Financial Pitfalls to Avoid for Retirement

Tom Toggas shares some typical mistakes to avoid when you are saving for a robust and healthy retirement

Abusing Your Home EquityIf you spend it now, you won’t have it later. Should you choose to sell, raiding your home equity could negatively impact what you earn. If you get a reverse mortgage at some point, it could lower the level of payments for which you are eligible.

Impromptu Roth IRA WithdrawalsIts flexibility is advantageous, but a dangerous temptation. Withdrawing from your retirement account doesn’t just rob you of those funds, but also of their compounding interest and wealth they accumulate for your future.

Failing to Save at AllOne of the biggest mistakes you can make is assuming you can’t afford to save right now. Most of us don’t come to the end of the month and try to figure out what to do with all the money that’s left. Saving needs to be in the budget from the start.

Financially Supporting Adult KidsFamily is likely a priority in your life. However, if you are going to support yourself in your golden years - and void becoming a financial burden on your family then - you need minimize your own costs now. Be very wary of letting your grown children grow accustomed to your help.

Co-Signing for a RelativeRegardless of what the expense is, if your signature is on it, you are on the hook. Should your relative pay late, your credit could be affected. And if you ever do need a loan, this obligation will count as your debt when the lending party determines eligibility.

Lacking a Back-Up PlanBe sure that whatever your savings trajectory looks like, you still have an emergency fund. Unexpected things happen all the time. What if you get laid off before you were planning to leave the workforce? Can you survive that kind of event without destroying your retirement savings?

Bad Investment DecisionsEven if you’ve managed to sign up for the 401(k) at work or to open an IRA for yourself, selecting the wrong funds or failing to diversify your portfolio can set you up for failure.

Forgetting to Be AdaptableYour investments may well need to change as your goals do. Keeping your accounts organized is absolutely critical.

Claiming Social Security EarlyIt is very often better to wait. Taking it as soon as possible may be tempting, but if you anticipate living well into old age, take enough time to really think about whether the smaller checks will be worth it.

Making all your plans — including retirement — for later. A life of sacrificing for a “later” that may or may not come is not much of a life. The key is balance.