Sadly, there are many out there who do not save enough money when preparing for retirement. In fact, according to Zacks Investment Research, 72% do not save enough for retirement each month.
Also, according to a different survey done by Bankrate.com, 36% of people in the United States have absolutely NOTHING saved for retirement.
These numbers are very alarming.
I believe that saving for retirement is possible, and it’s something more people should be working towards and succeeding at.
While many believe the economy ruins their chances for retirement, in reality most retirement preparation problems have to do with the specific beliefs people have towards retirement.
There are many reasons for why a person might be horrible at saving for retirement. By looking at the various reasons for why preparing for retirement doesn’t seem to be working for someone, I feel that more people can be aware of and overcome their retirement preparation problems.
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Below are five different ways you may by hurting your chances for retirement. Continue reading if you are interested in preparing for retirement but want to avoid common mistakes!
1. You skip saving for retirement altogether.
Many people skip out on saving for retirement for many reasons. These include:
- Believing you don’t have enough money to save for retirement.
- Thinking that you’re too young to care about retirement or that it’s too late to start.
- Relying too much on pensions and social security.
No matter how young or how old you are, you should be saving and preparing for retirement. You never know when you will need it, and I am all for a person being in charge of their own retirement plan instead of relying too much on other sources of retirement (such as relying on social security 100%).
The fact that 36% of people in the U.S. save nothing for retirement year after year is a scary number. These people will all have to retire one day and I’m not sure what they will do when the time comes.
Now is a better time than never.
Side note: I highly recommend that you check out Personal Capital if you are interested in gaining control of your financial situation. Personal Capital is very similar to Mint.com, but 100 times better. Personal Capital allows you to aggregate your financial accounts so that you can easily see your financial situation. You can connect accounts such as your mortgage, bank accounts, credit card accounts, investment accounts, retirement accounts, and more, and it is FREE.
2. You take on debt for others yet don’t put money towards retirement.
I talked about this topic in the post Should I Ruin My Retirement By Helping My Child Through College? There’s rarely a week that goes by where I don’t hear from a parent telling me their story about how they cannot afford to live any longer or that they know they will not be able to retire because they are paying for their child to go to college.
If this is your situation, I say STOP. Unless you are on track for retirement, I honestly think you need to seriously think about what is important. Your child will be fine without your monetary support if you cannot afford it. Try supporting them in other ways such as finding a job, helping them find scholarships, and more.
You can take out loans for college, but you cannot take out loans for retirement.
3. You think you’ll never have to retire, so you skip preparing for retirement entirely.
Recently, I read an article about someone who made hundreds of thousands of dollars a year, had a monthly budget of around $30,000 (yes, MONTHLY!), and yet hardly saved anything. This person said they didn’t really feel the need to save for retirement because they enjoyed their job so much.
Assuming you will love your job forever can be a huge mistake, as it’s hard to judge what you will love decades down the line.
Also, you never know if something will come up in the future that will completely prevent you from working, such as a medical issue or some sort of major life change.
4. You misjudge how much money you’ll spend in retirement, which can greatly impact preparing for retirement.
Many people just assume they will spend less money in retirement, but that is not always the case. Medical expenses may come up, you might decide to travel more, and in truth, usually retirement spending is not too different than spending from before you retire.
You might find some ways to save money, but you are still going to spend money on housing (even if you pay off your home completely, you will still need to pay property taxes, utility bills, etc.), food, clothing, entertainment, and so on.
Some make plans to become super frugal after they enter retirement, but life doesn’t always work out so perfectly. If you want to eventually be frugal, just start now!
5. You use your retirement funds for expenses other than retirement.
I’ve heard of far too many stories where a person has taken money out of their retirement funds in order to pay for a vacation, a timeshare, pay off low interest debt, and more. When preparing for retirement, this is a HUGE mistake.
While I don’t know everything about taking money out of retirement funds, I do know that this can usually hurt you more in the long run. Taking funds out of a retirement account can usually lead to large penalties and paying extra towards taxes.
You should always just use your retirement funds purely for retirement.
Do you think you will have enough money to retire and how are you preparing for retirement? What age do you expect to retire? What crazy retirement mistakes have you heard of?
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