Seven Money Moves That Could Kill Your Retirement :: Wamhoff Financial & Accounting

Seven Money Moves That Could Kill Your Retirement

It takes years to plan, save, and invest for retirement, but there are many moves you can make that could put your retirement in danger. Matt Allgeyer, Financial Planner at Wamhoff Financial Planning and Accounting Services, points out the top mistakes and what you can do to avoid them.

  1. Taking Social Security As Soon As You Can
    • The eligibility age for Social Security is currently 62, yet if you begin taking benefits at that point, your monthly benefit amount is reduced by about 30 percent.
    • The reduction decreases each year until you reach full retirement age of 67.
    • In most cases, it is better to wait as the monthly payment will be higher, although you will not get as many years of your benefit. A financial planner can do a break-even analysis to help you decide when the best time is for you to begin taking Social Security.
  2. Failing to Save – At All
    • Some people wait to save until they have a surplus of funds, but never have a surplus.
    • Create a budget which includes savings, then automate it and stick to it. In absence of a budget, you’ll likely never have a surplus to save.
  3. Unplanned Roth or IRA Withdrawals
    • If you find yourself in need of cash, either due to a job loss or for an emergency, your retirement savings should be the last place you turn to for that cash.
    • 75% of studies show that you never put all of the money back into the account, and you lose out on the compounded growth you’d experience if you left the money alone.
  4. Not Making Changes When Needed
    • When you change jobs, do a rollover.
    • If you have money in several places because of several job changes, consolidate your accounts to that you can keep track and make adjustments that are aligned with your goals and plan.
  5. Poor Investment Choices
    • Don’t put all of your eggs in one basket – diversify!
    • People tend to be more aggressive with their 401(k) over all other investments, which is not always the best direction.
  6. Raiding your Home Equity
    • Home equity should not be looked at as an emergency fund or a piggy bank. It is credit.
    • Many homeowners fall into the trap of thinking they don’t need to worry about maxing out a line of credit because they’re not planning to move, but the value of your home could go down and the bank can call in the loan at any time.
  7. Providing Financial Assistance to Adult Children
    • Teach your children financial responsibility, and allow them to experience financial mistakes.
    • In many cases when parents continue the financial support, the child will use the help to maintain a current standard of living – so the help has no end. Be careful!
    • This extends to co-signing for a loan. Most do not understand the ramifications of co-signing. When you co-sign, you are on the hook for the debt if the child is unable to pay.