Retirement Planning Mistakes to Avoid

A lot of people believe they have all the time in the world to plan for retirement, and this is undoubtedly the first and most important retirement planning mistake. Putting off thinking about, discussing, and actually initiating a retirement plan, too often leaves the retiree too close to retirement with too little money.

Most of us fully believe that that good paying job will always be there, and as long as there is a steady paycheck coming in, there’s always time to save. The truth is that jobs are not a guaranteed fact of life, and neither is an income. Putting off squirreling away a nest egg for that retirement ,or rainy day, is one of the most common mistakes, and one of the most tragic.

401(k) plans are good ways to save and in many cases, they are company matched, making them an even better investment. Putting off contributing to a company plan because it will decrease the amount of the weekly paycheck is another major mistake. While it may take a bite out of the available cash, it will grow over time and come in handy down the road. Another equally bad mistake is to not take complete advantage of the 401(k) plan, and the maximum that can be invested and matched by the company. If the company is matching employee contributions, every penny allowed should be invested.

Some potential retirees were once convinced that their Social Security and a pension plan were enough to sustain them after retirement. While this may be true in some cases, having a nest egg, preferably one in an IRA that will continue to grow, is always a good safety net. While most pension plans are insured and secure, some are not, and they may not always be there when needed.

After a certain age, usually mid fifties, withdrawal from 401(k)s are normally allowed without penalty. While it is tempting to use this money for that new car, boat, or down payment on a home, it is good to remember that the money taken out will most likely never be replaced, and what was once a dream purchase, will depreciate rapidly.

Saving is a tricky and sometimes painful business, and various reports over the years have indicated that somewhere between 40-70 percent of all retirees have not saved enough to maintain their standard of living. The best plan is to start saving early, and keep at it.