Wanting a financially stable retirement and achieving it are two different things. You also need a clear, well-thought-out plan so you don’t accidentally sabotage yourself.
Unfortunately, preparing for retirement has become much more complicated in recent years. It’s not enough to simply do “the right thing”; you also need to avoid mistakes along the way. If you can, you’ll have a better chance of retiring comfortably. These five mistakes could reduce what funds you have available to you when you need them the most:
1. Starting Too Late
The most common–and most dangerous–mistakes you can make is not starting to save early enough. When it comes to saving and investing for retirement, time is a major factor. The sooner you commit to your retirement strategy, the better prepared you’ll be when the time comes around.
2. Putting Your Kids First
Not one that you may like to hear, but need to. With student loan debt soaring to astronomical highs, it’s natural for parents to want to help remove some of the financial burden of getting an education. However, fattening up your child’s pockets while neglecting your own retirement savings is a serious form of self-sabotage.
3. Not Having a Plan
Putting aside a chunk of your savings each month is not a real retirement plan. A real retirement plan helps you estimate how much money you’ll need to cover your living expenses for the rest of your life. Without one, you could come up short. Get a sound and detailed plan in place with help from a professional retirement planner.
4. Not Maxing Out Your Contributions
Making the largest possible annual contribution to your retirement plan is another critical factor in investing success. The more you can contribute, particularly in the early years, the more you’ll have in your plan by the time you retire.
For example with 401(k)s, 403(b)s, 457s and Thrift Savings Plans (TSPs), you can contribute as much as $19,000 per year, or $25,000 if you are 50 or older. For traditional and Roth IRA plans, the maximum annual contribution is $6,000, or $7,000 if you’re 50 or older.
5. Living With Debt
This is easily one of the biggest ways people sabotage retirement savings. If you adopt a debt-based lifestyle early in life, it can haunt you the rest of your life. It can even follow you into retirement.
Being in debt makes it nearly impossible for you to save money for retirement. After you make your credit card payment, your car payment and your student loan payment, there’s just enough left—you hope—to pay for necessities. After managing your debt, start by saving up a full emergency fund of 3–6 months of expenses. Then you can get serious about saving for retirement.
Saving for your future should be a top priority. Knowing what you should and shouldn’t be doing can help you keep your retirement plan on solid ground. Avoid these 5 mistakes to dramatically improve the chance your golden years will really be golden. If in doubt, always contact an experienced retirement income planner.