10 Mistakes To Avoid When Saving For Retirement

The following is a guest post from the Indexed Annuity Leadership Council.

Whether you’re a working mom or stay-at-home with the kids, saving for retirement can often be put on the back burner. Between staying on budget and wanting to build college funds, finding a little extra to invest in your retirement can be a daunting task. Moms are usually the driving force in the household when things need to get done. Here are some tips for moms to avoid these common retirement planning mistakes when they’re considering their financial future.

Biggest mistakes when saving for retirement:

1.Waiting to save.

Start saving early so your money has time to grow. If you’re worried about sticking to your budget, start small. Even $20 a week can go a long way over time, and when your budget allows, contribute more.

2. Failing to plan.

It is important to understand expenses for the type of lifestyle you want, so you can save enough money. Figure out what your retirement goals are, and start planning your retirement finances now. There are helpful interactive calculators that can help you determine how much you will need in retirement.

3. Saving for college before retirement.

Moms want the best for their children, but there are many factors when deciding which savings take priority. Consider this: Your kids have access to loans and scholarships to help pay for college, but if you don’t save enough money for retirement, you may not be able to afford your expenses.* You could also have separate savings for college and retirement, and contribute to both. Even if you’re contributing less to each than you would like, the longer the money is in the account, the more the interest will accumulate.

4. Retiring with a lot of debt.

Find a way to pay down or pay off consumer, student loan, and mortgage debt before you retire. These recurring payments will be harder to make when you’re on a fixed income.

5. Relying on Social Security.

Your Social Security benefits are a valuable source of income during retirement, but with an average benefit of just $1,237,** it is unlikely that Social Security will be able to cover all your retirement expenses. Before you retire, visit www.socialsecurity.gov to find out what benefits you should plan for.

6. Failing to research options to increase your savings.

The key to growing your retirement fund is balancing risk and reward. Look into different options and how they could fit your retirement goals. If you want a low-risk option, check out fixed indexed annuities (FIAs) at www.FIAinsights.org. Market-driven options like mutual funds or securities have higher risk, but also the potential to really increase your savings. You can research a variety of retirement plans here.

7. Individualizing your accounts.

If financial assets are in one account under one name, it may be hard to access those funds in the event of a family death. Having joint retirement accounts will protect you, your family, and your finances in the event of an unexpected death.***

8. Using your retirement funds before retiring.

Let the money in your retirement fund grow, and if you need money earlier, consider other sources. It is harder to save the closer you get to retirement, and many retirement accounts have steep penalties for withdrawing early.

9. Failure to plan for taxes.

Keep in mind that you will still have to pay taxes after leaving the workforce. Plan ahead so you’ll have enough money to pay your taxes as well as enjoy your retirement.

10. Depending on a specific retirement age.

You may plan to work until you’re 65, but sometimes unexpected circumstances alter your retirement plans. That is why it is important to start saving for retirement early, so you won’t be short of your retirement goals if you are unable to work earlier than expected.

 

*Source: US News & World Report

**Source: Social Security Administration

***Source: USA Today

3 Things Parents Must Teach Their Kids About Managing Money

(The following is a guest post. I’m sharing because I think they are great tips!)

As a father of five teenagers, it feels like all I do every day is teach my kids lessons. These lessons span a wide range of topics – from “how to treat others,” to “being a team player,” to “exude confidence not cockiness.” It has taken me years to determine the most important lessons pertaining to personal money management, which is one of the most important skills they need to learn.

With all the issues facing teenagers today, why do I say this? Three reasons:

1. Schools teach them absolutely nothing about personal money management.
2. The example set by our society is to spend more than they make (in other words, debt is good).
3. It is one of the most important skills they need to take into adulthood.

It is imperative to set the right example for your children when it comes to money management. In my book, “Why Didn’t They Teach Me This in School? 99 Personal Money Management Principles to Live By” (www.whydidnttheyteachmethisinschool.com), I discuss these lessons in a simple, memorable manner.

Here are what I consider every parent’s three “must teach” principles:

• Always live below your means. If you want to manage your money successfully, this is one of the most important principles to follow. And, this is where most Americans have gone, and will continue to go, wrong. People want to have everything … now. They just can’t wait until they can afford it. But you must wait until you can afford something before you buy it. If you make a habit of purchasing things you can’t afford, you will quickly begin a downward spiral that will continue until you go bankrupt. Plus, you’ll enjoy your purchase all the more.

If you always live below your means, you will always have extra money to save and invest. Over the years, your money will grow and you will find yourself with significant financial security. Keep in mind that living below your means doesn’t mean living badly. It means you prioritize your spending and focus on what is most important to you. It means “living smartly.”

• Develop a written budget and evaluate it every single month. People think this is painful but it’s actually quite simple. And it must be done. You can’t manage something you’re not tracking. And the concept is clear – more money must come in every month than goes out! I have a simple budgeting process that takes a half-hour every month and allows for the three most important parts to be completed: developing, tracking and analyzing. The analysis part is so important. Where did you spend too much? Where didn’t you spend as much? What else do you need to include next month? What is in your emergency fund? What are your financial goals for the next 12 months? And remember, you will always have tradeoffs!

• Save and invest 50 percent of every salary increase. This is an easy principle that requires a little discipline. Think about it; you were living on your old salary before you got a raise. You can have the best of both worlds. You’re still going to live better, but why not invest some for your future? Most people don’t do this because they get behind in the first place. They start by spending more money than they make in the first place. You just can’t do that. If you employ this principle, you will be shocked at how well you do financially over time.

Ninety-five percent of adults don’t follow these principles because they’ve been told that debt is OK and they’re trying to keep up with the Joneses (who, by the way, are bankrupt)! I’ve told my teenagers (and my nephews who are in their 20’s), if they always follow these three basic principles, they will become extremely adept at personal money management.

Take the time to talk with your children about all the issues that confront them. Especially, take the time to discuss the issue of personal money management. From experience, we all know that it is an issue that has caused much pain to our generation.

    About the author:

Cary Siegel is a retired business executive. After earning his MBA from the University of Chicago, he began his career in brand management with Kraft and went on to lead several companies in marketing and sales. He wrote “Why Didn’t They Teach Me This in School? 99 Personal Money Management Principles to Live By,” whydidnttheyteachmethisinschool.com for his five teenage children. Following his personal money management principles allowed him to retire at the age of 45. Siegel is a popular speaker on both marketing and personal money management.