Retirement planning is a topic that more and more people are getting interested in lately, especially over the last few years. This is not only due to more awareness about this subject thanks to the multitude of financial blogs, magazines, channels and so on, but also because of the recession that came about in 2008 which led to the erosion of retirement accounts of thousands of retirees.
However while planning for retirement is a good thing and there cannot be a better time to start working on it than now, there are a few mistakes that most people tend to make. We will go through the main ones in this article in the hope that you would learn from these and avoid them while planning for your retirement:
1. Starting out too late:
As we said there’s no better than to start planning for your retirement than now, for years will keep passing without you even realizing and one day you’ll be staring at your retirement without the necessary savings in your account. Therefore, it is a mistake that you need to avoid at all costs.
Even if you save a little money every month, it all adds up over the years and makes for a sizeable amount when you reach your retirement age, thanks to the interest you gain on your capital as years roll on.
2. Not making the most of 401(k)’s:
A lot of people fail to make the most of 401(k) as they do not match the contribution that their company offers. This is not a little mistake but a serious error that needs to be corrected as soon as possible. Since contributions to your 401(k) are taken from your paycheck before taxes, you don’t need to pay taxes on taht part of your income, so if you aren’t making the most of it, you’re making a huge mistake as it is essentially free money that you’re losing out on. If you need professional help regarding retirement planning, you should consult retirement planning surrey to take care of this.
3. Being too conservative while investing:
The great recession of 2008 eroded the life savings of many people, but mostly of those who had invested a lot of money in the stock markets. This instilled fear in the minds of both youngsters who heard about this debacle as well as those who lost a major chunk of their hard earned money. However holding bonds and thinking that you’re risk free is a costly mistake as the stock market tends to give very good returns in the long run, so if you do not have enough exposure to it in your younger years, you’ll miss out on sizeable returns. The best way to go about such planning is consulting a professional such as financial planner surrey who will help you sort out your finances.
4. Cashing out early:
Many folks tend to get lured by the amount of money stashed in their retirement accounts and are tempted to cash out their 401(k)s. However, this is another mistake since by doing so you’ll owe taxes on the amount you cash out and also face a 10 percent penalty, so it is a deadly combination that is going to turn out very costly for you in case you decide to do it. Thus, a better way is to roll your 401(k) into an IRA and stay tax-free!