Security check usually won't pay the bills, especially if you still have mortgage payments. "You'll need to make up the shortfall with other sources of income,' Hobart says. "The important thing to look at here is, in a world where few people have pensions anymore, the onus on saving is on the individual retiree. It's more important than it's ever been."
Thinking you can dictate when you retire. One study showed that 51 percent of retirees retired earlier than they planned - and less than half did so by choice. "You have to expect the unexpected and plan for it well ahead of time," Hobart says. "Many things can happen - downsizing, health issues, taking care of a family member."
Signing up late for Medicare. The initial enrollment period is three months leading up to your 65th birthday, during the birthday month, or three months later. But if you don't enroll, your Medicare premiums can increase by 10 percent for each year you were eligible and didn't enroll. "Whether you like Medicare or not, you don't want to pay more for something when you didn't have to," Hobart says.
"There is no reason you should trip over these things that you can avoid early on," Hobart says.
Read the article in Advisors Magazine here