3/23/2012 9:36 AM ET|
5 ways to blow your retirement
It's far from impossible to save enough for a comfortable retirement. But these blunders could come between you and your financial security.
A comfortable retirement is definitely achievable. Yet, many people face tremendous retirement challenges because they spend years neglecting simple measures that would make having enough money in their golden years a certainty.
Here are some common ways people blow their chances of having a comfortable retirement:
Not saving enough for a rainy day. Everyone needs to have an emergency fund. But while that's a good start, you need much more than just 12 months of expenses stashed somewhere safe. People get laid off, have their salaries decreased, or their businesses shut down because of changing business climates all the time. (Are you saving enough for retirement? Use MSN Money's calculator to find out.)
Assuming your current salary will continue. It might be overly optimistic to believe that if you save 5% of your paychecks every year for the next 30 years you'll have enough to retire comfortably. You might not be making the same level of income or get regular raises for three decades in a row. That's why you can't really be saving too much unless you've already hit your ultimate retirement goal.
Failing to factor in inflation. You might think you're playing it safe by putting your nest egg in a bank account that is FDIC-insured. But earning next to nothing in interest each year can be dangerous, because inflation will erode the purchasing power of your money. It's important to select some investments that are likely to keep up with inflation in retirement and maintain diversification in your portfolio.
Not looking far enough into the future. Some people get interested in stock investing while they are young, spending hours every day trying to pick a winning investment. But when you are young, your nest egg is small, so you should spend your time trying to maximize your earnings potential instead.
As your assets grow, it is prudent to start spending more time on your investments simply because there is more to lose. There is no shame in finding an investment adviser to help you manage your money, but you should still be very much involved. You are responsible for growing and protecting your own nest egg. (Use MSN Money's 401k calculator to see if yours is likely to provide enough.)
Allowing lifestyle inflation. It's easy to inflate your lifestyle as you earn more. Just one more night out, more frequent updates to your possessions and a few upgrades will exponentially increase your expenses.
Though there are a few ways to buy a bit of happiness, too many people make the mistake of thinking that spending more money will create lasting joy. In reality, it's having the ability to spend whenever you want that will truly make you happy. Learn to control your spending, and a comfortable retirement is really just a byproduct.
More from U.S. News & World Report:
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1. Starting too late, not at all or taking contribution vacations (start in your 20s or very soon after)
2. Not having an emergency fund to protect your retirement from being withdrawn (save one)
3. Putting less than you should away (could you contribute more?)
4. Failing to increase your percentage (Every year)
5. Banking on an inheritance that might not materialize (Figure on nothing)
6. Carrying inadequate disability insurance (Find out what you have)
7. Cashing out when changing a job (ROLLOVER, trustee to trustee preferred)
8. Hoping Social Security will be there (Ignore it, if it is there, good for you)
9. Carrying inadequate health insurance (See #6 too)
10. Putting up with high fees (Find out what you are paying and compare)
11. Impatience (Please, take a breath and stop reacting to the talking heads)
It doesn't take money to make money - it takes participation - the earlier the better. It'll add up faster than you might imagine. IRA, Roth, SAR/SEP and 401(k) are all options. Yes there will be down years when, by the way, you'll be buying on sale (and there will be up years too), don't let that de-rail your efforts - it is time - years and years and decades of time which cause 'dollar-cost-averaging' that will be your best friend. Pay your senior self first - you are the most important bill you have.
My grandsons (don't have granddaughters) were born and I opened a TD Ameritrade account for them and put $1000 dollars in it. I told my son to invest it for them as he sees fit and gave him a few suggestions. I figure it will get my son who is in his twenties looking at different stocks and investments for his children. He can put this knowledge to work for himself as well. When my grandsons are old enough to understand they own stock (one of them is Disney and they love Mickey) they will pay attention at a young age. Hopefully by the time they are my age, they will know more about investing than the majority of people their age and be better off for it. It is shocking how many adults do not understand much about money (saving, compounding interest, the stock market in general, a simple amortization schedule etc.)
How to REALLY blow your retirement:
1. Bail both of the stepkids out of jail 4 times each.
2. Pay for stepdaughter's 3 marriages and 3 divorces and 4 kids from 4 different fathers and all of the lawyer fees.
3. Have Auntie G move in and let her rack up a $15,000 debt online gambling on your home computer.
4. Sell the paid-for house and buy a brand-new one in another state, lose both the job in your home state and find no job in the new state. Accept a low-paying seasonal job that pays only your medical insurance but won't accept your wife with her previously diagnosed perpetual medical conditions.
5. Take out 2nd, 3rd, and 4th mortgages on the new house to pay for it all.
6. Be sure and always have beer and wine in stock and on-hand for all the family members who move in and out of your place every week. Gotta support those freeloaders, 'cause they're FAMILY.
Why can't anyone tell the real truth?!? You know what? I should be writing these articles. The truth hurts, but I wouldn't lie and assume 90% of the population live or have lived prosperous and respectable lives.
Just get sick. Most of you will. It will all go to the doctors, drug stores and hospitals and its BANKRUPTCY CITY.
I had 3 co-worker which were 25 to 30 yr with the company they were in there early fiftys,51 to 56.whith in 3yr to 4yr before retirement they die heart attack and cancer.they were planning and looking forward to that day,but they all die with in 2 to 3yr before that day.So my point is you gamble on retirement to live, i know retirement is good but i think we gamble on life as if it s guaranteed but its not, tomorrow is not promise,but today is start looking and doing the thing your passionate now injoy NOW because we dont know when our time will come,and we know its coming so injoy the people we love now because they will be injoying what i didnt get to injoy if i die!!!
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