Your retirement will be here before you know it. Those who wait until the last minute to plan, however, risk making mistakes that can keep them from being able to enjoy retirement fully. Planning ensures you can minimize your risk of running out of money during retirement. It also allows you to figure out the best course of action to get the most value out of your 401(k), IRA, or other savings accounts
Let’s not forget about the unique savings options you can explore, either. You can do things like setting up a health savings account (HSA) that helps you optimize your savings, or work with an independent financial advisor who can help you build and execute a personalized retirement strategy. Partnering with a financial advisor offers a great starting point for crafting a retirement plan. The advisor can teach you about myriad savings options and help you choose ones that align with your requirements.
Retirement only comes once, so you should try to make the most of it. Those who approach planning with an open mind can develop a strategy that meets their expectations. This post will go into detail about five common retirement mistakes and how to avoid them.
5 Retirement Mistakes You Need to Know About
There is no such thing as a foolproof retirement plan. A financial advisor can help you develop a plan that offers protection against common mistakes, such as:
1. Failure to Account for Taxes
Taxes on Social Security and other retirement income can put a dent in your post-career savings. You cannot avoid these taxes, but those who account for taxes as they prepare for retirement can limit their impact. Learn about the different types of savings accounts and their tax implications. You may want to consider a Roth IRA, as this option lets you add money after you’ve paid taxes on it.
Maintaining a diverse investment portfolio can have far-flung effects on your retirement savings. A financial advisor can work with you to put together a plan that helps you keep your tax expenses in check by understanding the ins and outs of local and national tax laws.
2. High Account Fees
You may be subject to fees from the provider of your 401k or other savings accounts. There may even be costs associated with mutual funds or exchange-traded funds (ETFs) in these accounts. The fees to maintain your accounts can add up quickly, and may end up costing you thousands of dollars if you’re not careful.
An educated approach to retirement planning is key, particularly when it comes to avoiding high account fees. Those who understand how various account options work and the fees associated with them can find ones that deliver the best ROI. It can also be beneficial to pursue ETFs or index mutual funds with low or free trading commissions. These investments have a low barrier to entry and can provide substantial returns over an extended period.
3. Early Withdrawals
There is no telling when an emergency arises that leaves you short of funding you need to pay bills and cover other everyday expenses. This scenario can leave you scrambling for money and may lead you to withdraw funds from your savings accounts to make ends meet. Those who withdraw funds from their retirement accounts may face a 10% tax penalty. The IRS applies this penalty to anyone who takes out money from a qualified plan before the age of 59 ½.
Setting up a savings account can help you avoid having to dip into your retirement account due to an emergency. You can gradually add to this account to be financially protected if an emergency arises and you need money right away.
4. Working Longer Than Necessary
Most people want to retire as early as possible, yet concerns about having adequate finances available for retirement can cause people to work longer than necessary. There is no need to let concerns about a retirement income gap get the best of you. People who plan for retirement can establish financial goals and the steps required to accomplish them. They can next find out how much they need to earn each month to ensure they have enough money to retire by a certain age.
5. Waiting Too Long to Start Saving
Research indicates approximately 39% of adults start saving for retirement in their 20s. Some financial experts project people need at least $1.7 million in retirement at age 65; an adult would need to save nearly $500 each month, starting at age 25, to reach this figure.
It is never too early to start saving for life after work. Any adult can set up a retirement savings account and watch it grow over time. Those who pursue account options today are well-equipped to find ways to have sufficient funds at their disposal during retirement.
Even a single mistake can have severe ramifications for your retirement savings. You can work with a financial advisor who can take the guesswork out of the planning process and help you avoid mistakes along the way.
Your financial advisor has a simple goal: to ensure you can get the best results from your investments. The advisor will learn about you and what you want to accomplish. He or she can then offer guidance to ensure you can achieve your desired returns with minimal risk.
Contact an Expert With Questions About Financial Planning
Bogart Wealth has independent financial advisors on staff who are committed to our clients’ success. We can review your investments and offer insights to help you build a financial plan that serves you well now and in the future.
We are available to meet with you and help you launch a financial strategy. Contact our offices today to request a consultation with one of our advisors.