Mistake No. 1: Relying on a Single Source of Retirement Income
Many people assume that Social Security or their 401(k) alone will be enough to support their retirement. While these sources are valuable, relying solely on one can be limiting. Social Security benefits may not cover all of your living expenses, and the value of your 401(k) can fluctuate based on market performance. If one of these sources underperforms, you might find yourself in a tight spot later on.
How to Avoid It: Diversify Your Income Sources
Diversification can play a crucial role in building a secure retirement. Relying on just one source of income can leave you vulnerable, so it’s smart to spread your savings across different assets. This helps keep things more stable as you get closer to retirement.
Mistake No. 2: Not Planning for Health Care Costs
Healthcare is one of the biggest retirement expenses that’s often overlooked. While Medicare provides some coverage for health-related expenses, it doesn’t cover everything. From prescription drugs to long-term care, these out-of-pocket costs can add up quickly. You may be shocked by just how much you could need to save for healthcare.
How to Avoid It: Prepare for Health Care Expenses
To avoid getting blindsided, take the time to research your healthcare options well before retirement. According to Fidelity’s 2024 Retirement Health Care Cost Estimate, a 65-year-old retiring this year could face up to $165,000 in healthcare costs throughout retirement. The sooner you start planning for these expenses, the better prepared you’ll be. If you're eligible, consider contributing to a Health Savings Account (HSA), which allows you to save for medical expenses tax-free. It’s a great way to prepare for healthcare costs in retirement. Additionally, be sure to review your Medicare options and think about long-term care insurance, which can help cover expenses not covered by Medicare.
