Retirement Planning: The Main Mistake People Are Making That Could Leave Them Broke
Planning for retirement requires wise savings and investment choices so you’ll have enough money to sustain yourself comfortably after you leave the workforce. The ultimate goal is to create a nest egg substantial enough to provide financial security for the rest of your life. But therein lies the problem — how long will that be?
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Underestimating the length of your retirement can leave you struggling to make ends meet in your later years. Keep reading to learn more information about this critical error, what you can do today to avoid it, and how to prepare for a worry-free, sustainable retirement.
The fundamental goal of saving for retirement is to secure an income stream you can rely on from the moment you stop working until, well, the end of your life. But accurately guessing how long you’ll need your savings to last can be a lot more difficult than you may at first think.
What’s more, CNBC conducted a survey in late 2024 that revealed a lot of people aren’t planning for a lengthy retirement. Only 64% of people planning for retirement say they think they’ll need to save for 20 years or less, while only 16% are preparing for a retirement of over 30 years.
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There’s some serious risk in underestimating the length of time you’ll be around after you stop working. One major pitfall is assuming you’ll be able to work until you decide to retire. While this may have once been the case, present-day reality suggests it may not be that simple.
Older workers have to face the fact that their employers may choose to replace them with younger, more affordable workers. There are also the realities of aging to contend with. As we get older, unexpected health issues can necessitate early retirement, which can seriously complicate financial plans made with a longer working life in mind.
If there’s a silver lining, it may be that medical advances and improvements in senior healthcare can dramatically extend your life expectancy. The downside here is that this makes it nearly impossible to rely on statistical averages.
In the worst-case scenario, you’ll run out of funds at some point during your retirement, which means dealing with drastic and uncomfortable lifestyle changes, going into debt or even struggling to afford the essential medical care you may need.
A good way to increase the odds that your retirement savings will last as long as you do is to plan for a longer lifespan. Instead of aiming for an average life expectancy of 77.5 years, plan on living to be 100. Though you’ll have to save more in the meantime, it’s better to have it and not need it than to need it and not have it.