MISTAKE #3: GOING IT ALONE
While many investors feel confident about their abilities, less than half got a passing grade on a basic financial literacy assessment, according to FINRA’s Investor Education Foundation. The older the investor, the less he or she is likely to know.
What to Do: Get Professional Guidance
Money management is a lifelong process and there are a lot of things to consider. It might be in your best interest to find a financial professional to help you navigate through it all.
Where can you find a financial professional? Here are some resources to get you started:
- Financial Planning Association – fpanet.org
- Certified Financial Planner Board of Standards – cfp.net
- Securities and Exchange Commission – sec.gov
Whether your retirement is 4 or 40 years away, it’s important that you put a strategy in place so that you will be able to retire with fewer worries. To help you get started, here’s how to avoid three common retirement planning mistakes that could cost you money.
MISTAKE #2: UNDERESTIMATING NEEDS
“One mistake people make when they try to calculate retirement needs,” said Jirele, “is that they don’t take inflation into account.”
Jirele said that even small inflation rates can do damage over time. If consumer goods prices rise three percent a year over the next 30 years, for example, items that cost $100 today would cost $134 in 10 years, $181 in 20 years and $243 in 30 years.
So if you’re planning to live on $60,000 a year during retirement, a three percent inflation rate means that in 10 years you would actually need $80,635 a year, and in 20 years you’d need $120,000.
What to Do: Create a Realistic Plan
There are plenty of tools available to help you figure out what your retirement needs will be. You can find online tools and worksheets at these Web sites:
- American Association of Retired Persons (AARP): aarp.org
- Financial Industry Regulatory Authority (FINRA): finra.org
- American Savings Education Council (ASEC): choosetosave.org
- The National Endowment for Financial Education (NEFE): smartaboutmoney.org
MISTAKE #1: DOING NOTHING
Millions of people are worried about having enough for retirement, but many of them aren’t doing anything about it. Nearly 60 percent of workers don’t know how much they need to save for retirement, according to the 19th Annual Retirement Confidence Survey, released by the Employee Benefit Research Institute.
What to Do: Start Now
“A lot of people think that it’s too early or even too late for them to start saving for retirement,” said Jasmine Jirele, vice president of Market Management and Product Innovation for Allianz Life. “But now, more than ever, people need to take action in order to have a more secure future.”
In addition to participating in employer retirement plans, look into other investment options such as mutual funds, IRAs, bonds and certificates of deposit. “Some workers may also want to consider an annuity for a portion of their retirement portfolio,” said Jirele. “Annuities are contracts between you and an insurance company. You make payments over time, and when you retire, you receive a guaranteed income for life that can help meet your retirement needs.”
