Not going for the max
What you contribute annually to your IRA is paramount to how much you will have in your nest egg, later on. It may be better to feel a slight sting each year, than a huge pain, after you retire. “Back when I opened my first Individual Retirement Account (IRA) in March 1983, I wasn’t particularly diligent about maxing out my annual contributions. So when I’d begin working on my income taxes each year, I’d look at my bank accounts to see how much I could afford to contribute to my IRA. The maximum annual contribution back then was $2,000 per year; but I often contributed only half that amount. I now know that underfunding my IRA by $1,000 per year for 31 years (assuming an average annual return of 6.9 percent from an IRA invested in an S&P 500 index mutual fund) meant $100,180 less in my retirement kitty at the age of 62! If I’d realized how much it would ultimately cost me to underfund my IRA, I’d have figured a way to come up with that extra $1,000 annually. After all, how many retirees can give up $100,000 in retirement?” says Timothy G. Wiedman. D.B.A., PHR, SHRM-CP, retired associate professor of Management & Human Resources at Doane University in Crete, Nebraska. Here’s how you can retire with a cool million by age 50.
Touching their 401Ks
Life is full of surprises, and not all of them are pleasant. Even if you’ve been diligent about saving, you may find yourself up against large medical bills, or lost employment. Even so, dipping into your retirement fund is bound to hurt even worse, in the long run. Take it from retiree Dave Bernard, a contributor to U.S. News & World Report’s “On Retirement” blog. “The one thing I wish I knew then I know now: Never touch your retirement savings accounts, no matter how tempting. I cashed out 401k accounts numerous times with job changes, and sacrificed the increases that could have made a significant impact on my retirement lifestyle,” he explains. Find out the ten best places in America to retire.
Giving into fear
Throwing caution to the wind is not a great strategy for retirement saving, but neither is visualizing yourself living under a bridge and living in fear. “Fear of running out of money after retirement is natural, and quite common. But, it is a very unlikely occurrence. If you have planned, and invested well enough to consider retirement, then you already have the proper skills to make what you have be sufficient. Your expenses are largely under your control, and your lifestyle can be adjusted, to match your income. Once you retire, you will find that experiences are much more important than things,” shares Bob Lowry, who writes about his post-retirement adventures at the A Satisfying Retirement blog. Here are some need-to-know tips on saving money for retirement.