When it comes to saving for your retirement, every penny counts. Regardless if you are just starting to save or in the home stretch to retiring, making the wrong financial decisions could have a big impact on your retirement goals. With social security no longer being a sustainable retirement option, it’s important to make sure that you set yourself up for the future.
Ready for some shocking facts? According to the Federal Reserve, only 13% of Americans have given their financial planning for retirement “a lot” of thought. That’s a relatively small number. And what’s even more shocking is that despite little effort to prepare themselves, the Employee Benefit Research Institute (EBRI) shows that confidence about being prepared for retirement spiked in 2014 and again in 2015 after sitting at record lows between 2009 and 2013. So, what changed to make Americans think they are better prepared despite not thinking “a lot” about retirement? Nothing really. Savings accounts are low, and many people believe that things will just work out.
If the above doesn’t sound like a sound retirement plan to you, we couldn’t agree more with you! Here’re some simple retirement tips to avoid and there’s no time like the present to start implementing them!
- Not saving, not saving enough, and not knowing how much to save. The first step is to start saving, but not knowing how much you need to save and putting that amount aside will still leave you in a lurch come retirement time. It’s important to consider how long you think you may live (using family data), where you will live, what age you will retire, your lifestyle, and your insurance and health needs. Once you have an idea of how much money you will need each month, you can determine how much you need to save. For example, if you plan to retire at 65, estimate living until 85, and your monthly costs will be 3,000 per month, then you will need to save $720,000 total between all your retirement options.
- Not investing. Consider talking to a financial planner who can help you put your money in the best vehicle to get the best return on your investment. A regular savings account won’t get you the growth that you need to reach your goal. A planner can help guide you on the best place to put your money (401K, 403b, IRA, or Roth IRA to name a few).
- Relying on other Just because your spouse as a solid retirement plan, doesn’t mean it’s enough to support you. There is no guarantee that you’ll stay together until retirement, and you leave all the investing and risk management to someone else. Have your own plan as well.
- Not contributing enough or leaving early. If you work for a company who has a retirement plan, like a 401k, there are annual maximums that you can contribute on top of having an employee match. Ask your financial planner how best to maximize and utilize these plans. You also may need to work for a company for a set number of years to be fully vested – meaning if you leave before the required amount of time, you will lose any or part of your employers’ contribution.
- Cashing out or taking loans. There may be times when money gets tight and you are tempted to cash out a 401K or take a loan against it. But this should be a last resort if possible. You may also incur penalties and interest should you choose one of these options. You’ll also be missing out on gaining interest on the money you took out.
It seems so simple to save for retirement, but it’s easy to neglect things that don’t seem to be an immediate concern. It’s important to make smart retirement moves with your money as soon as possible. If you’d like to talk about the Saving Options at Litchfield Bancorp, including IRA’s – call or stop into one of our branches today.
Litchfield Branch Manager, Vice President
NMLS MLO ID: 698742