Planning for retirement is very important for everyone, but it’s something many people either don’t think about or plan inappropriately for it. There are some common mistakes made in retirement planning that can be avoided so as to be better prepared. These five are seen most often.
Putting off starting
The earlier you begin saving for your retirement, the more money you accumulate and the more time it has to grow. It is not uncommon for people to only begin in their 30s and 40s when beginning in your 20s is best.
Not taking full advantage of employer matching
By not investing the full amount you can afford when your employer is willing to match a percentage of your investments means you lose in two ways. By investing little your account is smaller and will grow more slowly. You also lose out on the benefit of having the additional employer funds going toward your retirement.
Not allocating wisely
Early on, when you have time on your side, being too conservative can mean you lose out on earning potential. When you come closer to retirement, a too high-risk plan can mean you could lose out on the money you have worked to save.
Borrowing heavily against your 401(k)
This is the core of your retirement savings. It should not be considered money for a rainy day. The less money is in the account, the slower it will grow. It is also something you have to pay back or pay a penalty. This usually means less of an investment you can afford virtually halting any real growth.
Relying too heavily on a single stock
Some find a stock they are confident with and purchase it in large amounts. While confidence is good, the more you have of a single stock, the more you stand to lose if things go south. You may also miss out on other stocks that may be performing better. By spreading your assets around you can lessen your risk and increase your earning potential at the same time.
We are in difficult times economically and we don’t know what the future holds for us, so it is more important than ever to look ahead towards retirement. A little careful planning can help so that we can look forward to retirement with anticipation instead of anxiety.