Perhaps you’ve dreamt of traveling across the world during your retirement. Or maybe this would be your time to relax in the comfort of your home, such as tending to your garden or enjoying time with your grandchildren. Whatever your retirement goals, many seniors are discovering they are not financially secure enough to retire when they had planned.
Whether it be unexpected health care costs, inopportune financial decisions or failing to save earlier in one’s career, those entering retirement often do not have enough to maintain their current lifestyle through retirement. “Among those 55 to 64 years old, two-thirds of working households with at least one earner have retirement savings less than one year’s income, far below what they will need to maintain their standard of living in retirement. By a variety of measures, most households, even those with defined benefit pensions, are falling far short of the savings they will need.”
Planning for retirement is not always easy. Below are examples of some of the most common retirement planning mistakes to avoid:
Underestimating life expectancy– The average life expectancy in America in 2013 is just over 78 years old, according to 2013 data. The Society of Actuaries “found that more than half of Americans underestimate their life expectancy, and that their financial planning time horizons are too short.”
Not saving enough money– For people 10 years away from retirement, the median savings is $12,000.
Mis-managing debt– According to Fidelity Investments, nearly half of all baby-boomers expect to retire with at least some debt. People 55 and older accounted for 28.6% of bankruptcy filers in 2011, up from 22.9% in 2008, according to the Institute for Financial Literacy.
Not planning for health crisis– Nearly 8 in 10 seniors are living with at least one chronic health condition and a whopping 50% have two or more.
Underestimating inflation– The items that seniors frequently purchase (gas, medical care, food) often have higher rates of inflation than the average rate of inflation.
Mis-managing assets– USAA recommends thinking of retirement in phases: early retirement-60s to mid-70s, middle retirement- mid-70s to mid-80s and late retirement- mid-80’s to end of life and working with a financial planner to ensure you have enough to last through the end of retirement.
A reverse mortgage loan can be a useful tool to bring financial security to seniors. Reverse mortgage proceeds can be used however the borrower would like as long as certain requirements are met. Borrowers must be at least 62 years old, own the home or have sufficient equity, live in the home as their primary residence and attend HUD counseling. For more information about reverse mortgage loans and to find out if you might be eligible, please call 866-751-6105.