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Survey: many underestimate retirement costs

It is common for people to give a fair amount of thought to what their retirement will be like, such as what sorts of things they will do during their retirement. It is also important for a person to give careful thought to what sorts of expenses they would likely face in retirement.

One pitfall a person can fall into when it comes to considering likely retirement expenses is underestimating such expenses. A recent survey indicates that falling into this pitfall is rather common.

The survey was of nearly 400 CPA financial planners. The planners were asked questions about their retirement planning clients. Among the things they were asked about was whether their clients underestimated their retirement expenses. The survey results indicate that around 57 percent of such clients made such an underestimation.

Why do you think underestimating retirement expenses is so common?

Underestimating one's retirement expenses could have many effects. It could result in a person's retirement plan being misaligned with reality, which could lead to considerable problems in one's retirement years.

Such underestimation could also lead to estate planning misalignment. This is because what kinds of expenses a person would likely face in their retirement years are among the things can impact what sorts of asset protection measures, such as trusts, they might want to include in their estate plan.

Estate planning lawyers can assist individuals with identifying what sorts of estate planning measures would be the best fit for their asset protection goals given their current financial situation and their likely future financial situation. Also, if a person feels their estate plan has become misaligned with their goals, they can have such an attorney review the plan and provide guidance on whether changes should be considered.

Source: Journal of Accountancy, "More than half of clients underestimate their retirement expenses," Courtney L. Vien, Nov. 10, 2015

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