5 Mistakes to Avoid if You Ever Want to Retire

People can spend their entire working lives dreaming about retirement. Retirement is a time to travel, to enjoy leisurely days, and to do the things we have always wanted to do. How comfortable our golden years will be depends a lot on how well we prepare for retirement. More and more often, would-be retirees are finding they must work long after they wish to retire because they did not save enough money to get by without working. If you want to avoid working into your 70s, here five common mistakes to avoid.

1. Start Planning Too Late

Most of us aren’t thinking about retirement when we first enter the work force.  Young workers believe they have plenty of time to save or that they can’t afford to put money towards retirement. But starting to plan for retirement as soon as possible can make a huge difference down the road. Every year sooner that a young worker starts saving for retirement takes about a year off how long they will have to work. Starting to plan for retirement too late can make it very difficult to make up the difference. Even if all you can only save a little, it is important to start saving as soon as possible.

2. Having Too Much Debt

It will be hard to make any serious plans for retirement if you’re struggling under a mountain of debt. It is important to include being smart about debt when you are planning for retirement. If possible, consolidate your debt. This could lower your monthly payments which would free up money you could put towards your retirement savings. If most of your debt is from credit cards with high interest rates, it may be worthwhile to look into refinancing that debt. Personal loans with fixed interest rates can help you save money by spending less on high interest debt.

3. Taking Money Out of Your 401(k)

It can be very tempting to cash out money from your 401(k), especially when sudden and expensive life events occur. A lot of people also end up cashing out their 401(k) when they leave a job. While using the money you have saved in your 401(k) before retirement can seem like a good idea at the time, it can really damage your ability to retire comfortably later. Early withdrawals can come with high penalties and taxes. In a financial emergency, it is better to take out a low-interest loan than cash out money from your 401(k). This will allow your retirement fund to remain untouched as it continues to grow. Another option is to borrow against your 401(k). This way, you are borrowing from yourself and paying yourself back as your 401(k) keeps growing.

4. Assuming Social Security Will Be Enough

The average Social Security retirement benefit is $1,411.00 per month which is about $17,000 per year. Assuming this will be enough, or even close to enough, to live off of in retirement can be a big mistake. If you earned more during your working years, you will collect more than that. However, the max benefit is $2,788 per month. For many retirees, this is simply not enough to pay for monthly bills, medical expenses, and other financial responsibilities.

5. Underestimating How Long Your Retirement Will Be

In the US, people tend to retire around age 62 or 63. Knowing when to retire can be hard as you do not want to retire too early and run out of money, but you also want to enjoy the personal benefits of retiring as early as you can. The hard part is you never know how long you will live into retirement. The money you saved might get you to 85, but what happens after that? On top of this, many people end up retiring earlier than they planned. Health reasons, downsizing, or a workplace closure can all cause older workers to retire early. For this reason, it is wise to work as long as possible.

The key to retiring well is to plan well. Get started as early as possible and follow these tips to ensure you can enjoy your golden years in peace and financial security. You work hard to provide for yourself and your family. Make sure all that hard work pays off in the end by taking steps towards your retirement goals today.

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