5 ways you risk going broke in retirement
Everyone wants to be able to retire comfortably but making that dream a reality is easier said than done. Even if you're socking money away here and there, there's no guarantee that you'll have enough cash for your golden years. In fact, you could be sabotaging your long-term financial goals without even realizing it. Here are five mistakes that can leave you feeling the pinch in retirement.
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1. Saving Without a Plan
Saving for retirement can be difficult when you don't have a plan in place. You may think that you only need to stash 10% of your income in your employer's 401(k). But depending on how much you've already saved (and how much money you'll need in retirement), you might need to save 15% or even 20%.
A popular quote says that failing to plan is planning to fail. If you don't take the time to think about your retirement budget and make sure that you're saving enough to meet your financial goals, you run the risk of shortchanging your nest egg over time.
2. Leaving Free Money on the Table
Contributing to a 401(k) is one of the best ways to start saving for retirement but not everyone uses it to full advantage. According to a recent study, 25% of employees don't save enough in their 401(k) accounts to get the company match. Over a 20-year period, each of these workers misses out on the chance to save $42,855, on average.
When you're saving for the future, every penny counts. Unless you can't afford to contribute the bare minimum, there's no reason to miss out on the employer match.
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3. Letting Your Debt Linger
Carrying debt into retirement can put a strain on your budget. Failing to pay off student loans, credit card debt or mortgage debt can limit your ability to enjoy a comfortable retirement.
If you're stuck in debt, it's a good idea to brainstorm ways to get rid of it as soon as possible. You can begin by looking for ways to make the debt you're carrying less expensive. For instance, you can transfer your credit card debt to a single card with a 0% interest rate or consider refinancing your home.
4. Forgetting to Save
It's easy to forget to save for retirement, especially when you're juggling multiple financial responsibilities and you have children who are preparing to head off to college. Since student loan debt is at an all-time high, it can be tempting to focus on helping your kids pay for school instead of planning for your own future.
While there's nothing wrong with helping your children avoid the burden of student loan debt, doing so could set you back financially in the long run. Unless you've already built up a sizable nest egg, spending $50,000 or $100,000 on tuition instead of saving doesn't make much sense.
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5. Forgetting About Medical Care
The number one threat to retirees' fortunes isn't an extravagant lifestyle. It's high healthcare costs. A recent study estimates that the average couple retiring at age 65 will spend about $245,000 on medical care in retirement.
If your retirement budget doesn't take the cost of healthcare into account, you could be saying goodbye to your savings sooner than expected. A long-term care insurance policy can help you protect the assets you've accumulated so you don't have to use them to pay for medical expenses.
Careful planning is important for anyone who wants to retire rich. Paying down debt, fine-tuning your savings strategy and looking at the bigger picture can keep you from going broke in the long run.
Related: Average retirement age in every state
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