4 Retirement Pitfalls Your Financial Consultant Forgot To Mention
Retirement: for many of us, it\'s a day we look forward to. Finally we get the chance to kick back and relax. We\'ve worked hard all of our lives to ensure we can enjoy our golden years in some semblance of comfort.
But we all know the world is changing. Every year the cost of living rises. You need more money just to have a decent standard of living. When you finally retire you fully expect to meet that standard. But will you?
Throwing off the shackles of work when you hit the retirement age isn\'t without risks. There are plenty of pitfalls waiting; pitfalls like these:
The Rising Cost Of Fuel
As the population of the planet grows, there\'s an ever greater demand being placed on resources. Fuel prices are slowly but surely climbing. Every year seems to see the price of a barrel of oil hitting new highs and this upward trend will only continue.
Even if you plan to give up your car the cost of fuel will still hit you. All those cheap goods we like buying from China have to be transported somehow. For now, the easiest and most cost efficient method of shipping is in a container on board a cargo ship. But how long will this remain a cheap way to move goods around the world as the price of fuel rises?
Likewise, the price of food will go up as transport costs rise. In fact, the price of oil impacts on just about every aspect of our lives.
Your retirement fund might be adequate if you were to give up work today but can it cope with future demands?
Missing Out On Government Incentives
Sometimes the government will offer you some juicy enticements like a top up for your 401k but events like these are few and far between. In the long run, the government is trying to cut spending and make us more accountable for our actions.
Basically, you should be looking for every opportunity to boost your pension fund. The IRS allows savers to top up their contributions for anyone aged 50 or over. Adding an additional $1,000 to your IRA account, or up to $5,500 into your 401(k) account may not seem like a huge addition but it goes a long way to filling any gaps in your savings.
Likewise, not taking advantage of employment pension schemes, where an employer matches your contribution, could be likened to throwing money away. The most common plan requires you to put 6% of your earnings into you pension plan. Your employer then pays in 50c for every dollar you contribute. With additional tax breaks, every year you can add another $4,000 to your retirement fund.
Failing To Invest Enough Money
Because we\'re human we all get a little bit lazy from time to time. Even your hyperactive, ultra-marathon-running next door neighbor will have those moments where any small task becomes a major chore to be avoided. Likewise, failing to invest properly into your retirement fund could prove painful.
The current limits are shown below:
401(k), 403(b), 457 accounts, and SARSEPs: The annual contribution limit in 2013 is $17,500. Don\'t forget you can contribute an extra $5,500 if you\'re over 50.
SIMPLE plans: The contribution limit is $12,000 ($14,500 if you\'re 50 or older)
Traditional and Roth IRAs: The limit stays at $5,500 ($6,500 if you\'re 50 or older)
In the grand scheme of things, these sums might seem like large amounts. But if you decide to not take your payments to the limit then you may find your retirement becomes uncomfortable.
Rising Cost Of Medical Care
When we\'re young it seems inconceivable that we could ever be laid low by a minor injury or illness. But, as age creeps up on us and time takes its toll, our bodies start to slow. Inevitably, the minor irritations we experienced in our youth become harder and harder to recover from. But that\'s not a problem because you have medical care... or do you?
Not so long ago, to be comfortable in our golden years all we needed were some savings, a pension and a top from social security. But the spiralling cost of health care could see your savings decimated by even a minor injury or visit to the hospital. If you don\'t have any kind of medical cover you risk living out your days in far from ideal circumstances.
Now, because you\'re savvy, you\'ve already started planning for any mishaps by factoring health care costs into your retirement plan. But have you taken rising costs into consideration? The cost of health care in America has risen dramatically in recent years. In January 2013, it was estimated that the average American, aged 65, will need about $240,000 to cover future medical costs.
Mind boggling? Well, that\'s only the bill for medical costs. If you require long term care the figures are far, far higher ($750,000 in total)., putting off paying for your future health care costs seems far more attractive.Suddenly
Maybe it\'s time to make sure you\'re not going to become just another statistic in the minefield of retirement pitfalls. The Calculator Site contains a retirement planning calculator to help you work out how much you might need to save to meet your retirement goals.
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Last update: 11 March 2013
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