Don't Make These Common Mistakes Assessing Your Retirement Preparedness
By: Katheryn Thayer
Elder Law Associates Newsletter dated February 26, 2018
Do you have a good sense of how prepared you are for retirement? The majority of working-age Americans (52%) are “at risk” of not having enough to maintain their living standards when they retire, according to the National Retirement Risk Index calculated by Boston College's Center for Retirement Research. So academics there were curious: how well we are able to assess our own retirement readiness? Do those who are off-track know it? Do the well-prepared still worry?
- Those who are "not worried enough" — falling behind on retirement when they think they're on track — are actually often high earners. In particular, the study found that people with a defined contribution plan like a 401(k) "may suffer from a 'wealth illusion.'" They see a large stockpile in their retirement account and don't consider the rules and best practices of withdrawing it. They also might not think realistically about what it takes to maintain their current standards of living.
- Those who are "too worried" — i.e. better-off than they think they are — often don't consider how much their home boosts their retirement outlook. With a reverse mortgage or a downsize, they can have more cash on hand.
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