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.

How to Budget for Travel in Retirement

travel in retirement

A lot of people anticipate that their retirement years will be a great time to travel. With more freedom and less time constraints, retirees can spend their days seeing the places they have always wanted to see. On the other hand, it can be hard to see the world on a fixed income. Luckily, jet-setting during your golden years is very possible if you take steps before retirement to budget appropriately for it.

First, you’ll need to be able to answer this question: What are your travel goals?

A budget for one yearly vacation is going to be very different from a budget for extended, more frequent travel to many different areas of the world. This is why it is crucial to determine what your travel goals are. Doing so will help you to plan accordingly. Make a list of places you want to see and get an estimate for how much it will cost to travel to each place.

In planning your retirement travel goals, you’ll need to make sure you don’t leave out any important travel costs. Remember to research costs for:

  • Flight tickets
  • Car rentals
  • Train tickets
  • Taxis/buses/subway fare
  • Dining
  • Tipping
  • Lodging
  • Sightseeing (guided tours, etc)
  • Travel gear
  • Souvenirs/other purchases

It’s a good idea to talk to other retirees who also have the “traveling bug” to see what their recommendations are or if they know of any good travel deals.

After you know your travel goals and approximate costs, you can figure this into your retirement plan. Before retirement, this may mean setting aside some of your savings into a travel fund with the goal of reaching a certain specified amount by the time you retire. Typically, it is considered safe to spend 4% or less of your total retirement savings per year without having to worry about running out of money. This 4% should also take into account everyday living expenses like taxes, food, health care and insurance. After retirement, you may continue to receive some kind of monthly income from Social Security, property you own and rent or investment proceeds. Make sure this income is calculated into your budget.

Look over the list of places you want to visit and put them in a list in order of priority. Next, create a timeline for your travels. This will not only give you concrete things to look forward to, but will help you figure out how much money you will be putting towards travel and when. This can give you a better idea of how travel will fit into your yearly budget. Maybe you will skip traveling a few years in a row to go on a dream trip. You may find your budget in retirement changes year to year depending on your travel plans. Be aware of the impact travel will have on your budget and plan accordingly. Maybe this will mean moving into a smaller house, eliminating a second vehicle, or even just spending less money eating out or on other unnecessary “luxury” activities.

During retirement, it is important to make every dollar count. Thankfully, with less time constraints, it is easier for retirees to stretch a dollar. Scheduling a trip during the off season is a great way to lower your overall cost. Take the time to watch airline deals online with sites like Expedia and Fly.com. Flexibility with when you travel (which will be possible in retirement) will allow you to take trips when they are most cost-effective. The longer you stay in one hotel, the more likely it is that you can negotiate a lower lodging rate. Combining long trips into one big trip can help you save on airfare.

Remember to always look for any senior travel discounts and do not be afraid to take advantage of every single one!

As with any kind of budget, you’re never going to be able to perfectly calculate exactly how much everything will be ahead of time. This is why one of the most important aspects of travel budgeting is leaving yourself a buffer. Spur-of-the-moment excursions, taxis, tips for staff and meals can sometimes exceed your planned allowance. A buffer will cover these extra expenses so you aren’t caught unprepared. Going with this rule, it is a good idea to get travel insurance. While it will make your trip slightly more expensive, it can save you big later if your travels are disrupted or a health issue forces you to cancel your trip.

Traveling can be a rewarding opportunity to have meaningful experiences in your golden years. If you are still preparing for retirement, now is the ideal time to assess where you are in achieving your retirement goals. Don’t let poor budgeting hold you back from living your retirement dreams!

Retirement and Student Loan Debt: How They’re Connected


To most of us, the word retirement brings to mind images of a renewed enjoyment of life – a time when we will finally be able to put work aside and possibly even find time to stop and smell the roses. Then again, the phrase ‘student loan debt’ isn’t one we usually associate with our golden years.

Unfortunately, these days, more and more older Americans are entering the retirement age bracket, but are unable to look forward to retiring with joy. Sadly, many older Americans are still affected by student loans they took out in their younger years, but were simply unable (for a variety of reasons) to pay off.

In fact, there are approximately two million Americans aged 60+ who are still struggling under the weight of unpaid school loans. According to the Federal Reserve Bank Of New York, this number has tripled since 2005.

Some older Americans are saddled with student loans that they themselves took out years ago in order to put themselves through college, while others took on the responsibility of cosigning a student loan for a family member (usually children).

Regardless of the reason for student loan debt among older Americans, attempting to repay an amount that is perpetually compounding due to high interest rates is exceedingly difficult for this particular group. Due to the fixed income that comes along with retirement, many retirees are finding it virtually impossible to stay up to date on their student loan debt.

What this means for retired debtors is that they will likely experience wage garnishment from their Social Security income. For an already struggling group, this can spell financial disaster.

Although retired student loan debtors truthfully do only represent a very small portion of all student loan debtors, the seriousness of their particular situation is quite dire.

In fact, wage garnishment being taken out of Social Security payments will likely push these older Americans into poverty. Working hard your entire life, only to spend your golden years without two pennies to rub together just doesn’t sit right with this New Jersey law office.

Can you relate to Carrie Mallik*? Age 62, Carrie is experiencing some declining health and a home loan that she can’t afford. On top of that, she owes over $100,000 on a $15,000 student loan from her youth, due to the astronomical interest rate when she borrowed the money. Unable to afford both her mortgage payment and her student loan debt, she is quickly finding herself in a hopeless situation. If you can relate to Carrie, it’s important that you know that there is hope for you.

Because of new legislation, people who took out student loans prior to July 2013 will now be able to refinance their student loans at significantly lower interest rates.

