10 Deadly Sins of Retirement
Retirement Wreckers to Avoid
Warning: Make the wrong decisions in today's treacherous economy, and it could kill the retirement of your dreams. It doesn't matter if you're 30 or 70, your nest egg is at risk, and the money moves you make now are critical. Do you want to live on baked beans and boxed macaroni and cheese in your twilight years? We didn't think so! So click through our gallery as the Dolans warn you about 10 deadly sins of retirement planning.
10 Deadly Sins of Retirement
Sin No. 1: Not Getting Started Right Now
This may sound simple, but this is hands-down, the No. 1 deadly sin of retirement planning. If you haven't started socking money away for retirement, do it now. Not next month or next week or even tomorrow. NOW. Just $100 a month will go a long way. In fact, thanks to the power of compounding, $100 a month at 8% annual interest will turn into $50,000 in just twenty years. $200 could, eventually, turn into almost $100,000! To see how fast your money could multiply, plug your numbers into our easy-to-use calculator.
10 Deadly Sins of Retirement
Sin No. 2: Passing Up Free Money
If your company still offers a 401(k) "matching" program to which it will contribute a certain percentage of whatever amount you contribute, we hope that you are taking full advantage of that match. Otherwise, shame on you! This is free money! We've heard from some people who aren't contributing to their 401(k) because they are scared of losing money in the market. We say "hogwash!" Every dollar your employee contributes is pure profit! And no one said you have to invest your 401(k) in individual stocks or mutual funds. Review your plan choices to find an investment option that fits your comfort level.
10 Deadly Sins of Retirement
Sin No. 3: Putting All Your Eggs in One Basket
Putting too much of your retirement nest egg in one basket is actually a common "sin." You might love your employer's stock, your favorite mutual fund or even a "safe" bank CD. But if something should happen to your company, your fund or your bank, you could be in deep trouble. We've heard heartbreaking stories from people who lost everything because they had all their money in their company stock when it plummeted. Diversity can help your nest egg grow consistently and safely.
10 Deadly Sins of Retirement
Sin No. 4: Underestimating How Much You Will Need
Now let's talk about everyone's worst fear -- outliving your money! Many people completely underestimate how long they'll live and how much they'll need. Your everyday expenses such as groceries, gas and even household utilities, likely won't drop much, if at all, once you retire. Plus, other costs, such as medical care and long-term care -- will go up. Don't fall into this trap! Assume that you'll need 100% of your current income in retirement to maintain your pre-retirement lifestyle. Many people use 70%–80% as a rule of thumb, but unless you plan to dramatically scale down your lifestyle in retirement, you really need to aim much higher (especially considering inflation).
10 Deadly Sins of Retirement
Sin No. 5: Raiding Your Retirement Funds Early
Come on, do you want to have a carefree retirement, or not? Raiding your nest egg early is not going to enable that to happen. We don't care if you need a new roof or that your child can't get a scholarship. Consider taking out a fixed rate home equity loan for the roof and have your child get a student loan for college. We know it sounds harsh, but the point is, do whatever you have to do to NOT touch that retirement account!
10 Deadly Sins of Retirement
Sin No. 6: Putting Retirement Savings Last on the Priority List
How many people have you talked to in the last month who are putting off retirement because they have not saved enough money? Our answer is, "Too many." We all have lots of personal financial obligations competing for our hard-earned dollars: paying off debt, buying a home or car, putting the kids through college. Don't let today's distractions derail your future personal financial well-being. Make saving for your future a top priority.
10 Deadly Sins of Retirement
Sin No. 7: Retiring Too Early
If you've saved "enough" by age 62, should you retire? Not necessarily -- especially if you're healthy and can work a few more years to help make up for any investment losses you may have experienced lately. Plus, at 62, you'll only get partial Social Security payments. Depending on what year you were born, you can collect full payments anywhere between age 65 and 67. See Social Security's benefits page to calculate your optimum time to retire.
10 Deadly Sins of Retirement
Sin No. 8: Mis-Managing Your Tax Advantaged Retirement Account
If you mis-manage your IRA or 401(k), your wallet (and future) will pay the price ... and dearly! Here are a few critical rules that too many people break:
1.If you change jobs and you need to move your 401(k), you MUST move it into another 401k plan or another qualified account within sixty days from the withdrawal.
2. You can't make a withdrawal on your IRA or 401(k) before the age of 59 ½ (though there are exceptions).
3. You MUST start making yearly withdrawals from an IRA or SEP when you reach 70 ½.
Break any of these rules, and you'll be in for a boatload of extra taxes and/or penalty fees.
10 Deadly Sins of Retirement
Sin No. 9: Not Having a Plan ... and Sticking to It!
The old saying is true -- if you fail to plan, you plan to fail. Without a plan, you can't answer critical retirement planning questions such as: How much can you live on once you pick up your last paycheck? How much can you afford to sock away for retirement? More importantly, how much do you need to save? Surveys report that 59% of people who take the time to calculate how much they need to save, end up increasing the amount of money they are putting away!
