Are they really preparing for retirement?
It can be easy to make a contribution to an IRA and put the idea of retirement in the back of your head — especially if you’re a younger employee.
But simply making that contribution isn’t enough. It’s very easy for employees to make a mistake that’ll end up costing them down the road.
USA Today consulted different financial planners and found several commonly overlooked aspects of retirement planning. It’s worth bringing up with your staff.
Do you have a budget when you retire?
Some financial planners say that retirees will spend 80% of what they spend during their working years. This is misleading. It assumes that you’ll be spending less on the commute, work supplies and clothing, dining out, etc. But in reality, retirement is the time when you could easily spend more.
Think about it: It’s easier to spend eight hours a day in an office and not spend money than it is to have a bunch of free time to shop, travel, eat out, etc. Plan to have a budget when you retire and stick to that budget.
How are you preparing for inflation?
Conservative retirement contributions are often a product of not calculating inflation. A good rule of thumb is assume you’ll have 25 years of retirement, plus 3% inflation. Plan accordingly.
Why are you so sure you can work in your retirement years?
Some employees purposely will plan to save less and assume that they’ll continue working in their retirement years. That’s a nice optimistic view to have, but how many 70-year-olds do you see in a typical workplace? It may seem callous but you can’t assume that you’ll be able to keep working into your sixties or seventies, or that jobs will want to readily offer you a job. You can’t predict the future.
How about health care costs?
Medicare doesn’t cover everything, including vision, dental and hearing. Experts say, retirees typically need help in at least one of those areas — and it could mean spending a huge chunk of your retirement to take care of. Plan accordingly.
Do you have tips for your employees when it comes to retirement planning? Let us know in the comments below.