retirement is the culmination Decades of financial decisionsAnd the unfortunate truth is that some of those decisions aren’t necessarily good ones. In fact, this is very common. Today, millions of Americans are making financial choices that will harm them in the future.according to GOBankingRates SurveyA staggering 64% of Americans will retire penniless.
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To gain a deeper understanding of the financial decisions that can taint the golden years of life, GOBankingRates interviewed real retirees. While they are generally satisfied, they have at least one persistent financial regret that they still think about.
Here’s what retirees can learn from their financial mistakes to ensure a happy retirement.
Create a comprehensive financial plan
Drew Parker is Complete retirement planner But he said he wished he had paid more attention to his retirement plans sooner.
“I wish I had known the full value of having a comprehensive financial plan when I was younger,” he says. “I didn’t make a plan until I was actually ready to retire, but I wish I had planned for it decades ago. If you ask me when I was younger, I would say, ‘As early as possible in my career. Plan your finances, and you will succeed.” “You have to guess and expect what it takes to be financially secure.”
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what you can do
Create a financial plan, either with an advisor or on your own, that outlines your retirement needs and aspirations and how to get there. Your retirement plans should consider your values and goals, risk tolerance, target retirement age, and desired lifestyle. Once you have decided how you will spend your retirement, how much you should save for retirement and how long it will take to save that amount based on your expected income from investments, retirement savings, Social Security benefits, etc. Calculate how long it will take. other sources of income. You can always readjust your plan as needed.
One way to start financial planning today is to open a high yield account. Choosing this type of account ensures that your money is safe, functional, and available when you need it.
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Leverage your 401(k)
“When I was living paycheck to paycheck with four kids at home, I wouldn’t invest $20 a pay period in a 401(k) or 403(b)[for educators]. I wish I had,” said former speaker Pam Davis. A school pathologist in the Omaha school system. “I thought I needed a few hundred dollars a month for retirement savings, but that wasn’t possible, so I didn’t put anything in my account for years.” , tried to make up for lost time, but it proved to be more difficult than expected. They never reached their goal.
Luckily, Davis worked in the pension providing field. “I had no choice but to donate a certain amount to my retirement fund, but my employer gave me 101% for it. I realized how much, actually, it only took a small donation.Money in our 401(k) and 403(b) accounts, it’s a lifesaver for us,” she said.
what you can do
You don’t have to live below your income to take advantage of retirement programs offered by your employer. You decide how much to donate per paycheck. Start small and increase contributions accordingly as your salary increases.
It is especially important to take advantage of employer matching. Let’s say you make $30,000 a year or he makes $2,500 a month. Giving 5% of your salary to a 401(k) equals $125 a month. Currently, if your employer matches up to 5%, you will be donating $250 per month instead. You just saved $1,500 to $3,000 a year for retirement. That’s a big difference.
don’t focus too much on making money
Kathleen Fox, a former university professor, researcher, and social worker, wishes she had paid more attention to money over the years.
“I worked hard most of my life and saved enough money (pension and social security) to live on when my husband and I retired,” said the mother of three. . “My only regret is that I didn’t get to spend more time with my children. Everything went by so quickly that I regret every day that I was out of work while my children were around.” It was a job that I generally didn’t like very much.It was a day of learning and growing that I could never get back.”
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what you can do
Without a doubt, one of the best parts of retirement is spending time with your family. But if you spend too much time thinking about the future, you may forget the importance of the present.
Try one of the following tips to avoid wasting precious time with your loved one.
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Create family nights by playing games, watching movies, and reviewing the day over dinner.
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Take regular vacations. There are many affordable ways to spend your vacation, such as staying in a local hotel or exploring your own city.
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Request a flexible work schedule or change your schedule to suit your child’s time.
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Take advantage of family time provided by your employer. Depending on the company, you may be able to take a certain period of time off for your child. If possible, don’t miss a dance recital or soccer match.
Don’t waste money on depreciable assets
“In my twenties, I was single and held a reasonably well-paid managerial position in the restaurant industry, but I spent a significant amount of my discretionary funds on depreciating assets such as a few second-hand European sports cars. I had a background,” says Timothy. Wiedman retired early at age 62 after serving as an associate professor of management and human resources at Doan University.
“As used cars, they all had mechanical problems at one time, and repairs seemed to require expensive imported parts and special tools. We also had to travel to resorts in Colorado, Quebec, and New England. I also went on a ski trip for a few weeks.”And then one summer I decided to buy a small sailboat. If I had a more solid career and more income, my long-term financial plans would always ‘catch up’ later.” I justified this sloppy money management by telling myself that I could.”
Wiedmann said his poor spending decisions made him even more of a bitter pill because he missed out on compounding interest by spending rather than saving.
“At the time, I only vaguely recognized that the earning power of compound interest was based on time, so the first delay in saving for the future could have serious consequences.” he said. “So it was important for me to open an IRA as soon as possible, but I didn’t do it until I was nearly 32.”
what you can do
Once you stop buying depreciating assets, you’ll have additional funds that you can use to open a high-dividend savings account that keeps growing your money.
Another option is to invest in a retirement account like the Roth IRA as soon as possible.
“If a 23-year-old fresh out of college invested $3,000 a year in a Roth IRA that earned an average annual return of 7.8%, by the time he reaches full retirement age 44 years from now, his investment would be worth $132,000,” he said. The dollar will have increased to $1,009,275.” Wiedmann.
“On the other hand, if you start the same Roth IRA 22 years later, you will get a very different result. Even if you put $6,000 a year (the current highest for people under 50) into that Roth IRA for 22 years, the total The investment equates to $132,000.” “However, even at full retirement age, earning the same average annual rate of return of 7.8%, that funding will only grow to $324,562. Investors would lose more than $684,000.”
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Learn how to make money doing what you love
Robert Sullivan, a former senior financial analyst, said to himself at a young age, “I wanted to pursue my dreams in my career, but build a solid foundation on which to base my abilities and learn how to make a living.” Seek professional advice so that you can do it,” he said. whatever you like. ”
That way, you may be able to keep your passion alive and make money with it even after you retire.
what you can do
Ideally, everyone should have a full-time job they love, but even if you’re not passionate about your 9-to-5 job, how do you monetize what you really care about? There are more. Consider trying a side hustle that leverages what you enjoy. It can be anything from photographing weekend events to selling crafts on Etsy to walking the dog in your spare time. Not only will this allow you to do more of what you love, it will also give you extra income to fund your retirement.
Little by little is enough
Whether you’ve just joined the company or are on the road to retirement, don’t miss out on these invaluable retiree insights. Many emphasize the importance of financial literacy. If more people were educated on topics such as investing, compounding interest and employee benefits, nearly half of the population might not think about poor retirement.
Take a moment to assess your financial position and be honest with yourself. Knowing where you are compared to where you need to be can make a big difference in the long run. Clear numbers can be scary, but they can also trigger actions that completely change your future.
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Erica Corbin Contributed the report for this article.
This article was originally published on GOBankingRates.com: Retiree confesses what he wanted to do with his own money
