Mistakes to Avoid When Planning for Retirement
Mistakes to Avoid When Planning for Retirement
Retirement is considered one of the most significant events in one’s life. Planning for retirement can be an overwhelming and sometimes frustrating process. So much so that it’s easy to make mistakes along the way. From saving too little, to taking early withdrawals from your retirement accounts, one can make plenty of mistakes when planning for retirement.
Here are the ones we hope you avoid…
Withdrawing Money From Your Retirement Plan
A plan distribution before you turn 65 (or the plan’s normal retirement age, if earlier) may result in an additional income tax of 10% of the amount of the withdrawal. IRA withdrawals are considered early before you reach age 59½, unless you qualify for another exception to the tax1.
Short of an emergency, dipping into your 401(k) before retirement is a bad idea.
1 – IRS
Not Taking Advantage of Company Retirement Benefits
It is always a wise decision to invest your money into your company’s retirement plan as much as you can afford. Especially if your employer offers a retirement contribution matching incentive. Maximize the amount that you and your employer contribute now so that you get the extra boost to your retirement savings that will continue to compound over time.
Relying on Only Your Social Security for Retirement Income
Even though social security can provide you with a considerable share of your own retirement income, it can still be a huge help if you have some other means of income that serve as your backup in case of unexpected expenses.
Aside from social security in retirement planning, it is always smart to have a company pension as well as personal savings.
Relying on The Retirement Plan of Your Spouse
This is one of the most common retirement planning mistakes most people make. It is very possible for a spouse that has no retirement plan to die, leaving their partner without any income.
There are also instances such as illness or divorce, that can leave one person without any retirement funds. Because of this, both spouses must have a separate retirement plan in order to secure their own retirement days.
Not Monitoring Your Own Retirement Plan
It is essential to keep track of your investments by regularly monitoring your various accounts.
We can help with that. Our dedicated team of professionals have the experience and resources to help you with every part of your retirement and what you invest into it.
Not Planning for Tax Implications
When implementing retirement planning it’s important to consider tax implications and what works best with your financial situation now and in the future.
What tax bracket will you fall into after you retire? Is it best to pay taxes on the front-end or wait to pay when you withdraw? These are questions to consider and discuss with our in-house tax team.
Not Planning for Medical Expenses
With healthcare expenses increasing each year, it’s important to factor in medical costs when budgeting for retirement.
Keep in mind that Medicare doesn’t cover all retirement healthcare costs. You may want to add a health savings account to your retirement plan or purchase supplemental insurance.
Retirement planning simply means ensuring that you have enough money to live the rest of your life once you are no longer working. Retirement should be the phase in your life where you can relax and enjoy your life without having to work any longer. The years of your hard work will begin to pay off when you are reaping the benefits of having a solid retirement plan in place.
Our team of fiduciary wealth managers are here to discuss your retirement goals and work with you to build your ideal retirement plan. Get started today, schedule your free appointment!