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Even though most of us know that retirement planning is something we should be doing, real life tends to get in the way of us actually getting it done.
Biggest Retirement Planning Mistakes
Retirement is so far away in your timeline, it’s tempting to put it off for a bit.
What's worse, we can be our worst enemies and make some huge mistakes when it comes to planning for retirement.
I'm going to share some of the biggest mistakes and how you can begin to fix them.
Waiting Until You Have More Money
One of the biggest mistakes couples and really individuals make is waiting for the next raise to happen before they invest.
They feel like their small contributions now will have little or no effect so why not just give a year (or two….or more) and when they get enough then they'll invest.
I have some great news – you don't need a lot of money to start investing and time is one of your biggest allies when it comes to your portfolio's growth.
You can start investing with $1,000 or less. When I graduated college, I set aside money for retirement, even though I didn't have much.
Investing Without a Goal
I think the big question people have when trying to figure out their retirement number is how much they will need as a couple to retire.
Of course, that completely depends on your own family’s circumstances.
So just how do you come up with the right amount?
The traditional rule of the says that you should plan for around 75% of your current income.
You cna then make a reasonable ballpark figure as to what you will need.
If you want to get an approximate idea of what your family would need, pick up Todd”s book.
You can also use resources like Vanguard to help you out.
Not Automating Your Contributions
The last hurdle for couples when it comes to retirement is not automating their contributions.
How many times have you thought about investing, but by the end of the month, there's hardly any money to give?
Protect yourself now (and later when you need to retire) by setting up automatic contributions.
If you haven't already, check with your employer and see if they offer a 401(k) with a matching contribution plan. That's basically free money that boosts your returns.
Having it automatically deducted means you'd hardly miss it as you simply budget from your take-home pay.
Depending on your employer, you’ll have different funds to invest in. If available, consider putting your contributions towards low-cost index funds.
My advice is to increase the amount as you receive raises and promotions through work.
It doesn’t have to be significant, just take it up a notch every raise. Besides allowing you to invest more, you’re also lowering your taxable income, a double bonus.
Build a Better Retirement Today
None of these mistakes are made intentionally, (as if someone wants to sabotage their retirement!) but they are all too common and they will hurt your chances at your goals.
Now is the time to start planning, get your contributions calculated, and automate them. Your future self will thank you.