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3 things you shouldn't do if you want to retire comfortably



Only 25% of baby boomers believe they will have enough savings to last through retirement, a survey from the Insured Retirement Institute found. And given the fact that half of American adults 55 and older have no retirement savings at all, according to a report from the US Government Accountability Office, it's easy to see why so many older workers are worried about their financial future.

It is not easy to save for retirement, especially as costs continue to climb and retirement becomes more and more costly. And with multiple financial priorities fighting for your hard-earned dollars, saving for the future can be challenging without ignoring your other responsibilities.

To ensure that you save enough to enjoy a comfortable retirement, it is sometimes not necessarily about what you do, but more about what you do not do.

  Person Handing Over One Hundred Dollar Bills

Image Source: Getty Images.

1. Don't wait too long to start saving

Saving for a pension is not something you can do in a few years, but still 42% of employees say they would rather not worry about it until they get closer to retirement age, found a report from the Transamerica Center for Retirement Studies.

The longer you wait to start saving, the harder you have to work to reach your goal. That's because when you start saving earlier, interest rates are on your side. Compound interest – which is actually interest earned on interest – helps your savings grow exponentially as long as your money is left untouched in your retirement account. If you wait until you are just a few years after retirement, you have to do most of the work yourself to see your savings grow.

For example, say you have a goal of saving $ 750,000 within 65 years. If you start saving at the age of 30, you will need to save around $ 450 per month to reach your goal, provided you earn a 7% annual return on your investment. But if you wait for 50 years to start saving, you have to remove the entire $ 2,500 per month while all other factors remain the same.

Although it is never too late to start saving, it is never too early. The best time to start is when you still have decades to retire because it will make it easier to collect hundreds of thousands of dollars in savings.

2. Don't play it too safe with your investments

When you work hard to scrape up hundreds of dollars a month to retire, the last thing you want to lose is to be too risky with your investments. However, too many people fall on the other side of the spectrum and play it too safely – which can be just as harmful.

More than half (53%) of workers say they are stealing at least some of the pensioners money into a savings account, according to a Morning Consult survey. At first glance, it may not seem like such a bad idea. Savings accounts are safe, and high-yield savings accounts can earn an interest rate of 2% or more per year.

Although good for short-term financial needs, they are not the best choice for long-term goals. With a return of only 2%, your savings may not even keep up with inflation – which means your money can actually lose value over time if kept in a savings account. Not to mention that it is much more difficult to save a significant amount when you only earn a return of 2%.

Although some workers may be hesitant to invest in the stock market – especially those who are still recovering from the Great Recession – It is the best way to save as much as you need for retirement. That said, you still need to be smart about how to invest your money. Instead of investing your life savings in a new technical stock, you have a gut feeling that will make you a billionaire, investing a little each month in index funds and mutual funds through a 401 (k) or IRA. You won't get rich overnight, but it can help you maximize your savings while minimizing risk.

3. Don't expect to rely too much on Social Security

Social Security benefits can be a lifeline in retirement, especially if your personal savings do not go beyond your goal. However, your benefits are meant to replace only 40% of your retirement income, so you cannot expect to rely on them to cover most of your retirement expenses.

This is especially true now, as the future of the program is shaky. Even if the insurance is not about to collapse and the benefits do not disappear completely, your checks could potentially be cut over the next few decades. When baby boomers retire in droves and retirees living longer than ever, more money is flowing out of the system in benefits than coming in from taxes. By 2035, the Social Security Administration's trust fund is expected to go dry, so the only money available to pay for benefits is that which comes from taxes. As of now, the tax money will be sufficient to cover only three-quarters of the expected benefits, which means the benefits can be cut by up to 25% if Congress does not come up with another solution within that time.

The average benefit payout right now is around $ 1,471 per month, according to the Social Security Administration. It is difficult enough for most retirees to reach that amount, but a 25% reduction can make it even more challenging to obtain if social security benefits are your main source of income.

To avoid this problem, make sure you overlap your savings before leaving. It's OK to rely a little on your retirement benefits, but if they are your primary (or sole) source of income, you may be on your way to trouble.

Saving to retirement is one of the biggest financial challenges a worker will face during their lifetime, and even seemingly small mistakes can derail your entire plan. But by avoiding these common mishaps, you can set yourself up for long-term financial success.


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