We’re all familiar with the cautionary tale of the three little pigs; a few curly-tailed pals build their houses with varying construction materials. Retirement planning is much the same. We plan and build and try to choose the best materials to house our golden years securely. While the big bad wolf isn’t actually coming for your retirement plans, there are a few common pitfalls that can make your castle in the sky susceptible to getting knocked down faster than a sandcastle at high tide. Here are a few mistakes to avoid.
If you don’t know where your money is going, there’s a good chance your financial plans are as leaky as a sieve. In order to properly plan for “down the road,” you have to plan for the now properly. Tally up your monthly expenses, take stock of your goals, and formulate a plan that can get you where you want to go.
Overlooking Your Emergency Plan
After creating a budget, the next vital step is creating an emergency fund. This should cover at least six months of your living expenses, as well as funds for expected, irregular expenses (think once-a-year bills, like car insurance, property taxes, etc.). Don’t forget to designate some of your emergency funds for surprises like home appliances or veterinary care. Adding enough to your emergency fund upfront ensures you don’t need to take from your retirement funds in case of unexpected needs while also protecting you from steep credit card fees.
Not Contributing Enough
If you aren’t contributing up to your 401(k) employer match, you’re missing out on a great opportunity. Free money for your retirement fund? That’s a no-brainer. Even if you’re not able to add enough to meet the match amount, contributing as much as you can budget for as early as possible gives your retirement funds an unbeatable jump start. Don’t be afraid to be aggressive in your savings strategy (if there is such a thing!). Many people start too late or are too conservative with their retirement savings.
Have you factored insurance into your retirement plans? Assets in qualifying retirement plans may be insured, but life and liability insurance are good ways to safeguard your assets in case of legal action. The last thing you want is to see your nest egg depleted because of a legal dispute.
Not Reviewing Your Financial Plan
Life changes, such as a marriage or divorce, the birth of a child, the purchase of a new home, or a new job, all affect your financial planning needs. It’s important to review your plan regularly to verify that you’re still on track. Tax season is the perfect time to give your plan a once-over since you likely have all of your financial documents easily at hand and fresh in mind. Don’t forget to update your will and beneficiaries as needed.
Building a retirement plan to last isn’t difficult. It just takes diligence and strategy, and the guidance of a knowledgeable wealth advisor makes it that much easier. If you need help reviewing your financial plan or even getting started, give us a call today! We can help you build a plan to reach your dreams.