There are many retirement regrets that you do not want to have in your later years. Most of them are from financial mistakes that were done in your youth. The reckless behavior that you displayed in your prime can be powerful enough to keep you from a good retirement.
Fortunately, most of these mistakes can be avoided. You just have to understand what they are so you can steer yourself from committing them.
According to facts published on the website of the US Department of Labor, less than 50% of American know how much money they need to put aside for retirement. Not only that, in 2012, 30% of workers who have retirement plan benefits did not participate.
This means a lot of us are not really serious about saving up for retirement. Based on the data provided by DOL.gov, the average American is expected to retire for 20 years. You need to be able to save up for your needs for two decades. If you are currently living on $40,000 a year, you need to have around $800,000 saved up for retirement. Failure to do so will keep you from the good retirement that you rightfully deserve.
5 mistakes that will keep you from your dream retirement
Sometimes, it is not like we do not have the money to save for retirement. It is just that we are committing certain mistakes that are keeping us from our full potential to save. With that, here are 5 mistakes that you need to avoid if you want to live out the retirement lifestyle that you have always dreamed of.
- You are always trying to keep up with the Joneses. This is one of the popular reasons why a lot of us are overspending. We are too focused on what our neighbors, colleagues and friends have. Instead of spending only on what we need, we are tempted to buy what the people around us have in order for us to feel like we belong. In an article published on Mint.com, this behavior is perceived to be an obsession that can lead to our financial ruin. We are compelled to look at the “Joneses” because of our inner “animal brain thinking.” This is our compulsion to fulfill the desire to impress. We subconsciously look at those around us in order to confirm our respective social and economic status. This is typically done by comparing our material wealth with those around us. If you are serious about saving up for a good retirement, you need to stop trying to keep up with the possessions of the people around you.
- You do not know how much to save. Some people have problems with saving money because they lack the finances. Some people simply do not know how much they need to save. They are blindly putting aside money every month without really considering if it is enough for the type of retirement that they want have. In most cases, these people are surprised that they are not saving enough money after all. Your retirement savings deserve some planning so you are sure that you will have the right amount of money when the time comes. Ideally, you want to put aside 10% to 15% of your income towards your retirement. Anything less should be seriously reviewed because you might end up with a poor retirement.
- You are saving for the wrong priorities. As we age, our financial priorities are also altered. Some people get confused because there are just too many saving goals to meet. You have your debt payments, dream house and even your child’s education. While all of these deserve your financial attention, you need to make sure that your retirement is part of the priority. It is great for you to save up for your kid’s college tuition but do not do it at the expense of your retirement. Try to prioritize the welfare of your future self because in the end, it is your present actions that will help determine your future. Put aside money for your retirement before you contribute to other saving goals.
- You are not putting your money where it can grow best. There are places wherein your money will grow because of interest or profit. For instance, putting your money in stocks will help it increase. Even the money that you put in your 401(k) or IRAs will also grow in time. Do not make the mistake of relying on your savings account alone. The interest in these accounts are too small compared to your alternatives. Educate yourself about your options to grow your money. That way, you can maximize its earning potential.
- You are too timid to invest. The last mistake that could be costing you a good retirement is being too timid to invest your money. No profit is without any risk. The higher the risk, the more you can gain from something. While you are advised to be wise with your investment choices, you are also encouraged to take the plunge. You cannot hope to grow your money if you are not willing to risk it. You just have to learn the game in order to minimize the risk potential. Find out the rules of retirement investing because having adequate knowledge about it will not make you timid about risking your money.
You have to try to avoid these mistakes so that having a good retirement will become a reality for you.
Tips to save enough and retire comfortably
As you avoid these mistakes, you also want to concentrate on making sure that you are able to save enough. There are certain rules that can help with retirement planning and following them is quite simple. In most cases, your downfall will be your lack of commitment to follow through with the plan that you have created.
Here are some tips that should help you commit to saving the right amount for your retirement lifestyle.
- Know the retirement life that you want to have. This will serve as your target. There are factors to consider when you are aiming for a comfortable retirement. Things like the type of lifestyle that you want to lead or where you want to live – these are important considerations to set a target for your retirement planning.
- Calculate how much you need to save every month to reach your goal in time for your expected retirement age. Once you know the kind of life that you want to have when you retire, it should be easy enough to calculate an actual amount to save up for. Make sure you take into consideration the inflation rate. This way, you can determine how much you need to set aside each month.
- Take advantage of your 401(k). Some employers offer to match the contributions of their employees. If you are one of them, you may want to get as much of that free money by putting in as much contribution as you can. According to an article from USNews.com, this is one of the lazy ways that you can save up for retirement. If the target is saving 10% of your income, you only have to come up with the 5% and the rest will be shouldered by your employer.
- Start acquiring assets. The thing about assets it is not easily spent as cash. Just make sure that you will focus on acquiring assets that appreciate over time. A great example of this is a house. Unless there is a housing market crash, you should be able to liquidate your house when you retire at a higher value than when you bought it.
Remember that a good retirement is not impossible. You just have to be really disciplined and determined to work hard for it.