It is important to start planning for your retirement as soon as you start your working life. Starting your retirement planning early will give you the space you need to make smart financial decisions. Your retirement plan isn't just about the money that you save to use for retirement, it is about mitigating your financial risks along the way so you can have a financially successful retirement.
Mistake #1: Retiring with a Lot of Debt
By the time that you are within a decade of your potential retirement date, you want to be living a debt-free lifestyle. Retiring with a lot of debt can make it much harder to live on the fixed income that you will have in your retirement years. Instead of using your retirement funds to pay your living expenses, and hopefully get a little joy out of life, you will want to be debt-free.
Being debt-free doesn't happen overnight, so you are going to want to work with your retirement planning advisor to figure out how you can pay down your credit card debt, student loans, personal loans, and mortgages over your working life, so you are not saddled with paying for these expenses out of your retirement funds.
Mistake #2: Not Having Both Taxable & Non-Taxable Retirement Accounts
As you build up your retirement accounts, don't put all your eggs in the same basket. You want to invest your money into retirement plans that allow you to pay taxes on the money before you invest and others that allow you to pay taxes on the money when you withdraw it.
That way, when it comes to withdrawing your money, with some of your accounts, you will know exactly what you will get, and with the other accounts, you will have to account for current tax rates. As no one can predict future tax rates, having both taxable and non-taxable income you can depend on during your retirement years is important.
Mistake #3: Not Paying Attention to Annual Accounting Fees
Third, you need to make sure that you are paying attention to the annual accounting fees that you are charged for your retirement accounts. An annual account fee for your 401(k) of 1% versus 0.5% may not seem like that much when you are just looking at the percentage points.
However, even a half-point difference in the annual account fee can greatly reduce the money that you actually have access to during your retirement years. Make sure your retirement accounts are not charging you such high fees that your wealth is being depleted before you can even access it.
As you work with your retirement planner, make sure you invest in a variety of different types of retirement accounts and pay attention to the fees associated with your retirement accounts. You should also work with your retirement planner on how to pay down your debt before you retire because bringing a lot of debt into your retirement years can greatly impact your finances while retired.
For more tips, reach out to a local retirement planning service.Share
12 August 2020
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