Most Americans aren’t where they need to be to hit their retirement goals, but it’s rarely their fault. No mandatory school courses cover retirement planning, so there’s a general lack of knowledge on doing it right. Here are the most common retirement planning mistakes and what you can do to avoid them.
Having No Plan
Even if you understand the necessity of saving for retirement, you may not have a concrete plan of how to do it. With student debt and housing bills to consider, savings might seem like less of a priority, but a retirement plan is crucial.
Your first step is to make a plan. Look at your finances, determine how much money you can feasibly set aside for retirement, and stick to it. As funds loosen up, start putting more into retirement savings.
Lack of Diversity in Retirement Portfolio
Your retirement portfolio should contain a spread of investments based on your objectives. The main asset categories are stocks, bonds, and cash equivalents, and you should have a mixture of these. Keep in mind, this is a long-term proposition, so when you notice stocks taking a dip, don’t fret. Different asset categories may rise while others fall; it’s why you want diversification in the first place.
Spending, Not Rolling Over, Retirement Accounts
If your workplace offers a retirement plan and you change jobs, you’ll be given the option to take the money as a lump sum, keep the money in the plan, or transfer the money (this is a rollover) into either an IRA or your new job’s retirement plan. Taking the money as a lump sum and spending it is a bad idea. You may only get 70 percent of the money, and your retirement savings will go to waste.
Not Understanding Your Plan
Retirement plans can be complicated. However, not taking the time to understand the ins and outs of your particular plan almost guarantees that you won’t get the most out of it. If you have a Roth IRA or any other plan, spend some time learning what exactly that means and how to use the plan to your advantage.
Now that you know the most common retirement planning mistakes, we hope you’ll have an easier time navigating the complicated waters and have a fantastic retirement.