When it comes to financial savings, retirement is probably the most universal goal that people strive to accomplish. Establishing a financial plan for later years in life allows individuals and couples to spend time working on hobbies or projects that interest them, rather than having to work for a paycheck to keep food on the table and the electricity turned on in the home.
There is no specific formula that individuals and couples must follow to save for retirement; however there are three retirement planning mistakes that often have many failing to save enough for retirement.
1. Not thinking about retirement
– Saving for retirement requires a person to take action. Savings don’t just magically happen, so a person needs to plan out a strategy that results in having enough funds to cover living,
health and entertainment expenses for a pre-determined number of years after retiring from the work environment. Many work environments offer 401(k) or other retirement benefits, and anyone interested in saving for retirement should carefully review these benefits to determine if they’ll be enough to sustain them for many years in retirement. If not, there are other investment options available that specifically cater to retirement savings, and financial advisors can help determine which options are best for specific situations.
2. Only using one retirement account
– The saying “don’t put all your eggs in one basket” certainly applies to retirement planning. Investing in multiple accounts, allows individuals to experience several advantages, including:
3. Planning for future life events
Flexibility in extreme market swings – both up and down
The ability to take advantage of multiple interest rates
The potential to reduce overall taxes paid on the entire retirement savings amount
Having access to some accounts at all times, while letting others continue earning interest
- If everyone had a crystal ball to see into the future, retirement planning would be so much easier. But since that isn’t the case, planning for any situation is the catch-all behavior. We hope that it won’t be necessary but items to consider when planning include:
The need for living assistance
A downward swing in the market
Having insurance for accidents or other threatening situations
Of course, there are many other retirement planning mistakes that can happen – from investing in the wrong type of accounts to paying heavy tax penalties for removing funds early from those retirement accounts. What are some of the retirement planning mistakes you’ve experienced or heard about, and was there a solution that helped to resolve the mistake?