People Sabotage Their Own retirement
Everyone wants and dreams of a retirement that is filled with expensive trips and living the life of luxury. Unfortunately, most people fail to plan or even fully contemplate what they need to do today to get to the retirement they want. The sad part is that most people could have the retirement of their dreams if they just planned properly and had a little financial discipline.
Here is a short list of common ways in which people sabotage their own retirement.
Waiting for The Right Time To Start
Making the mistake of assuming that you have lots of time to begin saving for your retirement is among the most prevalent blunders one can make. It is by no means too soon to begin saving money for your retirement. The longer you delay in saving money, the more you escalate the likelihood of definitely not possessing sufficient saved money to finance the retirement you want.
Not factoring in Inflation
This is a difficult concept for a lot of people to grasp, this is one of the first things I mention when someone tells me they are saving for their retirement. I inevitably get the same side eye look for everyone, they have heard the “inflation” word before and they feel like they should understand it but deep down they know they have no idea what it means. People are lulled into this false sense of security when they start saving for their retirement, and most just stick their savings into a high-interest savings account and call it a day. Unfortunately these days the interest on most of these savings accounts does not even match the current inflation numbers.
What does this mean and why is it important? Very simple, if inflation is higher than the rate of your return, then you are losing buying power. But the important thing that trips a lot of people up is the amount of money in your savings account does not change, you do not lose any money. It is sort of an abstract idea as you cannot see the loss from inflation in your statement, it is invisible until you withdraw your money and go to buy something 20 years from now. $10,000 dollars today can buy let’s say a new shingled roof, but 20 years from now that same roof might cost $20,000 or more, so inflation has cut your spending power in half. So the basic take away is that you have to put your money to work and invest it in a financial vehicle that will beat inflation at the very least every year.
Taking Money Out of Retirement Accounts Early
This retirement mistake speaks for itself and I think most people know deep down inside that they should not do this. I think most people get caught due to an unexpected financial emergency and are forced to tap into retirement funds. This is why it is important to have an emergency fund, to take care of any unexpected financial emergency. I mentioned some tips about starting an emergency fund in the 5 PERSONAL FINANCE BASICS article.
Underestimating Your Retirement Needs
It is important, to be honest with yourself when thinking about retirement, don’t lie to yourself now to make yourself feel better. People will often lie to themselves and think they can live with less in retirement and that they won’t mind it. I have not met anyone who wants to voluntarily cuts things out that they enjoy, so don’t kid yourself you won’t want to do that when you retire. The other snag that trips up most folks is that ugly word “inflation” people as I mentioned above do not understand it and thus do not take it into consideration when thinking of retirement and how much money they need. To get a better idea of how inflation can impact you in retirement check out inflationcalculator.ca this site offers a free inflation calculator and it is helpful to get a visual picture of inflation and its impact on your finances over the long term.
The above stumbling blocks listed are just a few that can trip you up on your way to funding your retirement. There are many more hurdles that can get in your way, and being aware of them helps to be prepared if they crop up. You are human and will stumble at some point in, but keep saving and learning and you should reach your goals.
This is not financial advice and all financial investments carry risks. Investors should seek financial advice from professionals before making any investment. I wrote this article myself and it expresses my opinions. I have no business agreement with any company mentioned in this article.