Planning for retirement requires wise savings and investment options, so you will have enough money to maintain your comfort once you leave the workforce. The ultimate goal is to create a nest egg big enough to provide financial security for the rest of your life. But the question is the problem – how long will it be?
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Underestimating the time to retire may make you work hard to make a living in the years that follow. Read on to learn more about this critical error, what you can do today to avoid this error and how to prepare for a worry-free, sustainable retirement.
The basic goal of saving for retirement is to ensure that from the moment you stop working, you can rely on your income source until the end of your life. But guessing exactly how long you need to save may be much harder than you initially thought.
More importantly, CNBC conducted a survey in late 2024, showing that many people have no plans to retire for a long time. Only 64% of those planning to retire said they think they need to save 20 years or less, while only 16% are ready to retire for more than 30 years.
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There is a serious risk of underestimating the length of time you will be there after you stop working. One major pitfall is to assume you can work until you decide to retire. Although this was the case, the reality today shows that this may not be that simple.
Older workers must face the fact that their employers may choose to replace them with younger, more affordable workers. There is also the reality of aging that needs to be confronted with. As you age, unexpected health issues may require early retirement, which can seriously complicate your financial plan, keeping your longer working life in mind.
If there is a silver lining, medical advances and improvements in healthcare could greatly extend your life expectancy. The downside here is that it is almost impossible to rely on statistical averages.
In the worst case, you will run out of funds at some point during your retirement, which means dealing with dramatic and uncomfortable lifestyle changes, debt, and even striving to afford the basic health care you may need.
A great way to increase the duration of retirement savings is to plan for a longer life span. Rather than targeting the average life expectancy of 77.5 years, you should plan to live in 100 years. Although you have to save more of your life during this time, having it and not needing it is better than needing it and not having it.
