Staying on top of the family finances is a huge responsibly, probably one that should not be handled alone without the help of your significant other, or even a family member or friend that you trust with financial advice. There would be nothing worse than plugging along through life and by the time you are ready to retire, realizing you don’t have enough to pay your necessary expenses, let alone have the funds to complete the traveling you have had your mind set on for decades. By avoiding some of the biggest retirement planning mistakes, you can maximize your nest egg and make sure that your golden years are best spent stress-free.
Not Having a Plan at All
It can be hard enough to get through the monthly finances that not having a plan for retirement can really put your future in jeopardy. For starts, if you were asked how much you need by the time you retire, would you be able to say? While sure, you can throw out a ballpark guess, but are you underestimating or overestimating? It’s probably a pretty safe bet that social security will not be a primary source of income to live off, so now is as good of time as any to figure out a plan so you are set up for success not only now, but what will hopefully add up to a lucrative nest egg for the future.
Putting Off Contributions
While it still may be decades away until retirement is on the horizon, that doesn’t mean that you can keep putting off contributing to your retirement account and hope you will have not only enough to live off, but are financially able to enjoy life experiences. Now saving is one thing, but increasing year after year to maximize your contributions will ultimately help achieve the goal of being financially independent. You may think how you can give up more money while you’re living paycheck to paycheck, but even if you start small and continue to build as you get used to it, anything is better than nothing.
Missing Out on Free Money
A great way to build up your retirement account further is to check at work and see if your employer will match contributions. Some may to a certain point, like say they will match up to 6%, so you could be missing out on free money if you are putting in anything less than 6%. Let’s say you make $50,000 and are putting in 6% a year, for $3,000. By your employer matching, you would be getting another $3,000 and now essentially be putting in 12% a year, which is a huge difference that could add up to tens to hundreds of thousands over time, depending on your salary.
Not Reviewing the Statements
Much like assuming your credit report is top notch, if you don’t check it regularly, you could be in for a surprise when you apply for mortgage, for example, and either get approved for a higher interest or flat out denied due to a poor credit score. Same goes with your retirement account. You can’t assume what you have select is performing at its best, especially with the fluctuation in the market. You may have too much stock in one area, or not even the right investments in general. The stock market can be extremely overwhelming so it’s a good idea to consult a professional, however keep in mind the fees that can be associated with that.
Borrowing Against Yourself
As you start to see your retirement balance continue to rise now that is has more of your focus, you may be tempted to tap into this whether it be to pay off debt, use for a down payment for a home, or want to take a vacation. While vacations are key in bringing work-life balance, your retirement fund should only be for emergencies, as you’d be taking out a loan against yourself. While sure the interest may be lower than a typical personal loan, but it’s better to build an emergency fund or saving in advance for a potential trip.
Avoiding a Budget
One way to set yourself up for not only the future, but the present, is to create a household budget that you can use to help reduce the unnecessary and impulse purchases and really focus on using your hard-earned income for good. By allocating amounts for bills, food, gas, spending, you can hope to free up extra money every month that you can use to increase contributions to your retirement account.