Common Retirement Money Mistakes

shutterstock_60503296Planning for retirement can be quite a challenge for many people. In this day and age of economic uncertainty, more and more people are becoming quite unsure of what their own retirement will hold for them. That is why it pays to prepare for retirement early.

But in some cases, people make common mistakes when it comes to retirement planning. They do try to save up for their future. But they make some mistakes along the way. Here are some of them.

No Emergency Financial Cushion

Some people literally save up for retirement, so much so that they forget to set aside money for emergencies. It is one of the primary reasons why some people’s retirement plan hits a snag along the way. Without funds for emergencies, they may be forced to use their retirement savings instead. There should be a balance between having funds for your retirement and having some set aside for emergency use.

Making Big Purchases During Retirement

Sometimes, people make lavish spending the first thing that they do to celebrate their first few days of retirement. They save the retirement fund all these years and it may run the risk of substantial decline in potential earnings with a single large purchase. While it may be natural for some people to celebrate and enjoy their retirement, they should try not to take out the amount they wish to spend lavishly from their retirement fund. All their careful plans will go down the drain once they do.

Going For Higher Yields

Some people also make the mistake of investing their retirement fund in high yield-high risk securities. In their aim to make their retirement fund work more for them, they start putting it on high-risk investments. Down the line, the risk may not be ideal since potential losses can also cause a substantial reduction on your retirement fund. Try to put a majority of your retirement money into investments with the less risk but provide added earnings, no matter how modest.

Emotional Investing

Other times, the mistake people make on their investments is how they react to the market changes. Even while they make sure that they place their money on investments that can meet their long-term goals, certain instances may make them react differently to short-term losses. Their fear sometimes get the better of them and act on impulse instead of common sense. Emotional investing can easily wreck any stable retirement nest egg. Do be easily swayed by market forces if you are sure that your investments are able to withstand the occasional down market.

 

Posted by Ardent Editor on Feb 27 2014 in Financial Planning Tags: , ,

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