10 Retirement Planning Mistakes to Overcome
When it comes to retirement one thing is generally true most do not have enough to get by. In decades past, people often received pensions or some other retirement plan. People tended to stay with one company throughout their careers. Few companies offer such benefits anymore. We need to prepare for our futures Now to make sure we have a good tomorrow. When it comes to retirement people tend to make some big mistakes but they can be reversed.
Over half of those over 50 do not have enough to retire. This can be very scary for people who suddenly find themselves close to retirement age who realize they do not have any money to stop working. Or find what they do have will not stretch far enough. This is not a situation you want to find yourself in. By then it may be too late. With some small tweaks to the way you view and use your money, you can make sure that your golden years are both comfortable and worry-free.
Mistakes People Make and How to Change
- Cashing out 401K, bonds, and IRAs (individual retirement account). Too many people use their retirement savings as a cash machine whenever times get tough or they want to make a major purchase they run to their retirement savings. This is a big no-no. It is too easy to look at those funds and think it cannot hurt to take a little or all of it. The problem is we rarely replace the money we have borrowed.
Make those funds invisible. They must become untouchable. Do not let those mounting $ signs tempt you. Open your account at a separate bank you do not normally use so the account is out of mind. Better yet use an investment house to manage such accounts. Make sure you also have a personal savings account so you have the necessary funds you need for vacations, expensive items, or relocation.
- Not opening a personal IRA when your company does not offer a plan. Too often when we are young we look at retirement as far off. We convince ourselves that we can always begin saving later and before we know it, retirement is around the corner.
Open an IRA account early in your working life. Plan to put a certain percentage away either every paycheck or every month.
- Not diversifying. Do not put all your eggs in one basket. It creates too much risk. One bad investment and you could lose it all.
You need to spread out your investments to reduce risk. Sometimes an IRA will not make as much sense as a 401K or 403B account, but your money is in a stable account. You need to use both. If you use an investment company, then ask them if they use diversification in their investments.
- Not considering the use of your company’s 401K plan. Too many people have a 401K plan through their employer, but they do not understand they have control over how that money is used. Only 1 in 6 people ever change their investments.
Make sure you find out how your money is invested. The money is yours and you can choose how the account is used. Check your investments at least once a year, but preferably each quarter and see how it is doing. There are several plans that allow you to invest conservatively or get a little bolder and make moderate to aggressive investments. However, there is some risk to the more aggressive investments.
- Making too many changes. You do not want to get too risky with your money or it will not be there when you want it.
If you are closer to retirement age you may want to keep your asset allocations conservative. If you are younger you can play with it a little, but again do not risk all your funds. Mix it up a little. As stated above, be sure to diversify.
- Not understanding how the process works.
Hire an investment company who understands mutual funds and will invest your money according to your needs. There is nothing wrong with not being a savvy investor. That is why there are so many investments companies. Most of us do not understand trading.
- Not contributing enough. Many people only deduct the smallest percentage possible to their 401k. Or they only put in what their company will match. The same is true for what they put in their personal IRA. That process is usually not giving enough for retirement.
Try to invest at least 6% and ultimately 7% or more. Are you getting by on what you are making? If so then as you get raises or a bonus, put one quarter to half of it into your retirement account. Your investments are withdrawn pre-tax and will be taxed as the amounts are withdrawn. Keep that in mind when planning future percentages.
- Choosing an investment because your buddy or family member says so. These people are not experts and while their choice may not be bad, it just as easily could be.
You need to choose investments that meet your own personal needs. You want a professional that believes in investing for the long-term. You should use every available professional resource. You want good sound advice so you can efficiently meet your retirement goals.
- Counting on Social Security (S.S.) funds. Too many think that they can retire on the S.S. checks they will receive once retired. Most cannot. S.S. will not, in most cases, allow you to live as you would like.
The S.S. office sometimes sends out a statement that estimates the amount of your future retirement check. You can also use an S.S. calculator to estimate how much you may receive on an annual basis. Then you can better plan for what you need. Remember there is no assurance that S.S. will continue to be available forever.
- Not taking medical expenses into consideration. While most of us will qualify for Medicare when we retire, it does not cover everything. We must remember that our health declines as we get older. While we can do some things to help us age healthier, chances are that we will still have unexpected health issues pop up.
When planning your retirement portfolio be sure to build in extra funds to cover possible health issues.
Retirement savings can add up fast and the beauty of it is that as your dreams for the future change you can adjust your retirement funds accordingly. You must have a visionary mindset. What will your future look like? If you imagine now how you want to live during your retirement you will make better choices to impact that future. Take the steps you need to get where you want to go.
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