6 Core Reasons People Fall Short of Their Retirement Goals
People often underestimate the need to save for their retirements. A lot of families are also guilty of putting away measly amounts every month, thinking they are doing enough. This false sense of security hits them hard when they are years away from their actual retirement. They are either forced to live a life of poverty or continue working well past their age of retirement.
To be able to plan your retirement, you first need to know the pitfalls that prevent people from achieving their retirement goals.
Retiring Too Early
Early retirement is a pretty popular goal. However, retiring early is only an option for the rich or people who plan their retirement flawlessly. Early retirement means you get fewer years to save for your retirement. You will also need to financially sustain yourself for more years than usual retirees. To understand how much you really need to save for early retirement consult professional retirement planning specialists who can analyze your goals and set a savings target.
Not Saving Enough
Retirement planning is not magic. You cannot invest a few hundred dollars every month and expect millions of dollars in payouts. It simply doesn’t work like that. In order to have enough funds, you need to make sacrifices now and invest a significant amount. For example, if you want to retire with $1.5 million you need to save $479 per month starting from the age of 20, if you are expecting a 6% annualized return on your investments. The monthly savings figure jumps to $1,296 if start saving for retirement at the age of 35. This brings us to the next reason why most retirement plans fail, not starting early enough.
Starting Retirement Savings Too Late
To get the full benefit of compounding interests you need to start early. Most retirement experts agree that 20 to 25 years is an amazing time to start savings. As you grow older you are forced to save more per month to achieve your target retirement amount.
Not Consulting a Retirement Planning Specialist
A retirement planning specialist not only helps you to figure out how much you need to save but also suggests funds that can deliver maximum return. While they do charge an amount, the fee you pay to these retirement consultants is well worth the money as you get to reap far greater returns on your investments.
Lack of Consistent Savings
To be able to gather enough funds for retirement, you need to put away an appropriate amount every month. There are more than a few investment funds that take money out of your account every month at a specific date. That’s the best option for most people. If you are manually investing every single month, be sure to be consistent with your savings.
Underestimating and Under-Preparing to Tackle Emergency Medical Expenses
An emergency medical expense can derail a retirement fund. People are often forced to tap into their retirement fund just so they can pay for an unexpected medical cost. This is why it’s always advisable to buy a solid medical insurance plan to protect your retirement funds.