Due to the current financial landscape, new financial issues are arising every day. For years, government-issued bonds were considered super safe. However, in recent weeks there have been various reports that have highlighted the skepticism surrounding the bond market. Experts frequently advise that investors need to diversify their assets. When it comes to long-term personal financial goals, there are several potential pitfalls that one should be aware of. Here are some valuable tips to consider when you are planning your finances for the long-term.
- 1. Inflation
One of the most important things to remember when it comes to long-term financial planning is to account for inflation. Failure to do so will mean that you don’t have enough money for retirement. Annual inflation has been around 2.55 percent for the past two decades. One should note that safe investments like bonds and savings accounts offer returns lower than inflation. Therefore, modest risks are needed to make sure you save enough money for the future.
- 2. Recalibrating Investments
The market is always changing. Just because your portfolio looked good ten years ago doesn’t mean that it will continue providing great returns without being recalibrated with today’s market. One should meet with a financial planner to update their portfolio regularly to make sure that their investment strategy matches their long-term goals.
- 3. Plan for Long-Term Care Costs
The old adage goes, “hope for the best, but prepare for the worst.” Most people need to plan for long term care. Studies show that most senior citizens will eventually reach a point where they cannot take care of themselves. That is why it is important to plan for long-term care.
- 4. Avoid Heavy Reliance on Social Security
Social security, which was signed into law by FDR helps to keep seniors from poverty. One should not expect their social security benefits to provide for an extravagant retirement. The average social security payment is around $1,200. However, a one bedroom apartment at an assisted living community can cost well over $3,000.
- 5. Updating an Estate Plan
Many people draft a will and then don’t think twice about it. As a result, the estate doesn’t go to who they really want. It is essential to look at your will every year and make any necessary changes. Updating your estate plan is especially important if beneficiaries have passed on. Furthermore, if the estate’s executor is no longer living, changes to the will are necessary.