Retirement is an exciting life event yet most people underestimate the amount of
preparation that goes into retirement planning any silly mistake in the
pre-retirement phase can rip you off the financial freedom and sanity that's
supposed to come with retirement luckily in this video i will share with you five
retirement mistakes you absolutely must avoid mistake number one underestimating
how long you will live conventionally retirement means stepping out of the
labor force so that you can finally enjoy the fruits of your labor but one
question you should ask yourself is this how long will this fruitful season last
to answer this question you'll need to realistically determine the number of
years you will live after retiring but this is only easy on paper for obvious
reasons many people perceive talking about death to be scarring and
uncomfortable yet estimating the length of your life is paramount in retirement
planning knowing how long you live is the chief determinant of how much money
you'll need to pump into your fund plus what your retirement portfolio will look
like for example if you retire at 60 and live up to 90 years old your retirement
savings will need to last for 30 years and although every person's time of
death is a mystery there are certain factors that can help you conjure a more
accurate picture for instance do you have a terminal illness does the nature
of your job expose you to life-threatening hazards is there
anything your doctor knows that your retirement plan or doesn't these
questions can help clear the air of unpredictability surrounding life
expectancy as a future retiree the worst mistake you can make is to underestimate
how long you live this mistake can cost you in terms of money and time the thing
is the longer you live the more money you'll need to save and invest and the
earlier you'll need to start people who underestimate their life expectancy
approach their retirement goals with lackluster whether this means starting
late and losing out on compound interest or outliving their retirement funds most
of them end up having unpleasant retirement experiences if you're
struggling to visualize how long you live financial experts recommend that
you adhere to three important rules the first one is that you make sure to max
out in your investing capacity whatever your income is make sure you're out
stretching your savings muscle and taking advantage of tax saving loopholes
secondly any retiree should save at least 10 times your annual income before
leaving work and lastly if you're still clueless on when you'll breathe your
last breath 25 years is a good estimation to work with when it comes to
the number of years you'll be retired mistake number two overestimating how
long you can work for there are many uncertainties in life and job security
is one of them if you love your job your intention is probably to soak in the
benefits of employment beyond your retirement age but the thing is with
intentions is that they're just that intentions one bitter pill to swallow is
that you can't be too sure about how long you'll work for every employee runs
a risk of layoffs physical incapacitation or involuntary early
retirement due to other unavoidable circumstances while the goal is to max
out on employment benefits and social security checks overestimating your
employment stint will hurt your retirement outlook thinking that you
work until or beyond 65 might dilute you into saving less money than you
realistically should this is why during retirement planning adopting a
pessimistic mindset is highly advisable by assuming the worst you're giving
yourself enough wiggle room to make quick adjustments in case your plans
backfire so if you're planning to retire at 65 make sure you save enough to push
you through in case you're forced to leave work at 55 also most retirees
suffer the consequences of assuming they land another job immediately after they
retire although your wealth of experience does give you some form of an
advantage many aged employees still find it hard finding a job post retirement
age discrimination and skills gaps are some of the factors that may hinder you
from gaining a sustainable job in your golden years to be on the safer side
start your own side hustle while still working this way you'll have something
to lean on even when your paycheck becomes redundant diversifying your
income sources will also free up your budget and enable you to double your
savings efforts mistake number three ignoring the financial impact of health
events the implication of dwindling health and old age is another key
consideration that you can't afford to ignore although the ideal scenario is to
sail through life without falling ill this contradicts reality as you grow
older your system will begin to wear out and the effects of illness will get more
and more severe therefore making plans for long-term health care will help you
emerge with a wholesome retirement plan ideally a standard retirement plan
should canopy the cost of medical checkups diagnosis treatment and nursing
a survey by the fidelity retiree healthcare cost estimate reveals that an
average retired couple should have at least three hundred thousand dollars
saved to cater for health care this is assuming that they intend to pay for
health care out of pocket with the skyrocketing healthcare costs even a
sizable estate can get depleted quickly but that's where insurance comes in
start by exploring health insurance options offered by the government for
instance retirees in the us become eligible for medicare from the age of
65. however it's important to note that such health coverages aren't free albeit
cheaper you'll still be obligated to make monthly contributions towards
sustaining your medicare coverage moreover medicare isn't tailored to
