A report by the National Institute on Retirement shows that three-quarters of Americans fail to attain the conservative savings target for their income and age in order to comfortably retire. Additionally, six out of ten working-age people neither own retirements benefit investments nor have a defined pension plan.
Such statistics underscore the grave mistake that many people make when planning for retirement: failing to save enough money or making mistakes along the way.
Here are some saving practices that you should steer clear of in order to make the most of your retirement when the time comes.
1. IRA Penalties
Some people remain unclear on when to withdraw from their different accounts, more so the IRAs. Many people have the wrong notion that one has to wait until they are seventy and a half to make withdrawals without penalties. Suppose you believe that your tax bracket will be higher after you retire than they are in your working years; you may opt to invest in a Roth 401(k) or Roth IRA so that you can pay your taxes upfront and all your withdrawals will not be taxed.
2. Not Having a Plan
To lead a comfortable life after retirement, you need to develop a sound strategy. You should start planning for your retirement well before you attain the retirement age. Your plan should factor in an accurate calculation of how much money you'll need. The plan should also factor in changes in the cost of living and the impact of tax on your savings. More importantly, the plan should be able to regulate your spending to match your retirement savings.
3. Using Social Security Before Retirement
While there are scenarios that warrant cashing in on social security, such as poor health or the inability to continue working, for many people, it pays to wait until you are fully retired. This is because you'll receive more money over your lifetime.
For instance, if you decide to take your benefits when you are 62 years; your monthly benefits reduce to 30%. If you wait until you attain the retirement age, you'll receive higher monthly benefits. Moreover, if you work until you reach retirement age, you'll probably add more finances to your retirement plan.
4. Life Expectancy
Some people decide to retire early because they project that they will not live past a certain age. Despite statistics showing an increase in life expectancy, some people assume that they won't live that long. Nowadays, many people live to be 78 years and over.
As such, your retirement plan should reflect the possibility of you living up to that age or even surpassing it.
5. Not Hiring a Retirement Planner
One thing you can do to help plan for your retirement is to hire the help of a professional financial advisor to make sure you’re making wise investments and money management decisions on your road to retirement.
After all, planning for the future can be a daunting task. Ensuring you have the most up-to-date and strategies will help you live a comfortable retirement life. Contact us today to speak with our financial advisors about how we can help you plan for your retirement and future.