Retirement Planning Mistakes

Retirement Planning MistakesRetirement is one of the most important phases of life that people should be able to enjoy, but unfortunately, some common retirement planning mistakes mean that retirees will have to scrimp and save rather than enjoy their golden years. Mistakes may include: not planning, thinking it is too late to plan, trusting the government to be the retirement plan, trusting the workplace to provide for retirement and not managing a retirement plan correctly.

Obviously, not planning for retirement leaves a person up to the whims of fate and government handouts. Many people may have a retirement account, but their savings plan is whenever they feel like it. They have no idea how much they will have retirement or how long it will last. Planning for retirement should include an idea of what goals and type of lifestyle that a retiree wants to live when the amount of money to be saved is determined.

It is never too late to plan. The later that a plan starts, the harder it is to meet certain high end goals, but that should not deter anyone from starting a plan and following through on it. Something is always better than nothing, and the right plan combined with real discipline can mean the difference between comfort and hardship.

Social security would be a great thing if Congress could keep their hands off of it. Instead, they have used it as a revolving loan system without ever looking to pay back into it. In essence, it has become a government run Ponzi scheme that is going to fail as the birth rates decline. In addition, economic downturns affect social security as fewer people have jobs and are able to pay into the plan. Social Security may not run out, but the benefits granted by it will bring only hardship unless something is done about it. Because we can’t trust our politicians to do the right thing over the long term, it is important that we take care of ourselves.

Congress borrowing from Social Security is roughly the equivalent of someone who borrows from their own 401K. The costs involved with such a loan are often larger than the person realizes as it leads to lost revenue generation over the life of the loan, and in certain situations, it can lead to penalties and higher taxes. Don’t make the same mistakes as Congress when it comes to your personal retirement account.

Corporate retirement plans are no better than government programs. It would be nice to believe that corporations fully fund retirement programs in the good times, so that when the lean times come, the company would not have to worry about it. Unfortunately, that has rarely if ever been the case. Instead corporations are cutting retirement programs completely and sometimes they are even cutting retirement from those who are already retired. While this may keep a company viable for a short duration, it is really terrible for the people who were counting on that money. Corporations have already shown that they are not trustworthy; it is important that individuals take care of themselves and see the corporate program as a nice addition for as long as it lasts.

If your company offers a match to the retirement savings program, take advantage of the entire match. It is like giving yourself a raise. People do not take advantage of this match and miss out on the immediate benefit of more money in the retirement account sooner, and that means more interest generated over the life of the account. Free money doesn’t come along very often, and the employer matching program is just that – free money.

Retirement Planning Mistakes

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