Why is it so hard to plan for retirement? The problem is people are not wired for long term planning or for the risks involved in retirement savings. They tend to be optimistic, but fail to plan for incidents that could happen in the future. For example, wining the lottery occupies a person’s mind, due to its positive effects on life, more than retirement preparation. As people age they increasingly push negative thoughts aside, and procrastination then becomes a problem, due to the illusion of more time in the future ahead.
If it’s not enough that people aren’t wired for long term planning, the short term tends to get in the way. Many people site day-to-day expenses and cost of living as the reason they can’t save for retirement. Distractions mount, as families grow and the interests of the children start to take center stage. Companies continue to cut retirement plans or stop contributing to them all together. Before long, life has leapt into the future and the time to start savings seems to have passed by. Getting the retirement planning advice is key to making up time and finding the right retirement plans.
Understanding Life in Retirement
Life brings about many unforeseen changes and taking them into consideration will help with retirement preparation. Retirement is long these days, lasting two to three decades or more. As time goes by, so often do interest rates, so it’s important to understand the worth of those dollars in the future. If interest rises 3% every year a $10 pizza today will cost.30 cents more next year. It’s best to be prepared for unforeseen things, for example stock market declines, a very long life, long-term care for unseen illness or even assisted care. Medicare will not cover a retiree’s entire healthcare, plan accordingly for a supplemental plan.
Develop a Plan
There are many things people can do to prepare for retiring, but the most important thing is to start saving now. At the age of 50, a worker can contribute more to their 401 (k) and IRA to increase their savings. Working past the age of 62 will help them save more money. Delaying Social Security benefits from age 62 to age 70 will increase a retiree’s base benefit by about 75%. Once retired, down sizing to a smaller house will cut down on taxes and utilities. Getting retirement planning advice through one of the many mutual fund companies like Fidelity, T. Rowe Price and Prudential will help a worker understand stocks, bonds and annuities that can contribute to their fixed income in retirement.
Understanding Is Half the Battle
There are many challenges people face every day that contribute to the downfall of retirement planning. A person’s inability to plan long term, see future risks, and ability to procrastinate are big obstacles to retirement preparation. More barriers cross a person’s path, as families grow, companies cut back benefits and time speeds ahead. Understanding what retirement looks like will help in its planning. Working longer and delaying Social Security benefits will help to increase savings and benefits. Finding the right resources is essential to assist the retiree’s savings and potential contributions to a fixed income.