By Omobola Tolu-Kusimo
Retirement planning is no easy task. Not only do factors like salary, debt and expenses all affect your ability to save, but there’s also no one-size-fits-all solution to realising the vision of your golden years.
Generally, the right plan is about timing, opportunity and not following the myths that can destroy your retirement. With that in mind, here are 35 retirement-planning errors to avoid, along with tips for correcting them.
- Having No Retirement Plan
Not starting the retirement-planning process is one of the biggest retirement mistakes you can make. You should determine what you want your future to look like, as well as how much money you can realistically set aside. Then, find a plan that will get you there.
Some employers offer 401(k) plans and pensions, though the latter are becoming less common. You can also open an IRA without an employer sponsoring the account. These products, which can offer greater returns and more diversification than a traditional deposit account, are effective ways to start growing your nest egg.
Learn how to enjoy your golden years — see the 50 things every 50-something should know about retirement.
- Not Knowing How Much You Need to Retire
If you’re nearing retirement, take a look at your current salary, add up your expenses — including medical costs in retirement — and meet with a financial planner to calculate how much you’ll need in order to retire and live comfortably.
If you’re decades away from retirement, come up with a savings rate to determine how much you should deduct from your paycheck each month to put in your retirement savings account.
- Not Increasing the Amount You Save After a Pay Increase
A retirement savings rate is the amount of money you deduct from your paycheck to put toward retirement. For example, if you deduct $200 every month from your $30,000 salary, your retirement savings rate is eight per cent.
You should always increase your savings rate as your salary increases. Put 100 per cent of your raise toward retirement — you know you can already get by on your current salary.
- Having Incorrect Beneficiary Designations
In the event of your passing, you don’t want to leave a financial mess behind for your family. Avoid this problem by making sure your retirement plan beneficiaries and the designations listed in your will are in agreement. That way, your loved ones won’t have to struggle over dividing up your assets.
- Paying High Retirement Account Fees
Be aware of how much you’re paying in investment fees, including 401(k) fees. In 2014, the Center for American Progress estimated that a typical worker who starts saving at age 25, earns $30,502 and pays aone per cent investment fee will end up spending nearly $140,000 in fees over his lifetime. A high-income worker making $75,000 at 25 years old will pay more than $340,000 in investment fees.
The promise of high yields is tantalising, but compare these account fees with ones attached to lower-yield options to determine the true value of your investment. Watch out for the hidden fees you’ll encounter in retirement.
- Not Checking Your Retirement Account’s Performance
Resting on your laurels does not bode well for a strong retirement plan. Do you know how well your investments performed last year or over the past five years? Unless retirement is imminent, long-term performance should dictate which funds you invest in.
- Culled from YahooRetirement planning is no easy task. Not only do factors like salary, debt and expenses all affect your ability to save, but there’s also no one-size-fits-all solution to realising the vision of your golden years.
Generally, the right plan is about timing, opportunity and not following the myths that can destroy your retirement. With that in mind, here are 35 retirement-planning errors to avoid, along with tips for correcting them.
- Having No Retirement Plan
Not starting the retirement-planning process is one of the biggest retirement mistakes you can make. You should determine what you want your future to look like, as well as how much money you can realistically set aside. Then, find a plan that will get you there.
Some employers offer 401(k) plans and pensions, though the latter are becoming less common. You can also open an IRA without an employer sponsoring the account. These products, which can offer greater returns and more diversification than a traditional deposit account, are effective ways to start growing your nest egg.
Learn how to enjoy your golden years — see the 50 things every 50-something should know about retirement.
- Not Knowing How Much You Need to Retire
If you’re nearing retirement, take a look at your current salary, add up your expenses — including medical costs in retirement — and meet with a financial planner to calculate how much you’ll need in order to retire and live comfortably.
If you’re decades away from retirement, come up with a savings rate to determine how much you should deduct from your paycheck each month to put in your retirement savings account.
- Not Increasing the Amount You Save After a Pay Increase
A retirement savings rate is the amount of money you deduct from your paycheck to put toward retirement. For example, if you deduct $200 every month from your $30,000 salary, your retirement savings rate is eight per cent.
You should always increase your savings rate as your salary increases. Put 100 per cent of your raise toward retirement — you know you can already get by on your current salary.
- Having Incorrect Beneficiary Designations
In the event of your passing, you don’t want to leave a financial mess behind for your family. Avoid this problem by making sure your retirement plan beneficiaries and the designations listed in your will are in agreement. That way, your loved ones won’t have to struggle over dividing up your assets.
- Paying High Retirement Account Fees
Be aware of how much you’re paying in investment fees, including 401(k) fees. In 2014, the Center for American Progress estimated that a typical worker who starts saving at age 25, earns $30,502 and pays aone per cent investment fee will end up spending nearly $140,000 in fees over his lifetime. A high-income worker making $75,000 at 25 years old will pay more than $340,000 in investment fees.
The promise of high yields is tantalising, but compare these account fees with ones attached to lower-yield options to determine the true value of your investment. Watch out for the hidden fees you’ll encounter in retirement.
- Not Checking Your Retirement Account’s Performance
Resting on your laurels does not bode well for a strong retirement plan. Do you know how well your investments performed last year or over the past five years? Unless retirement is imminent, long-term performance should dictate which funds you invest in.
- Culled from Yahoo
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