6 Financial Decisions That Could Haunt You In Retirement
The choices you make with
your money can come back to haunt you years later. How much you spend and how
much you save during your working years help determine how much you'll have to live
on once you retire. Here's a look at six common financial choices you could
face and how each could impact your retirement plans and leave you regretting
those financial decisions.
Regret No. 1: Skimping on saving
saving enough during your working years is a big mistake that may force you to
delay retirement and live less comfortably once you do. Happily, 60 percent of
workers feel confident that they're building a large enough nest egg for
retirement, according to the Transamerica Center for Retirement
Studies. Unfortunately, the coronavirus and recession have shaken some
people's confidence: 23 percent of workers say they're less confident in their
ability to retire comfortably in light of the pandemic.
you're among the portion of people who are not so confident, boost your efforts
to save for retirement as soon as possible. Start small and work your way up as
finances allow. Spending a little less will let you to save a little more. Once
you hit age 50, take advantage of higher catch-up contribution limits for
retirement accounts: In 2020, you can put up to $7,000 total in traditional and Roth IRAs ($1,000 more than
younger workers) and up to $26,000 in a 401(k) or similar employer-sponsored
retirement account ($6,500 more than younger workers).
Regret No. 2: Avoiding the stock market
might think of stocks as too risky, especially amid recent market turmoil. But
skipping stocks completely is not necessarily the answer. One major reason:
Investing in the stock market is your best bet for beating inflation. And while
the current rate of inflation is low, it likely won't stay low forever.
at a low rate, any cash you're stuffing under your mattress is losing
purchasing power by that much. Money safely stowed at the bank doesn't fare
much better. The interest rate on a savings account is just 0.55 percent, on
average, according to Bankrate. By contrast, Standard & Poor's 500-stock index, a widely
used benchmark for stock performance, has returned an annualized 10.2 percent,
including reinvested dividends, over the past five years through June 19,
according to Morningstar.
in uncertain times like we're seeing now, people might panic and avoid the
stock market because they think they cannot afford to lose — and they're right,
they cannot afford to lose all their money — but they can't afford to have all
their money sitting in cash, either," says Marguerita M. Cheng, Certified
Financial Planner and chief executive officer of financial planning firm Blue
Ocean Global Wealth, based in Gaithersburg, Maryland.
retirement could last for 30 years or more, given increasing longevity, you
want to keep investing for the long haul as you get older. Start as early as
your financial situation allows and invest as much as you can afford. A
low-cost mutual fund that holds a basket of stocks can be opened for as little
as $50. As your nest egg grows, reduce risk as you approach and enter
retirement by gradually shifting stock money into more conservative
mistakenly get caught up in taking too much risk," says Taylor Schulte, San
Diego-based Certified Financial Planner and host of the Stay Wealthy retirement
podcast. "I'd rather have someone take less risk and be comfortable, be able to
sleep well at night, and be able to stick with their investment plan. That is
what's really important in order to have investment success."
THE REST OF THE FINANCIAL DECISIONS HERE
should be spent relaxing, not worrying about finances. Telhio is here to help
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