Whether retirement is just around the corner or still years away, saving for a financially secure retirement can be daunting. It’s important not to let time get away from you when it comes to preparing for this phase of your life. Fortunately, there’s a great deal of retirement planning information available. Make sure you know the facts before putting together a plan. We’ve identified five common misconceptions that could hurt your retirement readiness.
1. “Social Security checks are all I need for retirement.”
Based on the retirement lifestyle you plan to maintain, relying only on Social Security may limit your ability to live comfortably. Depending only on Social Security checks might make you financially vulnerable.
2. “I’m all set with my employer-provided retirement plan.”
If you participated in an previous employer sponsored 401(k) for many years, you may have a healthy retirement account in place. But just setting it up doesn’t mean you shouldn’t keep an eye on it. A good rule of thumb is to periodically make sure your investment choices still match your goals. If you want to expand your choices, you have options, including moving it into a rollover IRA. You can manage it on your own, take advantage of more investment choices and avoid possible tax consequences.
3. “I don’t earn enough to save for retirement.”
Check out your employer’s 401(k) program. You might be surprised; you can usually start small and increase your contributions regularly until you can afford the maximum amount. If your company offers a matching program, that can help boost your overall savings more than you think.
If your employer does not offer a retirement plan, take a look at all of the extra spending you do each month on things expensive coffee, dining out and entertainment. Consider limiting some of these purchases and put that money to work in a traditional or Roth IRA so you can save on your own.
4. “I’ll wait until after I pay for my kids’ education to start saving for retirement.”
While providing an education for children is a common financial goal, they might end-up paying to finance your care down the road if you don’t have a retirement plan in place. Help your kids prepare for their education expenses by encouraging them to research scholarships or look into investing in a 529 plan.
5. “I’ll spend less when I’m retired.”
If you’ve paid off all your debt, you might think your expenses will be less in retirement. But remember this: You may not continue to receive the same tax breaks as you did when you were employed or paying a mortgage. Inflation and increasing health care costs can also affect your retirement budget. Finally, with additional free time, you might be tempted to spend more on traveling, hobbies or other things you don’t have time for now.
Our retirement planner can help you estimate your retirement income and expenses to see how much you’ll have and how long it could last.
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.