Making a plan to save for retirement is a complicated task full of unknown factors and estimates. You do not know how much money you will need, but you know that you need to save a significant amount to ensure your financial stability during your retirement years. There are many different approaches to saving for retirement that a person may use to reach their saving goal, but making a mistake with your retirement savings can be a setback that can be difficult, if not impossible, to overcome. Here are some of the most common retirement saving slip-ups to avoid.
Delaying Saving
One of the most devastating mistakes that anyone can make with their retirement planning is delaying saving until a future date. It is important to begin saving for retirement as soon as you can so that your money can grow as much as possible using compounded interest. People that begin saving for retirement in their twenties find themselves in a much better position financially when they reach retirement age than people that did not start saving until they reached their thirties or forties. If you have not yet started saving for retirement, reorganize your finances and trim your expenses so that you can begin diverting a portion of your pay into a retirement savings account.
Tapping Into The Funds
Tapping into your retirement funds before you retire is another big mistake you should avoid. While the amount of money held in your retirement account can be tempting when you are broke and facing an unexpected expense, tapping into these funds will do you more harm than good. Not only will you be penalized and taxed on the amount that you have withdrawn from the retirement account, you also cannot replace the money at a later date and may be barred from contributing to the plan for a predetermined period of time. There are many other methods available for obtaining additional money and all of them should be explored and exhausted before you remove money from your retirement account.
Missing Matching Contributions
Many employers offer to match employees’ contributions to their retirement accounts up to a certain percentage of their salary. Not taking advantage of these matching contributions is like turning down free money. To maximize your contributions, make sure that you contribute enough to your retirement accounts to get the full employer-match amount and continue to contribute this amount throughout your employment with the company.