Most of us know by now that America is in a retirement crisis. Many individuals approaching retirement age don't have enough to maintain their lifestyles once they leave the workforce full time. Sometimes individuals face outside obstacles that prevent them from saving, while others inflict injury on their own retirement plans by making some of the following mistakes:
- Dipping into retirement accounts – There are a few legitimate reasons why someone would take early withdrawals from a retirement account. The most serious is probably an expensive medical emergency. No matter the reason, though, taking out money early will result in you paying a penalty in addition to the taxes that you'll have to pay the government. So, if you're thinking about cashing out your individual retirement account to buy a new car, you may want to reconsider.
- Forgetting about the non-financial parts of retirement – It's important that you think about what your life will be like once you leave the workforce. Do you want to travel the world, or would you rather stay close to home? Once you have a vision of retirement, you will be able to develop a savings plan to meet your needs.
- Not creating a retirement target – Have you ever asked yourself how much you actually need annually for retirement? Many Americans fail to set a retirement target and almost always fall short. It only takes a few minutes to calculate your living expenses, so estimate how much Social Security income you will receive and figure out how much you will still need to maintain your quality of life.
There's more than one way to plan for retirement than putting funds into your employer's cookie-cutter 401(k) plan. It may be wise to explore alternative retirement income strategies.