Retirement can be both an exciting and scary time. Most of us look forward to the day we can stop working and start enjoying life full-time instead. But, preparing for retirement in order to be financially stable after you stop earning your regular income is also stressful. Ensure you have a successful retirement by avoiding the following bad retirement planning decisions.
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Bad Decision 1: Don’t make a plan.
Similar to many other big life changes, planning ahead for retirement is your best bet. The Department of Labor reports that you will need about 70 percent of your income before retirement to keep your standard of living once you stop working. For people who are lower earners, they will need 90 percent or more.
Think about when you plan on retiring and what type of lifestyle you want to live. Be sure to have the discussion with your spouse to make sure you are on the same page. Also, consider things like a life insurance plan, how much you will earn in social security and ensuring that your investments and savings are diversified.
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Bad Decision 2: Start saving too late.
If you are in your 20s or 30s, retirement seems like it a lifetime away, but in reality, it will arrive before you know it. Starting your retirement saving early is the key to your future financial success. Put money into your 401k and invest wisely. When you’re young, you can take more risks in the market, and when you are older, you should invest more conservatively because you have less time before retirement to recoup loses.
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Bad Decision 3: Don’t utilize your employer’s retirement plans.
If someone gave you a gift of free money, would you turn it down? I don’t think so. The same principle goes for your employer’s retirement plan. Many companies offer 401k plans that not only allow you to defer taxes, but also provide a matching contribution. Take time out to really familiarize yourself with your plan and make sure you take advantage of all of your benefits.
Also, remember that your goal should be not to withdraw early or take a loan (you pay back with interest) from your 401k. Keep in mind the IRS does allow you to withdraw for medical expenses, a home, tuition and a few other things.
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