We all know it’s important to save for retirement, however there’s a lot of information out there, so navigating the process can be overwhelming. Below are some common mistakes to avoid when it comes to saving for your retirement.
Neglecting to calculate how much you’ll need
Without knowing how much you’ll need to retire, it’s difficult to determine if you’re investing enough right now. Luckily, there are a number of simple, free calculators available online to help you calculate these figures.1 Click here for an example of an easy to use calculator.2
Not saving enough
Many companies offer matching contributions through their 401(k) plans. According to a recent article, “..about 25% of workers who are eligible for a match do not take full advantage of the benefit.” Employer matching contributions basically amount to free money, so it’s often recommended that employees take full advantage of their company’s 401(k) matching program when possible.1
Not understanding your investments
Target-date retirement funds, or TDF’s, are a common investment choice when it comes to 401(k) and similar plans. Much of their popularity is due to the fact that they’re easy to understand and take a lot of the guess work out of investing. “Investors simply choose a fund with the year closest to their intended retirement date…The fund is invested in a way the mutual fund company believes is best for someone with that much time until retirement. Another benefit of target-date funds is that they automatically alter how they invest over time, becoming more conservative as the investor nears retirement age.” Despite the simplicity of these funds, not all TDFs are created equal. For example, some are more aggressive than others. “Allocating all your retirement contributions to a single fund can be risky,” so make sure to do your research and consult a trusted advisor.1
Neglecting to name beneficiaries
It’s important to always name a beneficiary for your 401(k) or other retirement accounts. Failure to do so can result in your money becoming part of your estate upon your death. This can be a hassle and cost your heirs a lot of money.1
If you’re coming up short when it comes to saving for retirement and are looking for a way to supplement your income, a reverse mortgage may provide you the extra funds you need to live a more comfortable lifestyle. A Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage, is a Federal Housing Administration (FHA) insured loan. A reverse mortgage enables seniors to access a portion of their home’s equity to obtain tax free3 funds without having to make monthly mortgage payments.4 Many seniors use the funds to consolidate debt, make home improvements, and cover unexpected expenses or to pay for medical expenses such as prescriptions or in-home care. The loan typically becomes due when the borrower moves out of the home as their primary residence or passes away. At that time, the borrower or their heirs can choose to repay the reverse mortgage loan and keep the home, or sell the home to repay the loan.
If you’d like to learn more about reverse mortgages and see if you’re eligible, please use our Reverse Mortgage Calculator or call 800-218-1415.
1 6 Warning Signs You’re Sabotaging Your Nest Egg – wisebread.com, 3/8/16, http://www.wisebread.com/6-warning-signs-youre-sabotaging-your-nest-egg.
2 Are you Behind on Retirement Saving? – money.cnn.com, http://money.cnn.com/calculator/retirement/how-much-you-should-have/?section=money_retirement.
3 Consult your financial advisor and appropriate government agencies for any effect on taxes or government benefits.
4 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance and maintain the home according to Federal Housing Administration requirements.
Author: Meredith Manz