Many of us want to enjoy a comfortable retirement. We think about what we can do, and we save up, doing our best to build up our nest eggs so that we can do what we want in retirement (or semi-retirement, as the case may be). However, while you are think about your comfortable retirement, you might actually be missing some of the items that put your retirement at risk. Here are 5 things that could be putting your dreams of a comfortable retirement at risk:
1. Inadequate Savings
Many of us are putting something away for retirement. But is it enough? Many of us have an unrealistic view of how quickly our money will grow, and by how much. While the most important thing is to get started with retirement saving, if you are still only putting in $50 a month after you have a better job and a company match, you are doing your retirement a disservice. Get real about how much you need to be setting aside. There are retirement calculators out there from CNN Money, Kiplinger and Bloomberg, among others. At the very least, use a simple savings calculator to estimate how your money will grow.
2. Not Securing Income Streams for Retirement
Once you quite your main job, your steady income evaporates. This means that you need new income streams. Whether you plan to live off interest (and withdrawals) from your nest egg, or whether you have another plan, you need to start thinking about income now. If the market crashes right before your retirement, earnings from your nest egg probably won’t be adequate. Think about income investments, how you can get royalties, how you can get steady income from doing a web site, or even how you can work part time or work online in order to provide a little extra income. Think about where your income is coming from, and remember that government income benefits might be cut in the future, so relying on that for income might be a problem.
Inflation is a largely silent problem. It erodes your real returns, reducing your buying power. If inflation is growing at 3% a year, but you’re only seeing an increase of 2% a year, in real terms you are actually losing money. It is important to do what you can to find ways of creating a portfolio that at least keeps up with inflation, preferably beating inflation handily. You can protect part of your retirement portfolio with help from inflation protected securities in the form of special government bonds, but it is a bad idea to put everything in such low risk/low yield securities, since you risk winding up with inadequate savings.
Making interest payments, and saddling yourself with obligations is a surefire way to risk your retirement. Instead of putting money to work for you, debt takes your money and puts directly into someone else’s pocket in the form of interest payments. Paying off as much debt as you can before retirement, and carefully living within your means to avoid incurring further obligations is necessary if you want a successful retirement.
5. Long-term Care
It seems a long way off, but long-term care is a very real possibility. With longer lifespans, the chance that you will spend time in a long-term care facility has increased. While there are some government long-term care facilities, many of them do not provide the comforts that many would like. Other facilities, though, can be expensive and drain your accounts quickly. You can consult with a financial professional to help you figure out how to provide for this possibility with long-term care insurance, annuities or some other means.
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