Retirement mistakes can deplete your savings.
Chances are you will retire someday.
This milestone may be quite close.
It may also be years away.
Whatever your situation, it is important to plan carefully.
According to a recent Kiplinger article titled “Avoid These 4 Mistakes That Often Derail Retirement Plans,” retirement mistakes could compromise your golden years.
What are some common retirement mistakes?
Taking Early Withdrawals.
Retirement plans have rules.
Typically, you cannot tap into your 401(k) or IRA before age 59 ½ without incurring penalties.
The money withdrawn will be added to your gross income for the year and you will have an additional 10 percent tax penalty.
This can be a pretty hefty sum, too.
In some cases, there are limited exceptions to withdrawal penalties.
Educate yourself and do not assume you are the exception to the rule.
Forgetting your Employer Match.
Does your employer provide a match for contributions to your employer-sponsored 401(k)?
If yes, you should contribute at least enough each year to maximize the employer match.
This is essentially free money saved for retirement.
On average, people lose $750 per year by not meeting the employer match.
This can add up to nearly $100,000 of lost retirement income throughout your career.
Needless to say, this is a lot of money forfeited from a simple retirement mistake.
Do yourself a favor and contribute to meet your employer match.
Paying High Investment Fees.
Fee percentages can be deceptive and one of the more common retirement mistakes.
Two percent does not look like a lot, but it can cost you significantly over time.
Because these fees compound with your returns over time, you are also losing growth on your returns.
Missing Out on Compound Interest.
The primary reason you should save early is compound interest.
What is compound interest?
Compound interest is when you are able to charge interest what was earned through interest.
Essentially, your savings are growing beyond what you contribute initially.
It is a significant retirement mistake to not think long-term when saving and investing.
When it comes to planning for your golden years, retirement mistakes are often made when attempted alone.
Having a comprehensive plan is essential when it comes to paying for health care, claiming Social Security, and being tax-efficient in your retirement and estate planning.
Reference: Kiplinger (Jan. 29, 2020) “Avoid These 4 Mistakes That Often Derail Retirement Plans”