Retirement planning is an important part of every working American’s present and future. You must plan now if you want to have money to pay your bills when you are no longer working. There are four common hazards to avoid when saving for retirement.
The biggest retirement planning mistake to make is not planning. If you don’t have funds to retire, you may have to continue working. If you are physically unable to work you may have to sell your home or other belongings to survive.
Every American who has earned enough work credits will receive Social Security retirement benefits, but these benefits will only cover about 40% of your pre-retirement earnings. You must have some other means of income.
Cashing Out or Taking Loans
Another retirement savings mistake is taking funds out of your account early. Premature retirement withdraws may be assessed a ten percent fine. Avoid taking loans from your 401K or IRA. You may not be able to pay the loan back, which could leave you financially strapped in your retirement years. If you leave a job, avoid cashing out the account. Instead you can transfer your funds into a Rollover IRA.
Investment diversification is the best way to grow your retirement money quickly and safely. If you put all of your money into one stock investment and that stock fails you will lose your retirement funds. You should also rebalance your investments when needed to maintain a stable portfolio.
Not Taking Advantage of Incentives
Many retirement accounts offer incentive programs that you should take advantage of in order to maximize your retirement savings. If your employer offers a 401K match program, contribute the maximum amount allowed each year and you will see your funds grow quickly with the extra money from your employer. If you are over the age of 50, you should take advantage of 401K and IRA catch-up provisions. These allow older citizens to add a little more to their retirement accounts each year.