As too many people have learned in recent years, a faltering economy can wreak havoc on your retirement plan. But starting early and investing wisely provides assurance that while you may not end up with as large a nest egg as you had hoped, you will have enough money to sustain you when you retire. More often than not, retirement plans are derailed by our own mistakes rather than economic disaster.
You don’t have to be an investment guru to ensure a comfortable retirement. Some basic financial knowledge and a little common sense go a long way toward keeping your retirement savings on track.
Here is some information and advice on what mistakes to watch out for.
Start retirement planning too late. When it comes to saving for retirement, it’s never too early. The sooner you get started, the more time your money will have to grow. With compound interest, even a couple of years of saving a couple thousand dollars can make a major difference in the amount you have when you retire. Ideally you should start saving for retirement when you get your first job. If you have yet to set up a retirement fund, do it right away to maximize your savings.
Taking the wrong amount of risk. If you don’t incorporate enough risk in your retirement savings plan, then your returns won’t be as high as they should be and you’ll have less chance of saving as much as you need to. If you take too much risk, you could experience large losses. It’s important to find a happy medium. Remember to take age into consideration, too. When you’re young, it’s acceptable to take on more risk because you have more time to recoup any losses. As you get closer to retirement, you’ll want to lower your risk to keep your savings safe.
Taking early withdrawals. In most cases, taking money out of a retirement account before you retire results in penalties. This should only be done in the event of an absolute emergency when you have no other options. If you leave your job, don’t forget to roll your 401k savings over into another retirement account before the deadline. If you fail to do so, you may be hit with the same penalties.
Putting retirement savings ahead of paying down debt. It’s a good idea to put as much as you can afford into your retirement account. But when deciding how much they can afford, many people forget to take outstanding debt into account. If you have lots of high interest debt and are only making the minimum payment each month so that you’ll be able to fund your retirement plan, you’re shooting yourself in the foot. You might do better to pay off the debt and then increase your savings.
Don’t spend too much time and energy worrying about future market fluctuations eating up your savings. Instead, focus on the things you can control. By avoiding these mistakes, you can increase your chances of enjoying a worry-free retirement.
Tags: retirement advice, retirement mistakes, retirement planning