Planning for your retirement is arguably one of the most important financial goals you’ll ever undertake. Unfortunately, it’s easy to make a mistake now that might hurt your financial security down the line. The good news? These mistakes are easy to avoid! Read on to learn five common mistakes when it comes to planning for retirement, and how you can avoid them.
1. Not Having a Plan in Place
According to a study done by the Employee Benefits Research Institute, 48% of workers have not calculated how much money they need to save for retirement. How can you reach your destination if you don’t know what your destination is? Don’t worry – this isn’t something you have to do on your own. A chat with a financial planner can be hugely beneficial and can set you up with a roadmap to a happy retirement.
2. Not Saving Early Enough
So many people mistakenly think they’ll have plenty of time to save for retirement. Unfortunately, this usually isn’t the case. Life always finds a way to throw a wrench in your plan. Whether it’s your mortgage, your car payment, or your child’s tuition, there is always going to something eating up your budget. So when is a good time to start saving for retirement? Right now! It’s never too early to start thinking about your future.
The second part to this is the fact that people simply aren’t saving enough money. $60,000 isn’t going to cut it if you want to retire for more than say, a year. While it can be hard to switch your saving habits, think about it as redirecting priorities instead of sacrificing.
3. Not Diversifying Your Investments
While we’ve all heard the saying, “don’t put all of your eggs into one basket”, many people don’t follow this advice when it comes to their investment portfolio. Not diversifying your investments opens you up to more risk if something were to happen to your (one) investment. A diversified portfolio minimizes risk while maximizing your return.
4. Thinking You’ll Always Work
It’s not uncommon to hear the phrase “If I didn’t work, I’d go crazy!”. If someone is planning to work well into retirement, even if it’s just part time, they may not think they need to save as much. Don’t assume this! There are many different reasons why someone may not be able to work (medical issues, taking care of a family member, etc.), so it’s nice to be prepared for all situations.
5. Dipping Into Your Retirement Account
Your retirement fund is not – and should not be treated as – a regular savings account. Many people think that it’s no big deal to borrow money from your retirement fund if you plan on paying it back; however, taking money out means that it loses it’s ability to grow and compound. Compound interest is a powerful thing, so make sure you’re not missing out on extra savings!
If you’re interested in talking with an experienced financial planner about your retirement, give Liu & Associates a call!