So you made into retirement. Congratulations, now it’s time to kick back, de-stress and enjoy the time that all of those years of working have given you. Of course, the unfortunate fact is that millions of Americans today are not financially prepared for retirement, especially those who have never put any preparation into it to begin with. Trust us, if you think being broke now, while you’re still working, is a pain, try doing it when you don’t have a steady paycheck coming in.
If you want to avoid going broke in retirement, below are 4 habits, mistakes and behaviors that you definitely need to avoid. Enjoy.
The 1st is the worst; not saving enough money while you’re working. While this may be a “duh” moment for many, the simple fact is that there are literally millions of Americans who don’t save enough money for when they retire and, even worse, less than 50% of Americans have actually calculated how much they will actually need during retirement. The problem with this is simply that, if you don’t know how much you going to need, it’s hard to plan on how much to save. The solution is to do some calculations and, if necessary, consult with a financial planner, and determine how much you’re going to need when you retire. Once you do, you can start putting aside the money you need to reach that goal (or at least do your best).
Next is making the wrong choice of asset allocation. When you consider the various studies have shown asset allocation to be extremely important for building long-term wealth (through investing in a portfolio) you get an idea of how important it is to pay attention to the asset classes you choose to put in your portfolio. For example, younger investors who are building a portfolio should invest more in stocks and, as you get older, that should shift to income producing assets that are less risky.
Another huge mistake is to raid your retirement account when an emergency arises. Many consumers look at their IRAs, especially a Roth IRA where contributions can be withdrawn without penalties, as a sort of emergency fund. It’s not and, even worse, most people who decide to take money out, for whatever reason, don’t put it back, decimating their savings and also the effect that compound interest will have on growing their money. Some people also make the mistake of withdrawing money from their traditional IRA or 401(k) before they reach the age of 59 1/2, which means they have to pay a lot bigger taxes and penalties.
Finally, there’s one habit that many people don’t really look at when it comes to saving for retirement because it has nothing to do with actual money, per se, and that’s taking care of their health. Being overweight, drinking too much alcohol, smoking cigarettes, not getting enough exercise and many other unhealthy habits not only cost money when you’re younger but, as your body gets older and starts to break down due to these habits, the cost to repair your body becomes extremely expensive.
So there you have it. Save more money, choose your assets well, leave your money in long-term investments like your IRA and 401(k) and take care of your health. If you can do all 4 of those things (and avoid some type of accidental death, of course) you’ll make it to retirement in great shape and, even better, have plenty of money to enjoy yourself at the same time.