long-term care or nursing home costs without proper planning a health event
that requires long-term care would knock your retirement plan off of its feet for
this reason consulting a long-term care attorney is key prior to kick-starting
your retirement journey make sure you know what your options are in terms of
long-term care insurance the good thing is many private health insurance
companies offer coverage that is designed to suit retirees if you're a
high income earner you can opt for high premiums that umbrella all medical
expenses including nursing home costs but if you're focused on keeping your
insurance costs at an absolute minimum make sure you put in place plans for
long-term health care whether this means arranging with family members or taking
advantage of social security the earlier you plan the better also don't forget
that the cost of long-term care insurance increases as time goes by
it'll be cheaper when you take your insurance policy of 55 then if you wait
until 65. if you wait until too late you'll incur heavy penalties that will
dig deeper into your aging pockets mistake number four underestimating your
retirement lifestyle costs ideally your retirement lifestyle is work free
carefree and somehow cheaper but when the time comes to get off the employment
train you'll realize that this is far from reality moving from a rigid
schedule to a relaxed work free lifestyle can be an expensive transition
to make lifestyle costs like housing health care debt travel and kids can
distort your initial plan and extract the goal from your golden years and this
begs the question what factors should you consider when forecasting your
post-retirement lifestyle costs primarily think about your housing
situation do you intend to relocate after retirement will you be buying a
new home or is renting a more feasible option it turns out many retirees run
off to relocate to the suburbs or to new countries blissfully unaware of the
costs that come with that decision to add a realistic perspective to your
intent make sure you know the cost of living in your ideal destination this
will make it easier for you to plan accordingly secondly travel costs can
also eat up your retirement savings now that your 9 to 5 isn't getting in the
way of your vacation time you're free to visit the caribbean without a care in
the world when boredom kicks in you simply flash out a map and pick your
next destination in theory this is literally every person's dream
realistically only a rich retiree can lift the scenario from their heads and
live in it what makes the difference between the retirees able to travel and
the one who isn't is planning if you intend to enjoy those laid back
afternoons in the hawaiian coast then start by drawing up an annual budget
that will cover your travel costs this travel fund should be able to take care
of costs such as accommodation flight fees shopping and other sightseeing
experiences also once you're past the age of 65 certain travel activities will
be off the table anything that includes climbing will be off limits hence you
should think about things when saving for your travel expenses lastly your
kids age is another factor to mull over in case your kids will still be in
college when you retire make sure your savings are enough to cater for them
this could mean investing in education insurance or including your kids
expenses and your retirement plan here's the bottom line when planning for
retirement it's important to make a correct estimation of how much you'll be
spending think about any debts you have and any costs that may spring up as you
age a retirement rule of thumb states that your retirement fund should enable
you to withdraw four percent of it annually making the correct estimation
will determine whether you'll need to get a side hustle to help sustain your
golden years mistake number five starting to save too late in life the
single most painful retirement mistake you can ever make is starting late this
may sound cliche but when it comes to retirement planning time isn't by your
side it never will be think about it like missing a train that only passes
once the only way to catch it is to make sure you're at the station before it
arrives however one question that many employees ask themselves is how are they
just too late well as 20 something year olds you might be tempted to think that
retirement planning is for the oldies which is those over 40 yet many people
who open their 401ks express regret for delaying their retirement plans if
you're earning an estate of a million dollars you need to start saving from
the day you get your first job starting early has two main benefits for one it
allows you to make smaller contributions and still meet your goals as a 25 year
old for instance you only need to pack away 380 every month assuming a 7 rate
of return in order to hit the one million dollar mark yet if you wait
until you're 45 you'll need to stash up to 1920 every month secondly starting
early allows you to take full advantage of compound interest the thing is
compound interest is like a superpower that makes your money grow from the day
you save it to the day you withdraw it these compounded gains accrue every year
and those who enjoy the most of it are those who start saving early even if
your portfolio consists majorly of stocks holding on to them for long might
set you up for those wholesome profits when you eventually offer liquidity so
if you haven't set the ball rolling the best time to start is now in fact if you
ask the rich how they've grown their wealth many will attribute their
financial success to the power of compound interest and in this next video
i will share with you the five ways millionaires invest to reach seven
figure wealth that i know will change your financial life forever