Planning for retirement is relatively simple in that you need to find the best ways to put money aside and have it grow at rates that are acceptable to you. But there is more to the equation than that, since you also want to be able to enjoy life, and you need enough for expenses, travel, education and the other things you will want to focus on as you age. No matter whether you are just starting with your investments for retirement, or you have already gone a long way down that path, reevaluating can help you see if mistakes are being made. Here are some common planning mistakes.
Not Saving Enough to Cover Retirement
By far, the largest mistake that most people make is not saving enough, so when they get to retirement, they don’t have all the money they really need to live comfortably. They may get by, but it can reduce how much enjoyment they have in their later years. Life expectancy is also a consideration, because people who live very long lives will need more saved for retirement. It’s not possible to know how long you will live, so you need to plan for more than you think you will really need. That can help ensure that you have money throughout your retirement years.
Saving Too Much to Enjoy and Cover Present Life
On the flip side of not saving enough is saving too much. You want to be able to enjoy your life up to retirement as well as during it. You also want to be able to spend money on the things that matter to you, and if you put all of your money into retirement investing, you could find that you don’t get to use that money. An accident or illness could potentially cut your time short, and if you don’t make it to retirement or through much of it, all that money could have been used for other things. A balance between spending and saving is very important.
Choosing the Wrong Investment Vehicles
How you invest your money for retirement also matters a great deal. Some people choose to invest in stocks and bonds, others pick real estate, and still others use a combination of different options. There is no one “right” option, but there may be options that are right for you. Most of these depend on what you really want to get out of your investments, how much you are trying to save, and the rate of return you expect. Talking with a financial advisor about your goals can help you make good choices and invest wisely for your retirement.
Not Taking Risks to Get Ahead
Sometimes, a little bit of risk can be a good thing. Generally, people who make bigger investments and take larger risks have the opportunity to earn more for their retirement. But they also have to be aware that they could lose more, too. Again, balance is key. But if you’re young and just starting out in your retirement savings plan, you can generally afford investments that are riskier and that will pay off better if they do well. That can help you get a jump on your savings for retirement and make it easier for you to keep things moving as you age.
Taking the Wrong Types of Risks
Be sure to temper your risk as you get older, because you don’t want to be involved in high-risk investments when you’re close to retirement age. You could gain a lot, but you could also lose a lot. When you’re older, you don’t have the time to put that lost money back through working for years, so you may want to consider your investments are moderate to low risk. By using the right strategies and not making mistakes, you can have a better, stronger retirement to enjoy.
Disclaimer: The information contained in this article is for general information purpose only and is not intended to be a source of investment advice with respect to the material presented. The ideas contained in this article should never be used without first consulting with your financial/tax/legal advisor.