Be Careful from Committing These Retirement Savings Mistakes
Before, American employees have pension plans shouldered by their companies. It is all they need for retirement. But currently, workers need to strategize on their own retirement and they are having difficulty working on it. It is something that everyone must learn in order to prepare for his future. If you are already planning on how to manage your financial affairs during retirement, take note of these possible mistakes.
1. Not closely monitoring the charges involved
When you deal with an investment manager, you immediately assume that the fees you need to settle are those indicated in the brochure only. Mind though that there are usually hidden charges involved in these transactions. For some, the fees of investment managers may seem like a small amount. But always remember that over the years, a slight increase in the rate may mean a lot of money in the long run.
2. Not utilizing the available tax break
Getting an IRA (Individual Retirement Account) or a 401(k) plan can help you especially on your retirement savings. The advantage of getting such accounts is that it can help prevent you from settling tax on your savings.
If your company provides any of the two options (401(k) plan or an IRA), you need to utilize it. It is better if offered with contribution matching.
You should be grateful since only around 50% in the private sector has company-sponsored plans that provides access to these tax breaks.
3. Focusing on one kind of risk only
Investing in stocks is one of the best way to get better returns that you can use for your retirement. But based on research, roughly around 60% of workers do not invest in stock market because they think it is high-risk for them.
While investing in stocks is risky, other investment options that appear to be safer post their own risks as well. Since the returns are low, the money you will get when you retire may not be enough to support your needs. It is important to consider all types of investments and not simply on the risks involved.
4. Thinking of money over life
During retirement, a lot of people are having difficulty turning their savings into something that will earn profit. One of the suggested ways to do it is through annuity. Using this method, you give a portion of your retirement money to an annuity company. You will receive a guaranteed income yearly as long as you are still alive. In case of your demise, the company will take all the money.
Although this is a good way to generate an income stream, many people do not avail this option. They think that their savings will be wasted if they die earlier.