When it comes to saving for retirement, the more money you can set aside, the more financially secure you'll be. If you diligently save over the course of your career, you'll find that by the time you retire, the size of your retirement nest egg can grow to a number that's a lot bigger than you might have thought possible. For many, the $1 million mark is a simple target to shoot for, while others use the 4% rule or similar methods to estimate a more precise number that they want to save before they call it quits for their careers.

Yet before you get too attached to the idea that you're retiring rich, you should consider whether whatever number shows up at the bottom of your retirement account statement is really as big as it looks. There are several things that retirees often ignore in deciding whether they're truly financially ready for retirement, and that ignorance can prove costly. It's essential to take the following three factors into account when considering your true financial status in preparing to retire.

Binder labeled Retirement Plan on desk with glasses, pen, and graphs.

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1. Don't forget taxes

The most important thing that's easy to neglect when you're looking at your retirement savings is what impact taxation will have on your ability to draw money to cover living expenses. Millions of Americans have access to 401(k) plans or similar retirement accounts at work, and for many, their 401(k) balance is the biggest pot of retirement assets that they have. The tax-deferred growth that 401(k)s, IRAs, and other retirement accounts offer is invaluable in helping you accumulate as much in savings as you possibly can.

However, the IRS always wants what's coming to it, and for retirement accounts, that often means paying taxes. For traditional IRA and 401(k) accounts, because you got an upfront deduction when you made contributions to the plan, then you'll have to pay taxes on the money when it comes out. That includes not only the withdrawn contributions but also the income and gains that your investments have produced. For most people, 100% of their withdrawals must be included in taxable income.

Depending on your tax rate, that can mean that your savings are a lot less valuable than you thought. As an extreme example, say you're in the top 37% tax bracket and decide to take out $1 million in retirement withdrawals all at once. Your taxes on that withdrawal would amount to $370,000, meaning that what you thought was $1 million would really only be worth $630,000 after taxes. That example's not realistic, and many people are fortunate to be in lower tax brackets in retirement. Nevertheless, even taking 10% or 12% off the top -- the current bottom tax brackets under tax reform -- can be a large blow to where you thought you were in retirement.

2. Think about inflation

From year to year, the impact of inflation is hardly noticeable. Recent rates of inflation have been extremely low, but even at historical rates closer to 3%, you have to watch carefully to see that the price of your favorite grocery item rose from $3.89 to $3.99 or that the size of the package shrank from 16 ounces to 15.5 ounces.

Over time, though, inflation adds up. It takes less than 25 years for purchasing power to get cut in half when inflation averages 3% annually. Many need to plan for a retirement that could be at least 25 years long and make sure they won't run out of money even as the prices they pay on necessary living expenses inexorably rises.

Put simply, 25 years from now, a $1 million nest egg might only have the value that $500,000 in savings currently has. Structuring your investments appropriately can help you fight off inflation's negative impact, but that only works if you're aware of it.

3. Beware long-term care costs

No matter how big your nest egg is, a medical tragedy can wipe you out more quickly than you'd imagine. Nursing home costs can exceed $10,000 a month in some high-priced areas, and with Medicare not covering most long-term care expenses, a need for such a facility can wipe out even a $1 million portfolio in just eight years.

You can obtain long-term care insurance to help protect you against these costs, but the premiums themselves can be highly costly. Taking whatever measures you can to stay as healthy as possible can pay off in the long run, but beyond that, the key here is not to assume that you'll be able to spend every penny of your retirement nest egg on things that you really want.

Save smarter

It's important to save as much as you can for retirement to ensure that you'll have what you need. By keeping these three things in mind, you won't get lulled into a false sense of security only to find out later that what looked like a huge amount of retirement savings proved in the end not to be enough to meet all of your needs.

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