Secure Your Golden Years: 3 Retirement Planning Blunders To Avoid

Secure Your Golden Years 3 Retirement Planning Blunders To Avoid

Are you close to the glorious golden years? Retirement sounds glamorous only to those who have enough money for a comfortable life after leaving the workforce. Others struggle to stay afloat. According to a Vanguard report, Americans have average retirement savings of $141,542. But that’s just a statistical average because most retirees have much less.

A CNBC article states that the median 401(k) balance is only $35,345. How do you expect to live comfortably with this small amount without making a regular salary or running a business? The number is hardly adequate if you want to be independent and comfortable during your golden years. Retirement planning can be a savior as it enables you to build a robust foundation with timely measures. 

According to a report by the Federal Reserve, 40% of non-retired American adults believe their retirement savings are on the right track. But it is far from true because the country is not as financially-literate as you imagine. You may unintentionally sabotage your long-term finances by making some common financial errors.

Awareness keeps you a step ahead of these mistakes and sets you on the road to successful retirement planning. Here are a few blunders to avoid as a prospective retiree.

Mistake 1: Taking a One-Size-Fits-All Approach to Financial Planning

Not having a financial plan is a mistake, but following a cookie-cutter one is even worse. You cannot blindly imitate a colleague or friend because their plan seems good. Everyone has a different financial situation, with factors such as expected lifespan, planned retirement age, retirement destination, and lifestyle expectations. 

You must consider these factors to tailor a personalized plan to secure your golden years. Start by asking questions and digging deep into savings and investment concepts. You can begin with what’s better for you: a pension or an annuity. While both are viable options, the choice boils down to your circumstances and expectations.

Annuity Straight Talk recommends considering the differences between both choices and understanding how they work in your situation. Taking control over your money gives you an extra edge when it comes to retirement planning. You can research both options and get valuable insights and guidance to choose wisely.

Mistake 2: Not Saving Right Now

When saving for your retirement, sooner is better. Not starting at a young age means you may not have enough for a comfortable life ahead. Unfortunately, statistics indicate that only 39% of adults start saving for the golden years in their twenties. The rest wait until their thirties and forties and get into trouble.

You may feel that the twenties are too early to get on the savings ride, but it is the best age to start because you get plenty of time to consolidate. You can set a financial goal and plan a roadmap with yearly milestones. 

The best part is that the value of money you save earlier appreciates much more than what you save later. The compounding effect boosts your savings. On a practical note, it is easier to save when you are young as you don’t have family responsibilities like raising kids and paying home mortgages. You develop a saving habit and carry it to the middle age. 

Mistake 3: Poor Tax Planning

Tax planning may not be a priority when you consider life as a retiree, but it can make all the difference. Failing to plan for tax implications means you may lose a neat cut in your savings in the long run. You must understand how taxes relate to your current and future financial situation. 

The following questions can help you determine your tax plan:

  • What will be your tax bracket after retirement?
  • Should you pay taxes upfront or while withdrawing your funds?
  • What are the best investments for tax savings?

If you think you will fall into a higher tax bracket after retirement, invest in a Roth IRA as you pay all taxes upfront with this plan. It means your withdrawals will be tax-free. Those falling in a lower bracket post-retirement should opt for a traditional IRA because it lets you avoid taxes upfront and pay them on withdrawal. 

Conclusion 

You deserve the best life after retirement, but you cannot leave things to chance when it comes to savings and investments. Sound financial decisions and timely planning can help you achieve your dreams. At the same time, you must steer clear of these blunders as they can disrupt your plans. If you aren’t sure about your decisions, consider consulting a professional to seek guidance and avoid mistakes. 

Disclaimer: This article contains sponsored marketing content. It is intended for promotional purposes and should not be considered as an endorsement or recommendation by our website. Readers are encouraged to conduct their own research and exercise their own judgment before making any decisions based on the information provided in this article.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.