There are a lot of things that you can do that will negatively affect your retirement fund with most of them having to do with not beginning early enough or putting money toward other things instead of retirement. Here are 10 moves that may leave you poor when it comes to retirement:
Setting money aside for college ahead of retirement
While most parents want to help their kids when it comes to paying for college, it’s important to remember that your children can get loans for college but you can’t get loans for your retirement. If you plan early, you should be able to contribute to both, but if the choice is one or the other, in most cases you are better off funding your retirement first.
Believing it’s OK to wait
Retirement usually seems so far away that many people believe it’s okay to wait a few more years before they begin to save for retirement. The fact is that the sooner you begin, the easier it will be to accumulate your needed retirement funds and you won’t be scrambling in your later years to come up with money for your retirement.
Not taking advantage of 401(k) matches
If your company offers a 401(k) plan that matches a certain amount of your contribution, not taking advantage of this is the same as throwing away free money. You should contribute to your 401(k) up to the match at the minimum from day one if at all possible making it a priority within your budget.
Accumulating credit card debt
Accumulating credit card debt and paying the interest to the credit card company instead of placing the same amount into your retirement fund will make your retirement fund much more anemic than it really should be.
Counting on an inheritance
Counting on other people’s money for your retirement is something that you should never do. A lot of things can happen and there is no guarantee that the money will ever get to you. If you do receive an inheritance or a lump sum of money, be thankful and use it wisely, but don’t expect it has your retirement fund or you may be left in retirement with nothing.
Buying more house than you can afford
Buying more house than you can afford will leave your retirement fund with less money and with a major liquidity problem to solve. Your main residence is not a good retirement investment While there are tax advantages for the mortgage of your house, retirement funds offer better tax advantages if you have a choice between the two.
While nobody hopes for the worst, it does happen from time to time and that is what insurance is for. Not keeping the proper insurance can mean that a lifetime of retirement savings is wiped out in a single moment. It’s important that all of your insurance is up-to-date and at the proper levels
Failing to take advantage of IRAs
Failing to take advantage of IRA contributions, especially in the early years, can greatly hurt your retirement fund. Since IRAs have great tax advantages, you want to make sure that you contribute the full amount beginning at as early an age as possible. This is especially true since there is a limited amount that you can’t contribute each year to them.
Investing too conservatively
Part of the reason that you want to invest early is to take advantage of compounding interest. If you place your retirement money in investment instruments that are too conservative, the compounding will be greatly deflated. You also need to remember that inflation will take away part of the savings that you have placed in your retirement fund, so you need to make sure that you invest in a way that you significantly outpace inflation.
Investing too aggressively
On the other side of the coin, you don’t want to invest your money in high risk ventures that there is a good chance that your retirement fund will be wiped out. Your retirement fund should be aggressive, but not high risk as this is the money that you will need in your later years in life.
(Photo courtesy of Roberto.Jorge)