It’s been estimated that approximately 10,000 people retire each day in the United States. Are they prepared for retirement, and are they making common mistakes that will keep them from having enough to retire? Matt Allgeyer, Financial Planner at Wamhoff Financial Planning & Accounting, shares the top mistakes people make when planning for retirement.
- Cashing out 401(k) or IRA instead of choosing to roll it over or leaving it in previous employer’s plan
- According to a Hewitt Associates study, 45% of workers cash out their retirement plans when changing jobs.
- When that money is cashed out, not only do you incur the taxes and penalties on the withdraw, you also eliminate your ability to grow that money over time.
- Individuals typically have 4 options when leaving an employer, these include- leaving the money in the former employer’s plan (if permitted), rolling the assets over to his new employer’s plan (if available), rolling the account to an IRA, or cashing out the account value. An individual should consider various factors when determining the best option for their circumstance. Some factors to consider include the available investments options and fees and expenses associated with the account.
- Not Saving Enough, Not Having a Plan
- The two go hand in hand. It’s difficult to get where you’re going (retirement, in this case) if you don’t know exactly what you need and how you’re going to get there.
- The Employee Benefits Research Institute has found that 60% of the current workforce has not calculated how much money they will need to save for retirement.
- It’s been reported that the average retirement account value is $12,000.
- This will leave many Americans reliant on programs like Social Security and Medicaid, which many believe to be financially unsound long-term.
- Start early. Create a budget and a plan to get you to retirement. Calculate all your expenses, save until it hurts. Online calculators can give you a good start, and a professional advisor can help you create and work the plan.
- Underestimating Health Care Costs
- Health care costs, including long term care costs, into account is a major part of a retirement plan.
- In fact, Fidelity Investments estimates the average couple will need nearly $200,000 over the course of their retirement just for medical costs.