by Parshalla Wood, Financial Consultant, Wedbush Securities

Regardless of your age, you’ve probably spent some time wondering about your retirement. Will you travel? Will you maintain the same lifestyle? At what age will you retire? The more you ask yourself some of these questions, the more daunting the retirement-planning process seems.

By accounting for commonly made mistakes during the retirement-planning process you can create a plan designed to help you achieve the retirement you’ve always dreamed of.

1. Don’t assume your living expenses will remain the same

While certain aspects of your living expenses will likely decrease after retirement, some items like health care might significantly increase. The 2017 Retirement Confidence Survey determined that 47 percent of retirees spent more on health care than they expected, and 37 percent of retirees spent more overall than expected. The few years leading up to retirement can often be a good indicator for what spending could look like during retirement, so keep an eye on this and create a mock budget based on these numbers. Once you hit retirement, adjust as needed.

2. Debt doesn’t disappear once you reach retirement

Paying off debt before you retire will allow you to put yourself in a greater state of financial peace once your current income goes away. For example, paying off your mortgage prior to retirement will allow you to reallocate that money toward other expenses or provide the flexibility to put those funds away in an emergency account. Carrying debt into retirement may hinder your ability to continue to live your current lifestyle or cause you to have to scale back on other expenses.

3. Account for health care

The average 65-year-old married couple needs $226,000 in savings to have at least a 75 percent chance of meeting their insurance premiums and out-of-pocket health-care costs in retirement, according to a report published by the Employee Benefit Research Institute in 2017. This number explains why health-care expenses end up becoming a priority in the retirement-planning process. While Medicare will cover a portion of your costs, deductibles, copayments and coinsurance will still need to be covered by you. Medigap policies and Medicare Advantage can provide assistance with some of these costs, but they will not cover home care, nursing homes or other forms of long-term care assistance. Long-term care insurance may be a solution to this problem and should be discussed with a financial adviser.

4. Manage taxes

Before creating any kind of retirement strategy, always consider the tax implications. For example, if you withdraw money from your taxable accounts and leave funds in your employer-sponsored plans or IRA so they can continue to benefit from tax-deferred growth, keep in mind that you are generally required to take a Required Minimum Distribution after you turn 70 ½. If you decide to work during retirement while receiving Social Security, you may be required to pay taxes on a portion of your Social Security benefits. Speak to your financial adviser or tax specialist for more information on how to find the most appropriate tax strategy for you.

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances. To the extent this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.