9 Mistakes You Should Never Make Before Retirement.

9 Mistakes You Should Never Make Before Retirement. February 10, 2019

Your golden years are supposed to be just that, golden. In an ideal world, you shouldn’t have to worry about where you get your money to pay off your rent, mortgage, and bills. You should be splurging and enjoying your twilight years as you begin this final, yet fantastic phase of your life. But many people tend to overlook certain aspects about retirement. A lack of proper foresight and careful planning could lead to some costly hiccups later in life. Now rarely do you read about what you shouldn’t do before you retire. So to help you avoid some financial mistakes that could end up costing you big time, here are some things you should avoid doing before you retire.We know how tempting it is to start collecting on your retirement right now so you can bid adieu to your boss forever, but it’ll cost you significant amounts of money if you do. Just ask those that have claimed social security benefits as early as 62 and found that their monthly payment has been reduced by as much as 25 percent. On average, the time you can collect full retirement is somewhere between 66 and 67, but you get an 8 percent increase added to your payout for each year you hold off beyond your retirement age. So waiting definitely pays off.

So as tempting as it may be to withdraw funds from your 401k, it can have some serious repercussions when you reach your retirement age. The money in your 401k can only grow if it stays there. And remember, even if you’re allowed a hardship withdraw from your 401k, you won’t be able to pay into it for the next six months. But if you take the money out without being granted a hardship withdraw, you won’t be able to put that money back into your 401k ever again. So it’s better to wait until you reach your retirement age before cashing out.

So remember to invest only on options that cut back on the most taxes, as this will help you save more cash for your retirement. Investing your money in an IRA or 401k that’s tax-favorable means that you are allowing your tax-deferred earnings to compound. Also, keep in mind that some retirement plans offer you a tax break simply for contributing into it each year. In the long run you’ll see that you get a lot more from a 401k or IRA than the interest you would accrue from a savings account.

Alright, it’s true that you will have to invest your money in some way in order to save for retirement, but it’s crucial that you choose the right investment. Now this could mean that the low-risk investments you pick aren’t growing as fast as far riskier investments. But any investor will point out that while you’re not making money fast enough, you’re also not losing any money either. So consider investing some of your savings into a diversified stock portfolio instead of some risky stocks that can make or break you. By putting your funds in a series of mutual funds, you run less risk of losing money when the market goes down. Plus it ensures that your money will be safe until you’re ready to retire.

Given how meager your social security benefits will be, you can’t accord to lose your retirement funds. On the other hand, there’s nothing wrong with taking a few calculated risks while you’re still working and setting money aside for your 401k or IRA. That way, even if you lose you can quickly make up that money. On the plus side, if your risky investment pays off, it could help you retire sooner. So we’re not saying not to take risks. Just make sure you make smart choices when you invest your money.

You might think that just because you’re twenty, you’ve got plenty of time to think about retirement. But time marches on rather quickly, and before you know it, you’ll be left with little time to start investing on your retirement plan. So start as early as possible, even a small contribution each year helps. In fact, according to statistics, people who start saving as early as 25 will end up reaching their retirement fund goal a lot quicker and easier than those who start saving at 40.

Pumping all of your savings into your company’s stock or a 401k might seem like the safest choice, but diversification reduces the risk that the one investment you poured all your savings into will go bankrupt. In fact, the more you spread your funds across bonds, short term investments, and your 401k or IRA, the more your can increase your odds at growing your money, even in those moments when the stock market is a bit shaky.

Do something about it! There are way too many people who unfortunately get lost in wishful thinking of how they’re retirement will be like when they reach their twilight years. But simply envisioning yourself in a future where you’re free of financial worries won’t make it so. So sit down, think about the kind of life you want to lead when you retire, and make an investment plan that will take your money where you want it to go so you can have your happy ending when the time is right.

We often see retirement as the time in our lives where we can get to do all those things that we couldn’t do when we were young. Now we’re not saying you shouldn’t plan for your retirement and make wise investments on your 401k or IRA. You just need to avoid focusing all your money on your future, and give yourself permission to be selfish. So if you have a little extra cash saved up, add a percentage to your savings and use the rest to go on vacation with your family. Retirement is a great stage in your life, but that doesn’t mean you should deprive yourself of other pleasures in the earlier stages.