Don’t Make These Mistakes Before You Retire

Retirement is a time to look forward to, where you can relax and enjoy all the hard work you’ve accomplished over the course of your working life. It’s a milestone; however, that can bring a mix of emotions including excitement and anxiety.

Planning for retirement is certainly important. It is also important to avoid common mistakes that could cost you, thereby jeopardizing all you’ve worked for in the time leading up to your golden years. In order to enjoy a financially secure retirement, it’s essential to avoid these common mistakes.

The number one mistake often made by retirees is claiming their social security benefits too early. Once you apply for these benefits, you cannot go back and reapply. The amount you receive will be determined by your age at the time you submit your application. If you claim them prior to the optimal age, which is generally around 70 years old these days, you run the risk of a reduced monthly benefit amount that you will never be able to increase. Of course, social security is available beginning at age 62, but claiming them that early will cost you the additional amount you can collect at a later age.

The next common mistake to avoid is withdrawing from your 401(k) before it fully matures. Not only will you incur unwanted fees, taxes and penalties, you will run the risk of reducing your lifetime benefits that you worked so hard to save for. The best way to maximize your 401(k) savings is to wait until you claim your social security benefits. If you can wait until age 70 for both of these income streams, the amount you receive will be the maximum possible. Experts advise to avoid withdrawing from your 401(k) until it is absolutely necessary.

Another common mistake made by those about to retire is missing the advantage of tax breaks by investing in retirement accounts such as an IRA or 401(k) in the first place. By making a plan to deposit a certain amount of your income into these accounts each month, you will not only reduce your taxable income, you will earn interest on your investments which is tax free, thereby growing your retirement savings.

While investing to earn income for retirement is important, it’s also important to avoid risky investments that promise high returns quickly. This can and does lead to considerable losses, and can cost you more in the long run. Focus on steady-growth, low-risk investments such as bonds or index funds, which are generally stable and grow over time. For long-term investments, with the goal of growing your retirement savings, these types of investments are a safer option.

Another mistake people make when investing is putting their eggs in one basket, so to speak. By diversifying your investments you reduce the risk of losses across the board, and safeguard your investment in those that will yield a solid return over time. Investing conservatively is a more practical approach to growing your retirement savings.

Some people are unwilling to take a risk on any investments, and therefore miss out on the opportunity to grow their retirement savings. It’s certainly important to have a solid financial plan to increase your retirement savings. Diversity with minimal risk is the key to yielding the highest returns in the long run.

Another very common mistake people make is delaying a plan for their retirement. The earlier you start saving and investing for retirement, the more you will have to enjoy it when that time arrives. Even small amounts to begin with, like contributing to an employer sponsored 401(k) savings plan, offers the opportunity to take advantage of compound interest growing over time.

Our final tip about this subject is, don’t stress about planning for your future. While it is crucial to create a solid foundation for your retirement, it’s also important to enjoy your life. Striking a balance is the key to be able to enjoy the present while planning for the future. Be proactive with your goals, but don’t let that detract from enjoying your life before you retire.

Keep in mind that if you take small steps to plan for the future, save what you can, make smart decisions when it comes to investing, be practical, and stick to your goals, you will improve your chances of being able to retire comfortably and enjoy those years to the fullest.