Saving for retirement can seem overwhelming, but planning can prepare you for your future in the present. Here are five common mistakes to avoid when saving for retirement:
1. Saving too late
It’s never too early to save for retirement, but it can be too late. People in their 20s and 30s see retirement as decades away and may not start planning for what they need in savings. However, with compound interest, even a few extra months could mean a few extra years of cash during retirement. Also, saving early develops good financial habits, making it easier to save as you get older. Good habits can help reach retirement savings goals faster and more efficiently. Meeting goals in your 40s and 50s is possible, but not ideal.
2. Underestimating how long you will live
A survey by the Washington Post asked 26,000 people over the age of 50 if they thought they would reach 75. Of the 50 percent who predicted a life span that long, three quarters of them reached 75 years. One of the biggest mistakes when calculating retirement savings is to underestimate the length of life. If the length is estimated incorrectly, an individual might be forced to go back to work to make ends meet. Adding more time to the overall calculation can keep money in the bank longer.
3. Not diversifying investments
The saying goes that no one should put all their eggs in one basket. The same goes for retirement savings investments. Diversifying your portfolio helps to spread success and failure. There may be one investment that is working well, earning money at one time and then slowing down. Diversifying will help ensure success at more times. It is a basic principle that should be one of the fundamental thoughts for retirement planning. Having a financial advisor at Nicholas Wealth Management is one of the ways to keep a portfolio diverse and personalized to meet your individual goals.
4. Overestimating wage-earning years
Sometimes the goal for retirement gets hijacked by life. Sixty percent of Americans have had to retire early, according to one study. Early retirement can leave employees several years behind in savings. Another problem is getting let go from a job towards the end of a career. Assuming life will go the way it’s planned is a primary mistake and keeps many from reaching their goals.
5. Taking funds out of retirement too early
When money is withdrawn from a 401(k) retirement account before the age of 59 1/2, the owner could be subject to a tax penalty of 10%. That could erase some benefits of the 401(k).
Having a plan is key. If you have questions about a retirement income plan, give us a call at 404.890.5606 or visit Nicholas Wealth Management.
Securities offered through TCM Securities, Inc. Members FINRA – SIPC. Advisory Services offered through Triumph Wealth Advisors and BluePath Capital Management.
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