Watch Out For These Red Flags When Planning for Retirement

Saving for retirement is just the first step in achieving financial freedom during your golden years. As you go through life, you’ll need to make changes to your retirement plans. Don’t make the mistakes many other working Americans make. Watch out for these red flags when planning for retirement.

You Don’t Have a Cumulative Goal

Many people just put away a small percentage toward retirement. They don’t take the time to sit down and assess what they want their lifestyle to look like and how much that will cost. There are formulas to determine how much money you want to invest toward retirement to reach your cumulative goal. Don’t save a small percentage without knowing its purpose.

Not Planning for Inflation

While planning for retirement you need to take inflation into account. Real estate will cost more 30 or 40 years from now. So will utilities, groceries, and gasoline. Factor in an inflation rate to make sure your retirement savings is enough to get you the lifestyle you truly desire.

Saving For Your Child’s Education First

While most parents would love to pay for their child’s entire college education, it should not be done at the expense of your retirement savings. Your child may graduate with some student loan debt, or may have to work through college to help support themselves, but at least they won’t be saddled with parents who can’t afford retirement. Your children will have decades to earn money and take care of themselves. Put money aside for your retirement first so you children don’t have the burden of supporting you through retirement.

Not Having a Diverse Investment Portfolio

Investing all of your money into one account is a huge red flag when it comes to retirement planning. You want to have you money invested in a couple different types of investment vehicles. This will allow your money to grow at different rates and to be protected from the negative points of the market. A balanced investment portfolio allows for aggressive growth in some areas and cushion in others.

Not Changing Your Investments As You Age

The closer you get to your retirement years, the less risk you will want to take with your retirement money. Riskier investment vehicles tend to have a higher payoff, but they can also drop significantly as well with a downturn in the market. As you get closer to retiring you become less risk adverse and should start adjusting your investments to your new risk level.

Saving for retirement should be on the forefront of every working American’s mind. Although many live in the moment, you will be grateful in your retirement years if you were wise and planned ahead. Email Carolina Money Minders today to discuss your retirement goals; it will be here before you know it.