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Top Don’ts in Retirement Planning

No retirement plan is insured against failure until the time for retirement comes. Many of the people don't even set up a retirement plan, whereas others sustain great losses. Most of the failures are due to the following reasons:

  • Premature withdrawing from the retirement plan.

    Early money retrieval from your retirement account will deprive you from valuable interest and face you with penalties you should pay due to the premature retrieval. Nevertheless, some companies have realized the need for emergency money that may arise and have included the provision for hardship withdrawals and loans. However, you should carefully consider the pros and cons of such early retrievals.

  • Failure to contribute to the retirement account as much as possible.

    Many people don't realize the advantages of contributing as much as possible to their retirement plans and thus ignore the potential high returns due to such things as compounding. Nevertheless, you should be more proactive and allocate at least that much, which is enough to cover the minimum required getting your company matching funds, whenever offered.

  • Social Security dependence.

    Don't become too reliant on social securities and provide yourself with some additional financial resources for your retirement years. Investing in a retirement plan or a company pension will provide a good back up to the social securities once you retire.

  • Failure to monitor and control your investments.

    In order to find out about any inconsistencies, a constant monitoring should be applied with regards to your retirement investments. This is recommended in order to be able to better respond to every problem that may arise in a timely manner as regards with the performance of your plan. Thus, a greater degree of control is provided for the switching from one investment strategy to another in order to meet the emerged conditions.

  • Erratic retirement plan review.

    The inconsistent reviews of your retirement plan may lead to the loss of retirement income. You should regularly pay attention to such things as balances, asset allocation, goals and etc. This is required in order to make sure that you derive the most of your retirement plan.

  • Broker/financial advisor qualifications verification.

    Brokers and financial advisors are the people you trust your money to since they are responsible for the establishment and management of your retirement portfolio. As in every field, this also has its rotten apples you should be careful of. Therefore, before giving your money away to someone, verify their credentials and qualifications.

  • Spouse retirement plan dependence.

    In order to ensure yourself with high retirement security, make your own retirement plan. In this way you will avoid the possibility of ending up without resources for the retirement years due to the following events:

    • Death of the spouse
    • Divorce with the spouse
    • Serious illness
  • Inefficient asset allocation.

    The main factor that lies behind a successful asset allocation is diversification. Putting your money in one stock, may result in a financial disaster, since the company may go bankrupt. Whereas, diversification greatly reduces risk since the decrease in one stock may be compensated by an increase in another.

  • Company stock focus.

    Many people make the fundamental mistake of mainly investing their money in company stocks. This is considered highly undesirable since even the best companies go bankrupt due to some unforeseen or out of control event. Therefore, again diversification among different types of stocks is the way to ensure the success of your retirement plan.

  • Retirement planning ignorance.

    The secret behind retirement plan success is the early start and regular contributions. However many people, especially those in their early age, ignore the importance of retirement planning, since they are satisfied with their current lifestyle. But they forget that money is needed to maintain this lifestyle after you have reached retirement years. The money for the maintenance of such a living can readily come from a retirement plan that you have had the brains to set early in your life.

The main things you should keep in mind in order to ensure the success of your retirement plan are early start, regular contributions and goal stickiness. Remember retirement plans are plans for your financially carefree future.

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