Don’t Overlook These 13 Financial Factors In Your Retirement Plan

Retirement planning is a lifelong process that can shift as time goes on. Details such as your retirement goals, your post-retirement tax burden and your level of savings can all ebb and flow depending on your financial circumstances. However, there are some things that should always be considered, no matter how far away you are from retirement.

 

According to the members of Forbes Finance Council, the following financial factors are often overlooked as people make their retirement plans. As you’re plotting out your roadmap to retirement, keep these essential considerations in mind.

1. Optimal 401(k) Contributions

Many people don’t know the optimal 401(k) contribution to make. A majority save less than 10% of their salary, but if they could save another 10% on taxes, they could retire with two times the savings. Understanding available tax savings and using the right tools to maximize savings can give anyone a leg up. The power of compounding and maximizing savings is magnified if one starts saving at an early age. - Jaideep Singh, FlyFin AI, Inc.

2. Livable Annual Wages

When planning for retirement, you have to determine your livable annual wage. You can start by identifying what the annual livable wage is in your state. The livable wage in the state of Florida, for example, is approximately $50,000. Once you determine the amount of cash you need to have available to you in a year, your second step is determining how your livable wage will be funded. - Corey Patterson, Corey G. Patterson, CPA


3. Healthcare

I’ve spoken with thousands of retirees, and most have the same fear: that they’ll “outlive” their money. The single biggest unknown cost as we get older is our healthcare. The key to protecting and preserving your wealth, especially as inflation continues to rise, is taking the steps necessary to mitigate and ultimately better manage those future costs. - Robert W. Bache, Senior Healthcare Direct, Amerlife DTC

 

4. Debt

The focus of future retirees and their advisors is typically on asset accumulation projections and how to turn those funds into predictable and reliable income in retirement. But all too often, mortgages, car loans and consumer debts linger and follow someone into the retirement years, consuming a significant percentage of their income to service the debt that remains. - Matt Zagula, Zagula

 
 

5. Inflation

Many people overlook the impact of inflation on their expenses in retirement. Inflation can compound year after year and quickly deplete assets so they don’t last a retiree’s lifetime. Many people overlook how big investment losses in the early years of retirement can negatively affect their nest eggs and have huge repercussions on their income in retirement. - Mike Reppert, Spectrum Advisors

6. Long-Term Care

One of the biggest things individuals overlook as it relates to planning for retirement is the devastating cost of long-term care. I am not just talking about the monetary cost; I’m talking about the overall and lifestyle costs of caring for a loved one. Whether you’re caring for a spouse or are in the sandwich generation and planning for a parent, long-term care planning should be at the forefront. - Christopher Berry, The Castle Wealth Group | Estate, Tax & Retirement Planning

7. Income Replacement Ratios

High earners often overestimate how much of their income must be replaced. They look at their gross income, then remember the rules of thumb about income-replacement ratios they’ve heard and are easily discouraged. However, their net income is usually much lower. You need to remove retirement plan savings and FICA taxes from the gross number before applying the conventional wisdom. - Joshua Strange, Good Life Financial Advisors of NOVA

8. Kids’ College Education

Savvy financial planning means looking at what you’ll need at different stages and saving for them all. Parents nearing retirement age (within 15 to 20 years) are ramping up those savings while paying for their kids’ college education. Just as with retirement, time is on your side when saving for college, but the runway is much shorter. Save early so you’re not dipping into retirement savings or borrowing. - Robert Cole, Private College 529 Plan

9. Life Expectancy

When thinking about retirement, one should think about life expectancy, which is about 78.9 years in the United States. By 2060, expect that number to reach 85.6 years. As Americans live longer, there may be a risk of many retirees running out of savings far too soon. Fixed indexed annuities not only offer steady, guaranteed lifetime income but also protect against market volatility. - Jim Poolman, Indexed Annuity Leadership Council

10. Portfolio Diversification

Most people aim for a big number in their retirement accounts, and once they get there, they believe that they are ready for retirement. One important factor that’s often overlooked is the level of diversification in one’s portfolio. A $1 million portfolio with only stocks and bonds is very different from a $1 million portfolio diversified with stocks, fine wine and real estate. - Anthony Zhang, Vinovest

11. Social Security

Don’t forget Social Security. A high-earning person can easily take home more than $36,000 per year in pretax retirement benefits. These guaranteed, inflation-adjusted payments relieve stress on the rest of your retirement portfolio, allowing you to leave more of it invested for longer-term growth. Check your earnings record and benefit amounts at SSA.gov to see how much is waiting for you. - Erik Christman, Oxford Financial Partners

12. Portfolio Preservation

Many people underestimate the amount of cash or cash equivalents required to ensure portfolio preservation. A larger cash buffer to cover expenses during an economic downturn allows the retiree to avoid having to sell investments at reduced asset prices. A retiree forced to sell in a down market to sustain a monthly cash flow may reduce their retirement portfolio faster than forecasted. - David Herpers, Credit One Bank

13. Roth IRAs

A lot of people neglect to invest in a Roth IRA or Roth 401(k). A Roth plan is unlike traditional retirement savings in that it is taxed when the money is invested, not when the money is withdrawn. In retirement, you can still take advantage of Roth IRAs by converting your tax-deferred accounts. Your goal is to extract as much money as you can out of your retirement plans as cheaply as possible. - Jared Weitz, United Capital Source Inc.