Some errors are more costly than others. With retirement planning, one or two mistakes could cause painful changes in your retirement plans. Here are some common mistakes:
Not considering long-term care needs. About half of us will spend time in a nursing home. While the average annual cost of long-term care insurance is $1,700, it will protect your other assets and provide for adequate care should the need arise. Failing to consider the effects of inflation and taxes. Many retirees find that they are still in a high tax bracket after they retire. And inflation could rob them of their purchasing power. Not saving enough in the years immediately before retirement. An all-out effort leading up to the final day of work can make a big difference in the size of your nest egg. Some people save a third of the final total in the last five years before retiring. Making big loans to family and friends. These loans have a way of becoming gifts (not always, but often). Overestimating how much you can withdraw from savings. Most advisors are comfortable with 3 to 5 percent, though some approve of 7 or 8 percent in the early retirement years when you are most active. Underestimating life expectancy. Most planners now use 90 or 95 years as a longevity figure. Making risky investments. If 7 or 8 percent fills your need, don't try for 17 or 18 percent.
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