The 3 Biggest Mistakes You Can Easily Avoid
10 19 2016
Imagine: nearly HALF of all Americans have saved NOTHING for retirement.
Alarming, to say the least. That means that nearly HALF of Americans are relying solely on Social Security - a program that simply won't be able to sustain and manage the demand for our country's aging population. It's a large and festering financial gap that too many Americans will be unable to bridge; one that will have measurable consequences for our already-struggling economy. So how can you ensure that YOU will be able to enjoy the healthy and secure retirement you deserve?
Retirement planning can be overwhelming. But it's worth noting that no two retirements are the same. Every single person has different goals and different concerns. So your approach needs to be as unique as your personality.
That said, there are some tried and true lessons we can all learn from. Here are some of the most common retirement planning mistakes, and how you can avoid them.
Mistake #1: Not starting soon enough.You're working. You're building your life. You're trying to make ends meet. For many, the task of getting by day-to-day now overpowers any concerns for future financial planning. More and more Americans say that they're living "paycheck-to-paycheck" and that they're concerned with the rising cost of everyday life.
The truth is - there's never a convenient time to start saving. In your twenties, retirement is still an abstract concept. In your thirties, car payments, home mortgages, and monthly bills combine to eat up your paycheck every month. In your forties, rising college tuition make saving nearly impossible.
But the longer you wait to get started, the more difficult it becomes.
The number one regret of many financial investors is not starting at a younger age. Some professionals project that "every six years you wait to get started roughly doubles the required monthly savings necessary to reach the same level of retirement income."
What Can You Do:Give yourself a budget. Control your spending on the "nice-to-have's" and start focusing more on the "need-to-have's." And use the extra money you save to start a retirement account.
Most employers already offer one - your 401k or your 403b, and many incorporate some type of employee match. If they do and you're not contributing, you're literally missing out on FREE MONEY. And if you don't have access to one of those programs, it takes only about 15 minutes to start your own Roth IRA.
Pinch pennies - every one counts - and put them towards making sure you can live the life you want in retirement.
Mistake #2: Not having or updating your strategy.You wouldn't leave on a road trip without looking up directions first. You'd get lost.
You wouldn't head to the grocery store without a list. You wouldn't know what you need to buy.
And you shouldn't embark on the journey of retirement without a plan.
But it's also important to think about your retirement as a "strategy" and not just a "plan." Why? A plan is rigid. It's about the process. It can't account for changes and unforeseen expenses. A strategy has a goal in mind and can adapt and evolve to meet that goal. It's about results. A strategy allows you to correctly navigate detours on your road trip. A strategy allows you to change up your meal plan if the grocery store is out of the ingredients you need. And a retirement strategy takes unforeseen market volatility or expenses like surprise healthcare costs into consideration. Let your strategy evolve as your finances evolve.
What You Can Do:Contact a financial advisor today and ask them to craft a retirement strategy based on your income, your age, your tolerance towards risk and your financial situation. If they want your business, they'll give you financial advice to help you determine how much you should save to have the secure retirement you deserve and develop a unique strategy to get you there.
And continually update your strategy every year to account for any changes in your finances.
Get a promotion? Adjust your strategy.
Incur unexpected healthcare costs or take on long-term care for a parent? Adjust your strategy.
Encounter a life-changing-moment like buying a house or having a child? Adjust your strategy.
Your strategy should evolve with your circumstances and always be focused on the end goal: having the money you need to live the life you want in retirement.
Mistake #3: Investing incorrectly.Investment options are as unique as you are. And it's hard to figure out where to start. As a rule of thumb, the younger you are, the more risk you can afford to take. Younger investors can afford to weather a financial downturn in the markets. But as your age increases, so too should your approach to risk. As you get closer to your 50s and 60s, there's simply not enough time for your retirement fund to recoup losses.
What You Can Do:You should always be on the lookout for safe investment options.
Any financial planner will tell you to diversify your investments across a range of tools and services. So while younger investors can afford to put a portion of their retirement savings into a growth market, older investors may want to forego them for safer options.
Start planning your retirement now.We get it. It's not easy to save. It's not easy to strategize for the future. But you can make it easier on yourself by knowing and recognizing the three common pitfalls listed above. Start now. Create a strategy and allow it to evolve with you. And make smart choices in investing. If you do these things, you'll be well on your way to a safe and secure retirement. And you can take comfort in knowing that you're well ahead financially of nearly HALF your American peers.
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