People are Making these HUGE Mistakes When it Comes to Retirement Planning. Are You?
When fit and young and gainfully employed, it is difficult to predict exactly when you will retire, the quantum of your post-retirement savings, and estimate funds needed for various purposes. While it is comforting to have reasonably accurate answers to these tough questions, chances are that you may be very wrong.
A recent survey of 1,000 senior citizens attempted to ascertain how elderly Americans were doing financially, and whether they made correct decisions during their income-earning years to live comfortably in retirement. The study revealed that 55% of senior citizens failed to save adequately for retirement, and 21% of those surveyed confessed that their greatest financial regret from their younger days was not ensuring adequate savings for retirement. Here are some major miscalculations Americans make in their income-earning years, which prove to be very expensive during retirement:
Wrong Estimate about Age of Retirement
Most pre-retiree Americans believe they could work well into their mid-sixties and almost 40% Americans in the W.T. Watson survey felt they would work into their seventies. Actually, many of them leave work much earlier due to health issues or inability to get suitable jobs. Nearly 33% workers complained about being discriminated because of their age or have witness it at work. Analysis by the Schwartz Center for Economic Policy shows that the actual unemployment rate for those above 55, is 2.5 times the average national unemployed rate. These figures reveal why 62 years is the most common age for applying for retirement benefits, even if most Americans are optimistic about working much longer. If you stop working earlier than expected, it impacts your financial security as you deplete your precious savings sooner than planned for.
Incorrect Estimate about Social Security Benefits
Social Security is actually designed to compensate 40% of pre-retirement income, but 59% of recent retirees and 53% of future retirees in the survey expected 50% of post-retirement expenses to be covered by Social Security benefits with most making serious miscalculations in overestimating Social Security benefits for themselves. Most future retirees expected $1,578 in benefits, but the actual monthly benefits received by current retirees hovers around the figure of only $1,341. If people waited until attaining the full retirement age, the amount increases to $2,639. Most Americans are over-optimistic about the Social Security benefits. Once you miscalculate when you are younger, the chances are that you end up saving inadequately to provide for your retirement.
Inadequate Estimate about Healthcare Costs after Retirement
Most future retirees who participated in the survey estimated the family healthcare costs at about 20% of their monthly Social Security income. Those who have already retired often quickly discover this to be a major miscalculation. The Bureau of Labour Statistics estimated the average monthly benefit for 62-year-old retirees at $1,076, while the average healthcare expenditure is about $500 a month. Those above 65 may spend over half of their Social Security check, primarily on healthcare. Failure to plan for emergent healthcare costs during your younger income-earning years, could ensure financial disaster if health problems crop up, when you retire. About 25% retirees confess that spiraling healthcare costs prevent them from living the kind of life they expected in retirement. 75% percent of senior citizens suffer from health issues, and said that health issues came earlier than expected, with many experiencing concerns about their health 5 years earlier than anticipated.
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