10 Deadly Sins of Retirement
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Lynnette Khalfani-Cox, an award-winning financial news journalist and former Wall Street Journal reporter for CNBC, has also been featured in top newspapers, including the Washington Post, USA Today, and the New York Times, as well as magazines ranging from Essence and Redbook to Black Enterprise and Smart Money. Check out her New York Times best seller 'Zero Debt: The Ultimate Guide to Financial Freedom.'
Comments: (18)
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By: Lo on 5/15/2010 4:03AM
Ok, My degree is not in the area of finance, but in this day of a shot economy, why the he%% would someone wait four years longer for social security benefits when 1. You are closer to death anyway so the raise in your benefits may not be as beneficial..........most retirees need their money to ensure the quality of their lives is not compromised. What shotty advice.
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By: NubianEducator on 5/15/2010 11:17AM
I agree with you and would like to add that if you die before 70 you will get nothing, and truth is, that if you draw at 62 (for those that still qualify) and save that money it will average out to nearly the same as if you waited. Bottom line, you are not getting more-they are just adding the funds that you did not get from age 62. It is easy to do the math, just add the money at age 62 a month x 86 =125,388 without cost of living increase. That is a lot of money for 8 years that you will not have if you. But if you do live longer-you will still have your money regardless. Do not always believe what you read to form your opinions. Research and do the math for yourself. PEACE
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By: johny cartz on 5/15/2010 5:01AM
To be honest I hadn't made my mind up who I was going to vote for until this week. Now that doesn't mean I was considering Obama because there's no way I'd vote for him. On the issues he is willing to address, I totally disagree with him. But there are too many serious issues that he just responds with "I'm not going to go there". What kind of answer is that from a man wanting to hold the most powerful position in the most powerful country in the world?
http://maxxshredder.net
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By: Ann on 5/15/2010 8:19AM
Not getting your SS at 65 doesnt seem to be the smart thing to do. From what they are saying SS is running out so I would get on it as soon as I possibly could. One thing I dont rrcommend doing is getting on it before 65 if you can help it. Taking it early means you do lose some of your money and it could be a significant amount if your not careful. They are telling us to wait because they know the funds are running out and they hope you drop dead first. DONT WAIT you may not live long enough to collect. What we need to do is find out where all that money they take out of our checks every week is going. SS is for our old age..for some of us that is all we will get. Not all of us are fortunate to get pensions. When SS is gone what will the elder do then...sit in the streets with cups begging? We need to handle this now before it comes to that cause it is coming.
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By: truckmommaw on 5/15/2010 10:19AM
There is no fracking way that I will wait until 70 to retire. Are you aware that the social secutiry system is now running in the red for the first time. Based on my decades of experience, I feel it is wise to get into the system before it completely breaks. People who are already in and drawing benefits will probably fare much better than the ones who haven't gotten in yet. based on the actuarial tables, if I retire at age 62 and draw $1450/mo for my expected life expectancy of 79 years I will probably break even compared to wating until I am 70 and drawing the bigger benefit and dying at 78. Also, the benefits which I draw at age 62 will be credited with future value interest factor of 3 % APR. ( hee-hee-hee!!)
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By: Jim on 5/15/2010 10:56AM
I would not wait because no one is promised that they will live to a certain age. Just be thankful that you made it to to 62 or 65. The president is doing his best to clean up the mess Bush made in 8 years. That will take him until he is 70 years old.
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By: NubianEducator on 5/15/2010 11:34AM
Your are dead on :D and if the people that could afford not to draw SS for all these years that die and leave it to their estate would save money in SS. Perhaps a tax credit could be given to those that opt-out of SS benefits. If when I retire, and that money is not a need, I will not file for it. Honestly, because I am not a person of greed or fill that I should have something coming to me. PEACE
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By: KAYLOVE on 5/15/2010 4:02PM
On the real, you have to be old as hell before you can double your money, its a shame that you have to wait so late to enjoy your money that you worked so hard for all these years. I remeber back in the day when you was like 50 or 55 years old still young to do what you want anytime.All I can say is you better be in tip top health mentally and physicaly. the nursing home gonna get it or some family member waitin for you to die.
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By: Jake on 5/15/2010 4:40PM
Although Americans are living longer, I opted to collect my SS at age 62. While the application was being proccessed I became very ill. Thank God I applied for my SS because after my illness, I was not able to work per all of my doctors. I for one worked over 45 years and wanted to collect my benefits and contiune to work. It didn't happen as I had hope. Those of you who can wait until you are 66 and older, God bless you and I hope you will be able to collect.
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By: Don Brown on 5/17/2010 2:53PM
The main flaw in waiting is that I don't have any garantees on living to 66, let alone 70 years of age. I just had a friend who was reasonably healthy have a stroke and die within a week. he was just 60. It works in the governments favor for you to wait. 1. you may die first. 2. Even with increased monthly payments you have that much less time to live. I want my money back while I may be young enough to enjoy it.
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