What are some of the biggest regrets retirees have surrounding their savings? Let’s take a look at a few that you’ll want to make sure you avoid.
Failing to Diversify
There are many ways to save money for retirement. Often times, people contribute their entire retirement savings into pre- tax savings accounts. However, it’s good to diversify your money into both pre-tax and post-tax accounts. Additionally, you have the option of putting money into a Roth IRA which is an account where you won’t have to pay any taxes when withdrawing money in your retirement. Talk to a financial planner to discuss what’s best for you. Start working towards your retirement goals immediately. The sooner the better!
No Catch Up Contributions
Do you know what catch up contributions are in terms of retirement savings? An article written by Jasmin Suknanan for cnbc.com explains, “A catch up contribution is a provision that allows people ages 50 and older to contribute extra money to their retirement accounts each year to “catch up” on their savings. Catch up contributions are most useful to those who did not save enough for retirement while they were younger. Still, not many older people take advantage of this provision. According to Pham, a Vanguard study found that 15% of those eligible to make catch up contributions actually do so. This is essentially money left on the table since more contributions allow your balance to compound and grow faster, and it lowers your taxable income when you contribute to a 401k or traditional IRA.”
Retiring Too Early
Would you believe there are many retirees who regret leaving the work force too soon? Working even a couple extra years past the age of 65 can help provide a financial cushion. Many retirees exit the work force and find it extremely difficult to return if the need ever arises. Before you commit to retiring, make sure it makes sense for both you and your family.
Not Saving Enough Money
It comes as no surprise that one of the biggest regrets retirees have when it comes to their money is not saving enough before retirement. This is a real concern for those who worry they haven’t budgeted enough to fully live off of.
One of the best ways to avoid this issue is to start saving as early as possible. Even if you’re only putting away $20 a month, it’s worth doing. If you start in your 20’s, it’s a good idea to contribute roughly 10%-15% of your total income to your retirement fund. If you decide to start in your 40’s, you’ll need to contribute about 35% of your yearly income in order to be able to retire around age 65. When your money has decades to grow with compound interest, you’re setting your future retirement up for success. The more time the better. Start ASAP!
Don’t be another retiree with the same regrets. Do what you can to avoid them at all costs!