Finding a NJ attorney like George Veitengruber, who is experienced in and passionate about credit counseling and debt restructuring, is key to your success in this situation.

Veitengruber Law can help you secure your retirement and allow you to enjoy your golden years as planned. Call now (732) 852-7295.

Image credit: The Arches

*Name changed

Is it OK to Raid My 401(k)?

8265139231_3bcf9c8a26Image source: Chris Potter

Last week, we discussed the challenges that parents are facing when it comes to putting their kids through college while the cost of tuition has risen and continues to rise to astronomical heights.

Without careful planning years before your child(ren) even begin to think about applying to college, you could conceivably find yourself between the proverbial rock and a hard place when it comes to financing four years (and sometimes more) of continuing education. In a quandary, you may take a look at all the money you’ve saved for your upcoming retirement and wonder if you could or should borrow from one or more of those accounts – in particular, your 401(k).

Our general advice to parents who are contemplating borrowing money from their 401(k) in order to give their child a fully or at least partially funded college education is this: Back away from the 401(k). The risks associated with filching your own retirement funds include: money in your 401(k) is tax-sheltered, however, when you pay back what you borrow, you must use after-tax money. Sure, you have 12 months to pay back any money borrowed without a penalty, however, if you lose your job or leave by choice, any 401(k) loans that you have taken must be paid back immediately. If you fail to do so, you’ll be charged income tax on the remaining amount you owe, plus a 10% penalty fee.

With all of the above being said, we feel that giving blanket answers to financial questions isn’t very accurate, even regarding taking a retirement loan. So, YES, there is a case to be made for tapping into your 401(k) account, in very specific circumstances.

If you can confidently say that you are totally secure in your retirement and that you don’t actually need the money provided by your 401(k) or IRA, it could be a smart move for you to use some of that money to pay for your child’s or grandchild’s college tuition.

Another circumstance: if you happen to fall into a tax bracket that charges zero percent because you have high medical costs, distributing some of your retirement money now is probably a good idea for you and your loved ones. Wondering why? Simple – it’s better to share the wealth while you are in a zero percent tax bracket instead of gifting the money through your Last Will and Testament because it’s unlikely that your beneficiaries will be in the zero percent tax bracket at the time of your passing. In fact, some may fall into the fifty percent bracket if they had great schooling and pursued a high paying career. Naturally, because of the higher taxes they’ll have to pay, they will receive significantly less of your hard earned savings. Better to use the money now while you can get more bang for your buck.

Even if you are in a fantastically secure financial position regarding retirement, there are still better ways to help your child or grandchild pay for college than dipping into your retirement accounts, just in case things change drastically. Since retirement brings with it many uncertainties, it’s still a good idea to have your (grand)child take out some student loans. As long as the child remains in school, offer to pay for the interest on the loan. This will drastically lower the amount of accrued interest on the loan(s). After graduation, you can assist with loan payback, as long as your retirement outlook is very bright. In that situation, though, it would still be better if you were using income other than your retirement fund to help out.

Save for Retirement or Put My Kid Through College?

4075547422_112bac81a8Image courtesy of Tulane Public Relations

As the costs of attending a four-year college or university in the United States continue to rise, so do the number of parents who have or are tempted to take money from their retirement accounts in order to send their child(ren) to college.

Although the desire to provide your child with a fully funded college education is natural and admirable, robbing your retirement savings to do so is likely to be a grave financial error. And, even though being weighed down with too many student loans can be a problem of its own, remember this: you (and your child) can borrow money for college costs. You cannot borrow money to support yourself when you retire.

Many parents who were (or still are) burdened with student loans of their own have a strong desire for their children to avoid that particular hassle and instead make a debt-free entrance into adulthood. However, it’s crucial that you are able to support yourself during retirement, because the other option is to have your children care for you in your golden years. Frankly, the cost of some student loans will be much cheaper and easier for them to deal with than supporting you (and potentially your spouse) indefinitely.

Withdrawing money from your retirement accounts will do more than just reduce the balance. In fact, the lowered balance may be the least of your concerns. You will lose out on the compound interest that your retirement account(s) gain over time. Also, withdrawing money from a retirement fund can count as income which would then be taxable. With the additional income, many parents may render themselves ineligible for financial aid the following year. Another thing to keep in mind is that anyone under the age of 59 1/2 who borrows from their 401(k) will be required to pay the loan back with interest within five years.

The key to saving for both retirement and college is careful and deliberate planning. Research and invest in a 529 college savings plan. A 529 plan will allow you to save money at your own pace, making withdrawals when necessary without being charged any fees, and without being taxed. Studies show that parents who invest in a 529 plan are significantly more successful at paying for at least a portion of their child’s college tuition.

In order to be consistent, set up automatic withdrawals from your paychecks that go directly into your 529 account. This will remove the need for you to deposit money into the account, which may result in hesitancy when funds could be used elsewhere. Try to gradually increase the amount you deposit on a yearly basis or as you get income raises. Apply bonuses, tax refunds, inheritance money, and/or other financial windfalls to your 529 college account (at least in part). Ask friends and family members to donate to your savings plan in lieu of gifts whenever possible.

Sallie Mae’s Upromise program is a fantastic way to save money for college without really doing anything at all! Upromise allows you to earn up to 5% cash back on purchases made through their more than 800 affiliated online retailers. You can even earn money by eating at participating restaurants and by using e-coupons for grocery and drugstore items. Getting grandparents, aunts, uncles and other close family members to participate will help you increase your savings by leaps and bounds!

Even though the general advice is to avoid taking money from your retirement account to pay for your child’s college tuition, there are exceptions to every rule! There are some instances where it can be ok to dip into your 401K in order to write those tuition checks. Check back here next week to learn when and why doing so would be advisable.