While the rate of people contributing to some sort of retirement plan has increased, the bad news is there are still mistakes people make when planning for retirement. U.S. News and World Report recently highlighted common blunders that can cost people in the long run. These include:
Not having a plan. According to the article, a third of adults have no financial plan for retirement. This makes it difficult to know how much is needed for retirement and how much to save. Retirement calculators are an excellent place to start. NADART.org offers several types of retirement planning calculators to get participants started on the right path. Employees may also want to consider meeting with a financial advisor. There are many that offer fee-based services in lieu of those that are asset-based.
Low-balling Spending. Many incorrectly assume that they will spend less in retirement. While many expenditures stay the same as when one is working, items such as discretionary spending and travel actually increase.
Overlooking rising health care costs. The U.S. News and World Report article cites a study by Fidelity Investments which shows that a 65-year-old couple will need about $225,000 to cover medical costs during retirement. This assumes the couple doesn’t have employer-sponsored healthcare coverage, which grows more likely as the number of employers offering retiree health benefits is falling.
Ignoring inflation. What seems like a lot of money right now is not going to seem like much 30 years down the road. A good rule of thumb is to assume an inflation rate of 4 percent when determining your retirement needs.
Retirement planning can seem like a scary task, but NADART offers many tools and features, such as retirement calculators, online account access, participant statements, automatic enrollment, and target-dated funds, to help make it less daunting for participants. If you’d like to learn more about NADART retirement plan services, please contact a NADART representative at (800) 462-3278, ext. 7161 or e-mail nadart401k@nada.org.