4 Retirement Savings Mistakes to Avoid4 Retirement Savings Mistakes to Avoid http://learningcenter.statefarm.com/finances-1/retirement/4-retirement-savings-mistakes-to-avoid/ bb3 Dec 28, 2012
By Staff Writer
Nearly 50 percent of American adults worry that they’ll outlive their life savings, according to a Gallup poll. Fortunately, with a few tweaks to your financial strategy, you can help strengthen your savings posture and preserve your money for as long as possible. Steer clear of these retirement savings mistakes:
- Saving very little—or not saving at all
“It’s important to start early and save often,” says Helen Stephens, principal of the Helen Stephens Group, LLC, in Fort Worth, Texas. Create a goal to put 10 percent of your pre-tax income toward retirement. You don’t have to do it all at once—you can build up to that, Stephens says. If it’s easier, start at 5 percent, then increase to 6 percent next year, and so on. “Regular contributions are what’s important over time,” she says.
- Giving up on the notion of a retirement savings plan
Though it’s best to start saving early on, it’s better to start late than never at all. The thought of starting can be overwhelming, so work with a financial planner to devise a plan that fits your situation and determine how much you need to save to meet your goal. “Rather than avoiding the inevitable need to plan for retirement, create a modified picture of your future,” Stephens says. “As long as you have a diligent approach to retirement savings, you can rectify the situation.”
- Cashing out when you change jobs
This is the mistake Stephens sees most often. If you cash out before age 59½ not only do you risk moving to a higher tax bracket, you may have pay a 10 percent penalty tax. You’re better off leaving the money in your former employer’s plan or rolling it over into either your current employer’s plan or to an IRA. Also consider the fees associated with the plan/account and the available investment vehicles. “If you roll it over, it can work for you on a tax-deferred basis until you reach retirement,” Stephens says.
- Carrying too much debt into retirement
Debt—whether from a mortgage, car or credit card—can put a dent in your best-laid retirement plans. “A family should work with their financial planner to have a plan in place, not only for retirement savings, but for cash flow planning as well,” Stephens says. “This plan would include debt elimination.”
Your State Farm® agent can help you review your insurance needs as part of your retirement planning.
Neither State Farm nor its agents provide tax, legal or investment advice. Please consult your own adviser regarding your particular circumstances.
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