According to statistics, a common person spends almost one third of their life working. As part of the working class, how do you manage this huge amount of time to secure yourself financially, not only for today but also for your future? The answer of most would be saving money and investing. Easy to say but very hard to do. Unfortunately, even these people who prepare in advance for their retirement, usually make grave mistakes that cost them a very important part of their future. In this article, we are going to talk about the 5 critical retirement mistakes you should avoid doing.
5 Critical Retirement Mistakes You Should Avoid
Procrastination – The most important question when it comes to planning for retirement is “when will you start?”. Planning for retirement at an early age definitely makes a massive difference when compared to starting with it later. The ideal would be to start saving in your 20s so you could retire around your 60s. However, a lot of people lack the initiation of saving, usually procrastinating until their late 30s to 40s. Starting at a later time could result to insufficient savings later on.
Lack of discipline – One of the greatest obstacles when it comes to saving is the lack of discipline and self-control. Most people could not control themselves from spending instead of keeping their money to save for retirement. The rule to an effective retirement plan is very simple: once you place your money for retirement, do not take it out until after you retire.
Over-conservative investing – Investing too conservatively can result to more risk in the long run. Other than missing the opportunity to grow your money, investors also get affected too much from unforeseen sources of risks because they become confident that their investments are safe from risk. Because of these situations, investors become more hesitant in trying out opportunities and end up going in for safer investments with very little room for growth.
Overconfidence – There are also investors who become over-confident on specific stocks and securities, that they end up losing a lot once their biases decline in value. No matter how confident you are that an asset would rise, never neglect the possibility of risk. Mitigate this risk by diversifying your investments. That way, you would be able to lessen the impact of a losing investment to your porftfolio.
Insufficient retirement plan – Lastly, never sign up for an investment plan if you are not prepared. Make sure to analyze and list down your goals that you should meet. For example, compute the best percentage of your salary that you would set aside for your retirement plan. Stick to that percentage and don’t waver from it until you hit your target. Rebalance your portfolio at least once a year to secure your profits. Also, always consider the risk you are taking. Investors that are in their 20s should keep 90% of their savings in stocks because they are more efficient in handling greater amount of risk, while people around 40s and 50s should move towards investments that are more secure and has lower volatility.
It may seem very enticing to just spend and enjoy the money you are currently getting from your work, but life would get a hundred times better when you reach an age that you could stop working and just revel in the fruits of your labor. A little sacrifice today can cause you great relief in the future. So take note of the mistakes above and avoid doing them at all cost. Keep your eye on your target and focus on achieving that no matter what.
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