Saving for your retirement is vital. Without significant retirement savings, you may have to work when you are no longer excited about your job or able to perform it as well. It’s not enough, however, just to save for retirement; it’s also important to be retirement savings savvy to ensure that your retirement savings won’t disappear too quickly. Here are some top reasons that retirement accounts may vanish in the near future, and some suggestions that will help you avoid these problems.
1. Not Planning a Long Enough Retirement
A couple of generations ago, people retired at 65 and lived for another 10 or 20 years. Today, though, the average lifespan is higher, and more and more people are living to the age of 90 or even longer. Consider the possibility of an extended lifespan and plan accordingly to prevent running out of money while you’ve still got years of life ahead of you.
2. Withdrawing Too Much Too Early
In order to make retirement savings last 30 or 40 years, you need to plan your withdrawals appropriately. Most people schedule retirement withdrawals around the anticipated cost of living. Since the cost of living goes up every year, you’ll have to take out more each year than the year before. If you take out too much at the beginning of your retirement, you’ll quickly run out of money.
3. Retiring Too Early
Retiring at 65 is not always the best idea. At 65, many people still have a mortgage or other large bills to pay and are still capable of working. If you delay retirement, your retirement savings will continue to grow while you bring in income and supplement it with Social Security benefits. Consider delaying retirement for another three to five years in order to maximize your savings potential.
4. Putting All Your Eggs in One Basket
Retirement savings accounts are investments. Your portfolio manager invests the money you put in, and hopefully, the investments grow instead of shrink. It’s not a good idea to have just one kind of retirement account; if the investments fail or withdrawal rules change, you could lose money. Instead, diversify your retirement portfolio by investing in an IRA, a 401(k) (if your job offers one) and several annuities. Diversifying brings more money into your retirement accounts and makes it more likely that you will have enough money to last the rest of your life once you retire.
Retirement is supposed to be your reward for working hard for all those years. Don’t let it cause you extra stress. Follow these tips to help ensure your retirement accounts don’t vanish while you are still in the prime of life.