A lot of us are counting down the days until we retire. We dream of sipping margaritas on a beach on a casual tuesday afternoon. While it’s great to start saving for retirement early, many open up a 401k without much knowledge of how to manage it. If you’re going to be saving for retirement for years, you might as well do it the right way and avoid these common mistakes you might be making.
#1 Never mapping out a plan
One of the biggest mistakes you can make when saving for retirement is never thinking about the big picture. According to the 2017 Retirement Confidence Survey, only 41% of respondents said that they or their spouse has taken the time to estimate how much money they’ll need in retirement.
It’s important to set aside some time to calculate a well-thought out plan before you start saving. This will help you reach your goal more efficiently and effectively. The 2017 Retirement Confidence Survey reports 64 percent think they will need $500K or more, with 37 percent needing at least $1 million. This is a hefty amount to save with no plan whatsoever.
If you don’t know where to begin, check out this retirement planning guide to help you navigate your plan.
#2 Not Using IRA or 401K
Some people decide to throw 401k and IRA plans to the wind and create their own savings account for retirement. The problem is that both of these saving methods have tax advantages that will help you save for retirement. You will only be missing out if you choose to forgo these vehicles for saving.
The hardest part about a 401k is getting it started. Learn how to open up your account here.
#3 Waiting too long to start
Many of us will put off tasks until absolutely necessary, however, when it comes to retirement savings you want to start ASAP. Putting this off could cost you more than you think. You are going to be missing out on precious years of saving and chances to reach your goal faster.
If you’re in your 20s or even 30s you may be thinking that retirement is in the distant future. While this may be true, financially every year counts tremendously when savings for something as important as retirement.
#4 Not considering fixed annuities
It is a good idea to consider investing in one or more annuities for your retirement. Why? Fixed annuities can provide you with a nearly guaranteed regular income. In many cases, this consistent cash flow can continue for the rest of your life. This is a great safety net that will greatly reduce the chance you run out or don’t have enough money post retirement.
#5 Retiring with too much debt
Whether we like it or not, most people have some sort of debt. Whether it be from mortgages, credit cards, or student loans, retiring with unpaid bills can be a risk. Having outstanding debt makes you even more financially vulnerable in an already vulnerable stage of life.
You may find it easy to manage until those emergency situations happen when you have to replace a tire or make a surprise trip to the vet. Then costs start piling up on top of your debt leaving you in a difficult situation. It’s best to try and prioritize paying off debt before you retire to avoid these unwanted scenarios.
Learn how to start paying off your debt here!
Make smarter decisions to reach your retirement goals faster! By following these tips you will be just a few steps closer to sipping that margarita on a beach somewhere.
For more budgeting tips, click here!