After working hard for most of your life, you deserve to not have to worry about money during your retirement. However, in order to achieve this, you’re going to need to plan for your retirement well in advance.
The trouble is, there are a lot of mistakes you can make with retirement planning. Here, we’ll look at some of the most common mistakes you’ll want to avoid.
Not Saving Enough
By far the biggest retirement planning mistake people make is not saving enough. It’s easy to underestimate how much you need in order to live comfortably. Did you know for example, that you’ll need to replace around 80% to 90% of your income once you retire?
You’ll need to sit down and work out how much you need to live the lifestyle you want once you do stop working. Also, don’t overestimate how long you’ll be able to keep working. As a general rule, the earlier you start to save towards your retirement, the better off you’ll be.
Not Utilizing the Employer Match Scheme
Are you taking full advantage of the employer match retirement scheme? If not, you wouldn’t be alone.
If your employer offers the 401k or another match program, utilize it! You’ll basically be receiving free contributions into your pension. Provided you are also contributing, all of the money your employer puts into your retirement will be 100% yours. For example, if your employer donates 2% to your retirement, you should also personally contribute 2%. This would give you a total of 4% of your salary being saved for retirement.
Failing to Check Your Retirement Balances
You’ll want to keep an eye on your retirement balances. Ideally, this should be done every year. Without keeping track of your accounts, you won’t know how well your retirement plan is performing. When you invest in retirement schemes, there is always a risk you could lose money. So, by keeping an eye on it, you’ll reduce the chances of earning back less than you put in.
Eating into Your Savings
If you have a retirement plan which enables you to take a loan out of your savings, don’t do it. While you may need money now, if you eat into your retirement savings, it’s going to lower the amount you’ll receive when you do retire.
Saving for retirement isn’t easy and it’s made harder when you have a loan to pay back on the money you borrowed. As well as paying back the amount you borrowed, you’ll also be paying back interest, so you’ll effectively be losing money.
Not Diversifying Your Portfolio
You’ve heard of the phrase “don’t place all of your eggs into one basket” and this particularly relates to retirement funds. It’s really important to make sure you have a diverse portfolio. That way, if one investment isn’t performing well, it won’t affect your savings as much if you have money in other investments too.
Planning for your retirement is extremely important. The above are some of the most common mistakes you can make which could hinder your financial security.
