Take charge of your retirement
Today’s decisions determine tomorrow’s lifestyle
Courtesy of USAA
You’ve probably imagined what your retirement will be like. You may be dreaming of trips to exotic locales, a beautiful new home where you can entertain family and friends, indulging in your favorite hobbies, or starting your own business. No matter what your plans, your retirement lifestyle will primarily depend on one thing: money.
J.J. Montanaro, a USAA CERTIFED FINANCIAL PLANNERTM practitioner, details the five major mistakes people make when planning for retirement – and how they can be avoided.
Mistake No. 1: A swing and a miss
Don’t take your eye off the ball when planning for the future. Financial experts often use a three-legged stool as a metaphor for the sources of money Americans rely on for retirement. The legs represent Social Security benefits, pension payments, and personal savings and investments.
Economic and demographic changes have diminished the roles of Social Security and pensions, giving the third leg of the stool – personal savings and investments – increased importance. The quality of life you enjoy in retirement depends on the financial decisions you make today. Decide how much you should be saving, and follow through.
Mistake No. 2: Learning curves
It’s the question many parents – and even grandparents – struggle to answer: What’s more important, saving for retirement or paying for a child’s college education?
The answer is simple: Secure your future, and then focus on your children’s educational goals. Remember: Students can earn scholarships, work part-time, or take out college loans, but there are no scholarships or loans for retirement.
Mistake No. 3: Giving in to temptation
In the 1970s, the average time an American worker stayed with an employer was six years. In the 80s, it dropped to three years. And in the 90s, it dropped again – to just 18 months. When you change jobs, it may be tempting to spend the savings you’ve amassed in a 401K or another retirement plan. Resist temptation. Roll the money into your new employer’s plan or into another retirement plan. Invest in tomorrow, don’t live only for today.
We live in an era of instant gratification, but accumulated debt – credit card balances, new cars, and overextending on your mortgage – is a threat to your financial security in retirement. In fact, many Americans find themselves going to work each day long after they’d hoped to retire, simply because their debt loads are too high. Credit can be a useful tool when properly used, but don’t let it spiral out of control.
Mistake No. 5: Going it alone
Remember the old adage: People don’t plan to fail, they fail to plan. Enlist the help of a financial planner – an expert who knows the ins and outs of saving for retirement. How much money will you really need? What’s the best way to get there? An experienced, certified planner can tell you where you are financially, devise a strategy for reaching your goals, help put the plan into action, and guide you each step of the way.
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