The U.S. is approaching a major retirement crisis. The average person’s cumulative retirement savings
Mistake #1: Discounting the F
This is a catch-all mistake, because almost any retirement planning mistake you make, other than an accounting or mathematical error, is likely to be based on the same human frailty – discounting the future. In other words, treating your future self as if “his/her” needs are less important than yours. Once you retire, no matter how far off that is, you will still get hungry, your medical conditions will hurt just as bad (if not worse) and you will dream just as passionately as you do today. Start off with the right attitude.
Mistake #2: Underestimating Relocation Expenses (Especially Taxes)
When planning for retirement, it’s important to take into consideration relocation expenses in the form of cost of living and state taxes.
Take California, Hawaii, and Florida, for example – three of the most popular retirement destinations. All three states are relatively high in terms of cost of living, meaning that your retirement withdrawals will be higher, resulting in higher taxes to the extent that these withdrawals are taxable. California and Hawaii rank among the highest in the country when it comes to personal income tax, while Florida imposes no personal income tax at all.
Property taxes are another consideration. Hawaii, for example, boasts the lowest average property taxes in the nation, while Florida is about average, and California is only moderately above average. Also consider sales taxes, which vary considerably from state to state. California leads the pack with a 7.25 percent rate, while Hawaii is near the bottom at only 4 percent.
Mistake # 3: Underestimating Future Medical Expenses
Even with health insurance, your out-of-pocket medical expenses are likely to exceed $100,000 during your retirement. The longer you live, the greater these expenses will become. Don’t put yourself in the position where you’re banking on dying before you run out of money. Steps you can take to minimize your medical expenses and maximize your means of paying them:
- Live a healthy lifestyle starting today. There is probably
nomore effective step you can take than this one.
- Contribute as much as possible to a Health Savings Account.
- Purchase a whole life insurance policy that you can borrow against in the event of
- Enroll in a Medicare Supplement Plan
In addition to the foregoing, an “attitude adjustment” may be necessary. Don’t assume good luck health-wise. In fact, don’t even assume average luck. Factor in the possibility of catastrophic medical expenses as much as you can.
The Bottom Line
There’s a lot more than meets the eye to retirement planning, seek out the help of a professional with the estate planning skills to help you formulate a winning strategy. At Altman and Associates, we’ve spent decades helping our clients to put their retirement obstacles in check by thinking several moves ahead. Call us today at 301-468-3220, or fill out our online contact page, to set up a consultation at one of our offices in Columbia, Rockville, Washington, D.C., or Northern Virginia.