If you’re doing only a little saving and investing for retirement while hoping for the best, you’re likely endangering your future financial security. See if you’re making any of these mistakes:
¦ Not saving enough. Some suggest saving 10% of your income, but that may be far from enough — especially if you haven’t been saving and investing all along. See if you can sock away 15% or even 20% — or more. Remember that your earliest invested dollars will have the most time in which to grow for you. They can be your most powerful investments.
¦ Not investing effectively. Bank accounts, money market accounts and government bonds may be safe, but until interest rates get much higher, your money won’t grow well in them. Look to the stock market for building long-term wealth. If you’re decades away from retiring, consider keeping most or all of your dollars in stocks. Give strong consideration to simple, low-fee index funds, too, such as funds that track the S&P 500.
¦ Borrowing from or cashing out retirement accounts such as 401(k)s and IRAs. If you’re changing jobs and your 401(k) doesn’t have much in it, consider rolling it into an IRA or into your new employer’s plan. Let that money keep growing for you.
¦ Not having a plan. Take some time to read up on investing and retirement issues (in books, at Fool.com and elsewhere), and come up with a plan. Figure out how much money you should amass before retiring — and how you’ll make it. Try to determine when you should retire; doing so too early can deplete your funds too quickly. Come up with a withdrawal plan to help your money last as long as it may need to. Fixed annuities are worth considering for the reliable income they can provide.
¦ Not seeking help. An online search for “retirement calculators” can turn up some handy tools. Also consider consulting a fee-only financial adviser; you can find some at NAPFA.org. ¦
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