What are the five early warning signs that your retirement plan may be in trouble? Warning sign number one is not having a realistic estimate of your expenses throughout retirement.
Your spending will not remain the same in every phase. The first several years may include more travel, hobbies, entertainment, and major purchases. Later in retirement, some lifestyle expenses may decrease while healthcare, insurance, home assistance, or long-term care costs may increase.
You do not need 100% certainty because retirement expenses cannot be predicted perfectly. However, you should have a detailed estimate covering housing, food, transportation, taxes, insurance, healthcare, travel, debt payments, and unexpected expenses.
Without knowing approximately how much you expect to spend, you cannot accurately determine how much retirement income you will need or whether your savings can support your desired lifestyle.
Compare your projected expenses with income from pensions, Social Security, retirement accounts, taxable investments, and other sources. Also consider inflation, taxes, life expectancy, and the potential income available to both you and your spouse.
Do not retire based on a guess. Create separate budgets for your early, middle, and later retirement years, then pressure-test the plan against rising healthcare costs and a longer-than-expected lifespan. The Consumer Financial Protection Bureau’s budgeting guidance can help you organize your income and spending, while the Social Security benefit calculators can help estimate potential benefits.
If this is your first time with me, I’m Elizabeth.
• I help women navigate taking over the finances after widowed, divorce or illness
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