A very common mistake for individuals and couples in Greenville, SC, is to plan their retirement nest egg based on the amount they require to live after they retire. At first glance, this appears to be a logical and practical choice. However, working with Matt Dixon, a Registered Financial Consultant, quickly highlights the mistake in this type of planning.
Simply choosing a number, even if it is based on a reasonable assumption of expenses during retirement, fails to consider one very important factor. This factor is the ongoing cost of inflation and how that impacts the amount you need to save.
The Myth Around Interest and Inflation
People working with Matt Dixon often assume that the amount of interest they earn with their investments will outpace the cost of inflation. While this may be true in some years, inflation can have a very negative impact on overall retirement savings unless you have a substantial initial investment that continually adds value through compounding interest.
Cost of Living Considerations
Just as compounding interest expands your investments, inflation can consume your investments as well as interest earned. At the same time, the amount that can be purchased for a dollar today is going to be much less when you retire.
This becomes critical in retirement as people in Greenville, SC, tend to have different types of financial costs to consider as they age. A significant change is the amount of money spent on healthcare services.
One of the planning strategies Matt Dixon discusses with his clients is ensuring they have the correct types of insurance. This provides some protection against the constantly increasing cost of healthcare, leaving more for funding your retirement.
