Having your money and investments work for you the right way involves more than just socking money into real estate, a 401(k) or IRA. Just one major blunder with your retirement planning goals could mean the difference between you having to subsidize your income by working part-time at Walmart instead of enjoying a life of independence and freedom.
With aging there’s only one way to go and that’s forward so as you near retirement there is not much room for error with your investments. One of the biggest fears that most retirees face is that they will either run out of money before they die or they’ll have continue to work until they’re not physically able to anymore.
Below are three mistakes to avoid so that your lifestyle is fully funded as you near retirement age:
Mistake 1: Tax Deferral Is Not Maximized
The government wants you to save as much money as possible and they’ve given you some great tax incentives to help encourage you to do just that. Failing to take advantage of such generosity is a huge mistake. For example, by contributing to an employee sponsored plan such as a 401(k) you will not only reduce your taxable income but also be able to grow your money tax deferred. That means you will not have to begin to draw your money out until retirement age. Unfortunately, less than half of U.S. workers who could contribute to the plan ever do.
Mistake 2: Borrowing Money From Your Retirement Plan
Many times employees will borrow money from their 401(k) to make a down payment on a home, referred to as a hardship loan. This is a major mistake of the worst kind because you halt the magic of compounding interest and also lose valuable interest income. The golden rule of retirement is that once the money is in, you never should touch it for any reason until its mandatory that you begin to withdrawn it.
Mistake 3: Believing That You Will Still Want To Work When You Retire
There’s an old saying that goes “it’s better to have it and not need it than to need it and not have it.” Many people still thing they’ll want to work after they reach retirement age. What they fail to take into account is their deteriorating health and their sheer lack of enthusiasm to continue to work decreases. Thus they underfund their retirement account and they’re forced to have to go to work to supplement their income. Working in your golden years should be a choice not a necessity.