How You Can Avoid Common Mistakes in Retirement Planning

To make a comfortable retirement possible, proper financial planning is crucial. You need to know your sources of income, the amount you can expect to receive from each source and whether those sources are likely to last throughout your retirement years.

Mistakes can prove disastrous to your financial future. So try to avoid the common ones noted below:

  • Putting other financial goals first. You probably have several financial goals. You may, for example, be saving for a down payment on a second home. Don’t let other goals supersede your goal of a financially secure retirement.
  • Underestimating your life expectancy. As life expectancy increases, you may need to plan and invest for a longer retirement.
  • Incorrectly calculating retirement expenses. You may believe you’ll need a certain percentage of your preretirement income in your retirement. But should you plan based on a general percentage? It’s easy to underestimate.
  • Ignoring inflation. Investors who are uncomfortable with market volatility and therefore decide to invest only in Treasury bills, insured fixed-rate CDs and savings accounts must accept the fact that inflation could potentially eat away at their investment return. That’s because inflation could be higher than the returns offered by these investment vehicles.
  • Not taking full advantage of all available tax-deferred investing options. If you’ve already contributed the maximum to your company’s 401(k) plan, consider investing in another option such as an IRA.