Financial Retirement Planning


Five Big Retirement Mistakes

November 7th, 2014 ernie Posted in Mistakes to Avoid No Comments »

Five Big Retirement MistakesWe all make mistakes in our lives. However as we near retirement age, we really want to be cognizant of the mistakes that can affect us during retirement. There are many mistakes we can make. This post is focusing on the five big retirement mistakes that many people about to retire make.

We are assuming that you have the rest of your life in order. We will just focus on the preparation for retirement. Company downsizing, health issues and accidents can also have huge impacts on people during retirement or while you are working. Let’s focus on some of the things that we have control over and not on those that we do not have control over.

Five Big Retirement Mistakes

Leaving money on the table that may be offered to us in a variety of ways. For example dividend reinvestment plans where your company matches contributions to the plan, either as part of your retirement plan or a company savings plan is a good example. Always take advantage of these offers to augment your savings. Another example is leaving a company too soon and not being able to take your retirement plan with you. This is your money and you need to make sure that your money comes with you or gets locked in by a 3rd party.  Anytime you leave money on the table, you impact your overall financial situation.

Not saving enough money for retirement is another big mistake. Most people do not even know how much money they will need. The right thing to do is to meet with a financial adviser and work with them to calculate just how much money you will need. The simple way and not too accurate is to make your own calculations. If you make $50,000 today and want to have the same amount in retirement, you will need to have $1.0 million that generates 5% income every year to sustain your retirement. We happen to believe you need less than that, but that is a much more complex calculation.

Saving on auto pilot is a great way to make sure you have saved some money for retirement, but most people do not follow this approach. All you need to do is have your bank or financial company deduct from your account a fixed amount every month and place it in a savings account, financial investment etc. It is a form of savings and it is a start towards saving for retirement.

Paying high fees for banking services, for financial advisers, for trades on investments etc. Anytime you can reduce these fees means more money in your account. With compounding over the years these fees can add up and make a real difference in your retirement.

Retire too early before you have saved enough to last your remaining life time. Follow the first step and find out how much you need to save for retirement. Once you reach that objective you will know that you can safely retire and know you have enough for retirement.

These Five Big Retirement Mistakes can make a huge difference in your lifestyle during retirement.

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Top Retirement Mistakes

August 27th, 2013 ernie Posted in Mistakes to Avoid No Comments »

Top Retirement MistakesThe writer came across this list of retirement mistakes in an article that he was reading and decided to write a post about these mistakes from our own personal perspective. This list is not scientific or based on statistics of any kind. Instead it is based on the real experience of the writer and what the impact is or will be of making one of these mistakes. We would be interested to hear from readers about their thoughts on this subject and anything they can add to this thought process.

Here are the Top Retirement Mistakes

  • Spending too early
  • Start saving too late
  • Withdrawing from retirement fund
  • Forgetting about health care
  • Turning down free money
  • Ignoring your investment savings

 

More Detail about Retirement Mistakes

Saving without a plan or goal – this is akin to going on a trip with no particular destination in mind. If you are saving for retirement, emergency funds or a new car, have some idea of how much you will need to meet your goal. You could be saving too much or you could be saving too little and receive a nasty surprise. Talk to a financial adviser to discuss what you will need when you will retire to meet the lifestyle that you desire for you and your family.

Spending too early– any money in a savings plan will compound and if you spend it too early, you lose the interest or dividend income that was generated by the plan that was reinvested and contributed to meeting your goal. Remember that you need to have sufficient savings to get you to your goal which for most people is a satisfactory quality of life during retirement.

Start saving too late – compounding works wonderfully especially over a long period of time. Someone who starts saving in their 20’s will need to save far less than those who start in their 40’s. you may have lost 20 years of compound interest or dividend income which can only be made up by larger and larger savings from your income during your 40’s and 50’s. it is just so much easier if you start early!

More Items about Retirement Mistakes

Withdrawing from retirement fund – to pay for a car or a mortgage repayment has the same effect of not contributing. You have less money towards your goal. You are not reaping the rewards of the interest and dividend income your savings generate. Are you  saving the interest cost of your mortgage for example, however if you withdraw from a tax free savings plan, you may be giving up for more long term tax free income than you think. Talk to a financial adviser for assistance before making that decision.

Forgetting about health care – can make a huge difference in your plans. Paying ever increasing premiums. Paying for the deductible portion of the health bill can devastate a person’s savings. Plan for this requirement and make sure that you always have money set aside for your health needs. Many people forget that one spouse could end up in a nursing home due to the care that is needed while the other lives at home. Now you have the cost of both residences plus the health cost of maintaining the nursing home charges.

Turning down free money – Always take advantage of free money from your employer for retirement plans, matching investments etc.. Some employers will match contributions to retirement savings plans and investment plans. This is really extra income which can add up significantly over time.

Ignoring your investment savings – Once you have savings whether it is in a tax free savings plan or otherwise, pay attention. At least once every six months meet with your adviser. Determine if any changes are needed to rebalance your portfolio. Invest for the long term and focus on high quality investments with diversity in mind.

The Bottom Line

Saving without a plan or goal – to reiterate, establish a savings plan and a goal. Determine how much you will need to maintain your lifestyle during retirement. This includes pay for trips, look after the house and pay for your health care. Then start saving for this long term goal as soon as possible. It can mean a huge difference for you and your family, especially if you begin early in your life!

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