Several retirement coaches and investment gurus will highly recommend that you establish a retirement plan for yourself. With a retirement plan beside you, you can always be assured of your future after you leave your current employer at the age of 60.
However, having a retirement plan alone is not always enough nor is it a fool-proof protection against difficulties when you finally hit that magic number for retiring from corporate life. It’s what you do with your money that matters; you could save up for that time and still find yourself in a tight spot because you haven’t been paying close attention to what is happening.
Here are some of the common mistakes committed by people who mishandle their retirement plans. You’d do well to learn about these mistakes, so you can avoid them and the horror stories that they come with.
Withdrawing Money too Early
There are, of course, instances where you can go into retirement earlier than 60. However, you might think about waiting until you are 60 to withdraw your money. This is because most retirement plans subject you to a penalty in the form of a tax if you take out your savings earlier than the pre-selected retirement age, which is, in this case, 60 years old.
You could easily say, “Well, it’s just a penalty” but it’s still cash that you could have used to your benefit. If you’ve saved $50,000, for instance, and you withdrew it earlier than what is recommended, you could end up with roughly $5,000 in penalties. That’s a lot of money there!
Using Your Retirement Money For the Wrong Reasons
Some people have this mentality that, when they retire, they can do all that they want to do with their money. Thus, it’s only common that people take out a huge chunk of their retirement money and put it on something that eventually turns out to be a liability and not an asset.
For example, some retirees take out part of their retirement savings and use it to purchase a brand new house. There’s nothing wrong about getting a new home, especially it’s your hard-earned money there. However, you have to think about the expenses associated with maintaining a house. You have to pay the utilities every month, and you’re no longer earning a monthly stipend from a corporate employee!
So, you shouldn’t go ahead and incur an expense that will become a burden later on, just because you got the money to do it. If you really want to buy a house, at least wait until you’ve used your retirement savings to set up a steady source of income that can help you shoulder your expenses.
Not Keeping Track of Your Investments
We understand that you could be too busy, but nobody’s too busy to watch what’s being done with your money. That’s especially true when you’ve got somebody like a fund manager doing the overseeing of your savings for you. Demand periodic reports. Check news because retirement plans can change without you knowing it.
You don’t want to be hit with nasty surprises, so you better keep close watch with your money.
Retirement is an exciting new part of your life, but you should be adequately prepared for it. Watch that you will not make these mistakes during the preparation for your retirement.
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