1/23/2013 10:30 PM ET|
Retirement errors good savers make
It makes financial sense to put away as much as you can for later years, but don't let that focus keep you from enjoying your working years.
With so much data pointing out the inadequate savings levels of average Americans, it seems like almost everybody needs to save more for retirement. But it's also possible to take retirement saving too far and ruin your current quality of life in the process. Here are four mistakes that diligent retirement savers should strive to avoid:
Don't become obsessed with retirement guidelines. Many retirement savers are familiar with the 4% safe withdrawal rule. But it's important to remember that while aiming for a fixed number aids planning, you may need to adjust your strategy in retirement. Coming up with a fixed withdrawal percentage the day you retire and then religiously taking an inflation-adjusted amount each year no matter what happens in the markets is too rigid a strategy for most people to adhere to. In addition, a person who strictly adheres to the 4% rule will deem his or her portfolio as falling short whenever expenses exceed 4% of the portfolio balance. This can cause anxiety, even when the portfolio is likely still adequate for supporting the retiree's lifestyle.
Don't sacrifice too much now for tomorrow. While saving too little for retirement can lead to disaster in later years, many savers sacrifice too much today in hopes of a better tomorrow. Remember that today is also important, and take everything in moderation. After all, money is for spending, too.
Don't call it quits too early. If they sacrifice too much, many savers can come to feel burned out. They may end up retiring from their job too early and missing out on peak earning years that may also turn out to be their most satisfying years at work. Some people may even realize, years into retirement, that they need to get back into the game because they underestimated how much money a multidecade retirement requires. Even if finances aren't a problem, some retirees simply miss the social aspects of a work environment. Sure, it's hard to imagine right now, but can you guarantee that you won't miss work after 10 or 20 years or retirement?
Don't start thinking money is all you need after retirement. A healthy retirement is much more than having enough money to live on. Many savers spend far too much time planning and thinking about money. Through their working years, they sacrifice their health for a bit more money. They sacrifice their time and their relationships just to work a few more hours. Family, friends and hobbies are among the things that are as important as money for a comfortable retirement. Don't neglect other areas of your life as you strive to put more cash in the bank.
Most people definitely need to save more, so don't use the advice above an excuse for excessive spending. But if you take saving and planning too far, your retirement may not be all that rosy, either.
More from U.S. News & World Report:
VIDEO ON MSN MONEY
Save more money. Don't save too much. Spend more money. Don't spend money.
MSN Money is a pathetic comedy routine. Tomorrow, they'll post an article about how we aren't saving enough.
All I can say is that if you rely on MSN Money for ANY advice on your finances, you are in serious trouble. They will state the obvious over and over about saving money, planning for
retirement, etc., then turn around and come out with an inane article like this. You'd probably come out better in the end consulting your dog or your three year old child about financial advice.
Well, that was nice, for a change!
Don't y'all just use it as an excuse to blow all your next paychecks, though!
Balance. Have a realistic plan. You gotta' have an idea of where you want to be, and a way to pull it off.
It's worth it. It feels really good...
Rule #1 SAVE, SAVE, SAVE!
Rule #2 DIVERSIFY, DIVERSIFY, DIVERSIFY!
Rule #3 CALL YOUR OWN SHOTS (access help from reliable sources)
Rule #4 DO NOT! I repeat DO NOT! take advise from the people who write the columns for MSN!
Rule #5 Follow the first 4 rules ( if you don't save you will never, I repeat, never achieve your goals)
How do I know all this? Take it from me, I am retired have been since age 55, started planning at age 30, Have a very nice nest egg, I am not rich, wasn't when I was working, but I do live a reasonably comfortable life, without the headaches of work.
The 4% rule worked 10 years ago and is no longer valid. It's now a 3% rule as the 4% is no longer real with the very low interest rates.
Divorce, job loss, disability, medical, family, these will alter 90% of all retirement plans. Most all financial advisors fail to tell you that a divorce will wipe out your detailed savings and retirement plans, and one early career change with job loss and you're starting from scratch in many cases. Life happens and even the best laid plan is sidetracked.
You can never save enough money given the political atmosphere and "share the wealth" rhetoric.
I'm retired and hope my hard earned money outlasts me.
Save all you can. You can NEVER save too much. If you are depending on SS you are fools with the govt always changing the rules and age requirements for you to get "your" money... I don't see any accountability in the govt so things" are" going to get worse and not better. Inflation will have to kick in to cover all this money being printed to buy our own debt and to keep floating the QE1,2,3...ect.
Be personally responsible, get out of dedt, and find a place to stach any money safe from inflation...
That's my story and I'm stickin to it...
It's like listening to two marching-bands at once! Like a perverse Half-time at the HS ball-game with the competing bands both out on the field at one time playing different toons. One blowing horns for the SAVE SAVE SAVE, OR ELSE YOU ARE (will be) DAMNED (in retirement) song, the other sounding a slightly less-loud cheerful brassiness for HEY! SPEND SOME NOW and LIVE YOUR LIFE! (why worry? you can work until you die, right?).
An amusing image comes to mind of the "men behind the curtain" pulling the various strings and working over folks in their relative naivitae about their future, what they "need to have" and what they'll get (or not), balanced against pandering to everyone's desire to have something NOW. Of course nobody should suspect that actually there are folks out there (and influencing writers and press-rooms and buying "pundits") who may just have some motives and interests in having "the masses" go more one way (SAVE for LATER) than another (SPEND it NOW)...
Me? I'm sort of wondering whether the "SPEND" folks out there are feeling a need to speak up and put a counter-point in against the currently loud drum-beat of SAVE OR ELSE - the folks who want to sell products and services NOW might just be feeling a need to defend their stake in the economy. And so we get this article.
And it IS a balance that we all really need and even want to have. Let's imagine that the SAVE notion rules completely: what happens if folks don't spend any money on cars, TVs, games, meals out, etc. etc.? NOBODY gets paid to make or provide those things = lost jobs = lost ability to SAVE as you don't have a job. There will be no retiring for most. On the other hand, if the SPEND notion wins... well, that puts YOU into the past centuries where your average "retirement" option, as a worker, was to... work until you died. So there it is, pretty simple, really. Do you WANT to eventually "retire" and not have to get up to go to work? Then, you must SAVE some for that later. How much? Lots of tools available that may help you vaguely estimate that "enough".
I would caution folks against being lulled too much by this article - IF you end up having saved "too much", why, perhaps your kids will get some inheritance. IF you don't save, it should be increasingly clear that "society" does not want to provide any help, cushion or succor for the old, and your future welfare will lie more and more in your own hands.
Saving too much. I am glad I saved too much. If I didn't I would not have been able to purchase all the foreclosures I did. Now I can retire at 55, and not worry about SS or MC. Just wish I started earlier. Also being a student of history helped. About every 50 years we get a depression, Should have happened earlier in the 1990's but was delayed until Congress changed the rules to be more like the 1920's, with things like buying on margins, So instead of stocks, it was homes, and the same thing happened again, People walked away, resulting in the crash. And like History the peole with cash made out like bandants, and increased their wealth, the people who didn't save became poorer.
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