5 Retirement Planning Miscalculations That Waste Your Money

If you’ve been procrastinating about retirement planning, now is a good time to sit down and just do it. Write down how much money you will need in the future to maintain your current standard of living and figure out your sources of income.

If you don’t know how to even start, speak with a professional advisor. Here are 5 financial miscalculations that you should avoid making:

  1. Making the financial miscalculation that your family will be able to come up with the money to take care of your final expenses:

One way to help your family cover the cost of your funeral is to get funeral expense insurance. PolicyZip explains that this is an insurance policy that pays all the costs associated with your final burial arrangements.

Also known as burial insurance, this policy is a term life insurance policy with lower death benefits, ranging from $5,000 to $10,000.

  1. Making the financial miscalculation of cashing out of your 401k between jobs.

The average cash-out amount of someone under 40 years of age who is changing jobs is under $15,000. Although you might solve some pressing immediate financial problem by cashing out of your 401(k), you’re creating a future crisis.

If you withdraw money from your 401(k) before 60, you’ll face a ten percent early withdrawal penalty, along with any pertinent federal and state income taxes.

When changing jobs, a much better option is to roll over your 401 (k).

  1. Making the financial miscalculation that your cash-flow projections in retirement will be the same as they are now.

It’s unrealistic to make your plans based on your current cash-flow. Your math will not correspond with reality because economic conditions are always in flux.

Since you don’t know what your future income and expenses will be, limit yourself to making conservative projections. If, for example, your current invested assets are growing at ten percent, don’t assume that this will always be the case.

Another thing that you should also consider is that you may live a long time. The exponential growth of medical technology is making it easier for people to live longer, healthier lives.

  1. Making the financial miscalculation of relying only on your Social Security Benefits.

While your Social Security Benefits will provide some level of financial security, chances are that your money won’t go as far. Think of these benefits as only providing for a quarter of your income needs.

Think of ways that you can set aside a portion of your current income.

And if you don’t have enough money to tuck away for your retirement years, think about what new online skills you could learn to earn money from home. Also, think about what investment you can make now that will provide an income for you in your retirement.

  1. Making the financial miscalculation of paying high retirement account fees.

You may be paying high investment fees without realizing it, and this includes your 401(k) fees.

It’s easy to dismiss these fees if you’re getting high yields, but you may be able to enjoy the same high returns with a different brokerage. Often, too, you may not even be aware of the fees you’re paying because they may be hidden or only mentioned in small print.

Find out how much you’re paying in investment fees, then research ways that you can achieve the same high ROI at a lower cost.

In conclusion, don’t procrastinate about making retirement plans. We procrastinate because we find something difficult to do, putting off doing it because it makes us uncomfortable or because we don’t know how to do it. You must overcome these mental and emotional obstacles by taking constructive action.

 

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