BIG MISTAKES TO AVOID WHEN PLANNING FOR RETIREMENT

Employee Benefit Research Institute stated that only 13% of those surveyed feel confident they can afford a comfortable retirement. Why is this number so small? How can you prepare yourself for retirement? There are several mistakes that many people fall victim to based on poor decision making and failing to understand how to save for retirement. Here are some tips to assist you with retirement planning.

Failure to Plan

The major issue is failing to plan. Far too many people look at today and not at tomorrow. They are not taking the time to calculate how much of each paycheck should be added to their retirement account. Few people set goals for retirement and even less contribute a high amount to their company’s retirement program.

Failure to Start Early

Another issue we often see is individuals do not start saving for their retirement until their late 20s. Most young adults do not take advantage of company 401(k) plans, which can cause people to miss out on several years of retirement savings. Saving at a younger age provides more time to grow your retirement earnings.

Do You Have a Retirement Account?

While a large majority of corporations provide 401(k) or IRA plans, smaller companies may not offer this benefit. This can lead to problems for many individuals as they do not open their own retirement account through their bank. Since their employers do not match their contributions to retirement accounts, it can be harder for them to grow a large amount of money for retirement. Always participate in an employer retirement program as it is simply free money they are offering.

Do You Understand the Stock Market?

How does your money grow in a retirement account? It is placed into stocks, bonds, and mutual funds where it will earn money over the years. All stocks will come with inherent risks. Failure to understand these risks can lead to trouble for individuals saving for retirement. If you are young and you shy away from higher-risk stocks, you can miss out on large growth in your retirement account. If you have an aggressive retirement plan when you are nearing retirement age, you could be taking on too much risk, causing you to lose money if the stocks fall.

Borrowing from Retirement

You have the option of borrowing from a 401(k), which is nice if you end up with large medical expenses. However, borrowing from retirement will have its consequences. You have to pay it back, and the money is no longer part of the growth option while it is withdrawn from the account. This means you will not be able to grow money as quickly as you could. Meeting with a retirement planning company is the best way to secure your financial future by making smart decisions and investing the right amount of money into your retirement account.