Let’s talk about retirement. No work. Beach Town. Spending time with the grandkids. Golf. Hobbies. Doing what you want.
And no money? Rather than the idyllic retirement that many dream of, many Americans will be faced with a financial shortfall as they prepare for retirement.
Terry Parham Jr, is the Co-Founder & Financial Planner at Innovative Wealth Building. He shared some of the mistakes people make as they prepare for retirement and some of the dangers they face.
Assuming They Will Be Mortgage-Free
One common mistake people make is assuming they will have a mortgage-free home by the time they retire. While this is a commendable goal and achievable for some, approximately 35% of retiring homeowners will still have a mortgage. Failing to plan for this expense can leave individuals unprepared for meeting their retirement spending goals.
Not Considering Inflation
Another mistake is not considering the impact of inflation on spending goals. A spending target that starts at $3,000 per month can easily increase to $4,000 per month over ten years with a 3% inflation rate. When compounding over a 30 year retirement time horizon, the differences in total dollars needed can be quite drastic.
Not Counting Healthcare Costs
Many people do not accurately account for healthcare costs. According to a study by Fidelity, retiree healthcare expenses average around $500 per person per month. These costs are expected to grow at approximately 5% per year, which is significantly higher than general inflation. Furthermore, this estimate does not include long-term care expenses, which can be a substantial financial burden in retirement.
