“Lifestyle choices, cash reserves, tax planning, estate planning, insurance, education funding and planning for life after work (retirement) are all important considerations for any comprehensive financial plan.”
As you put together a plan that combines all your financial priorities to help you to pursue your goals, it’s vital to be certain that the plan you are implementing is appropriate and customized to your needs.
nj.com reports in the article “Retirement plans that might not pan-out” that, unfortunately, many people start plans that are based on strategies, scenarios and assumptions that may prove unreliable and unsustainable. That can mean bad results. So as you start to plan, exercise caution if you’re considering the strategies below.
Working forever. Frequently people think they’ll never have enough money to retire. This drives people to look at extending their working years as a possible answer. This can make sense for some, but in many cases, people assume that they’ll “never stop working” and use this as the solution for their financial planning concerns.
Remember, we’re all living longer than ever before, and you may experience health issues, ageism and skills obsolescence that can restrict the length of your career and or the earning potential during this phase of your life. There’s just no way to tell how long your health will let you work on either a full or part-time basis. Too often, people make assumptions about how long they have to work without ever creating a real financial plan.
Assumptions on life expectancy. Some seniors use a shortened life expectancy assumption to make retirement seem more feasible. However, that’s another assumption that’s based on something out of your control. Life expectancies are also being extended, not shortening. Be sure to consider the impact of longer life expectancies on the sustainability of your plan. Have you saved enough to have enough money at age 90 or 95?
Downsizing. Your home is usually one of the bigger investments a person makes, so downsizing or “rightsizing” your home is often seen as a way to reduce costs and improve the quality of retirement. Swapping a larger, more expensive home for a smaller one may be a great way to reduce costs, especially if you can use the equity proceeds towards a mortgage on your next purchase.
However, reducing the size of your home may not certainly decrease expenses, as much as you might think. That’s because real estate tax reductions may be offset by things like new homeowner’s association fees. There’s also paying off debts, realtor fees, moving expenses and costs associated with the next home that can leave little gain.
When you’re financial planning, apply realistic strategies and assumptions that will help you pursue your goals.
Reference: nj.com (June 14, 2019) “Retirement plans that might not pan-out”