Retirement seems so far away, so why talk about it? Because of compound interest, the earlier you start saving, the better off you’ll be when you reach retirement age. And because money is the number one cause of stress in the United States, having financial security later in life is very appealing. Everyone makes mistakes, but some mistakes carry greater consequences than others. So if you’re working hard on saving for retirement, here are some mistakes you should watch out for:
Not Maximizing Your Employer Match
Everyone loves free money, right? That’s exactly what a company match is: free money. If you’re fortunate enough to be employed by a company that offers some kind of 401(k) match, then you should be taking full advantage of it. If your employer will match your contributions dollar for dollar (up to a certain point), try your best to max it out. If the company you work for will match up to 6% of your pay, you’ll essentially be investing 12% into your future every pay period. Sacrificing a little money now will pay off a lot when you retire.
Borrowing From Your 401(k)
It’s nice knowing that you can borrow from your 401(k) if you ever find yourself dealing with an emergency. Unexpected expenses can pop up that not even your emergency fund can cover. However, you should avoid doing this if you can help it. Not only might you have to pay fees and interest on what you borrowed, but your money loses its opportunity to grow and compound.
Retiring Too Early
The average life span in the United States is 78.8 years. Choosing the optimum time to retire could make all the difference between a comfortable, healthy retirement and one in which you have more free time, but have too little money to enjoy it. Three out of four retirees sign up for retirement benefits in the earliest year allowed, but many miscalculate and outlive their money. Consider working a few more years to allow your money to continue compounding and maximize your benefits. And when you do finally retire, you’ll ensure that you’re living comfortably and not stressing out about your financial well-being.
Only Looking at the Numbers
Having enough money in retirement is extremely important. However, is it the most important aspect? Because so much of what our lifestyle will be like in retirement depends on our savings, financial planning becomes top of the list of priorities. However, staring at spreadsheets often means we forget to plan for living happy, purposeful lives. Make sure you define what a successful retirement looks like to you. Look past the dollar amount that you’ll need to pay the bills, and consider how you’ll spend your time and what your goals are. Don’t completely look past the financial aspect, of course, but make sure you’ll be happy with the life you’ve worked so hard to create for yourself.
Waiting to Plan for Retirement
Watch this It’s A Money Thing video on compound interest to see how contributing to a retirement plan now will pay off down the road. Start saving for your retirement NOW!
Have you started saving for your retirement yet? I’d love to know!