The Golden Years of retirement should be a time of rest and relaxation after a lifetime of work, but improper or inadequate retirement planning can mean working longer than expected. In fact, some studies claim that half of Americans are at risk of not having enough for retirement. Knowing the mistakes to avoid and areas of opportunity is key, and we’re here to help with a few do’s and don’ts of retirement preparation.

Don’t Wait Too Long

Savings work best the early that you start. That’s because retirement savings bring something called “compound interest” into play. This is the process of money accumulating on top of previous savings. Compound interest will work best for your plans if you give it the greatest amount of time possible. If you start saving $5,000 a year at age 22, you’ll have almost double the retirement savings at 67 that someone who starts saving at 32.  

But the amount doesn’t matter, the key is reinforcing the habit of saving early on.

Do Maximize Savings Opportunities

Although you don’t need to focus on putting away a lot initially, you do want to look for opportunities to save. Setting a budget is the first step, followed by identifying expenses that are hindering your ability to save. Unnecessary expenses, such as unused subscription services, can add up over time, so identify these expenses and cut them off if possible. Check out our article on getting the most from your savings for even more insight.

Don’t Put Your Eggs in One Basket

Not diversifying your financial plan can be a mistake. Low-risk options such as savings accounts are great as accessible, interest-bearing accounts, but they won’t earn much on their own. Likewise, putting all your money in higher-risk investments can spell disaster in an economic downturn. The trick here is to vary your retirement strategy so that you’re earning a healthy return now, while ensuring you have an emergency savings should something go awry.

Do Look for Free Money

If your employer has a deal in place to match 401(K) and/or IRA contributions, and you’re not taking advantage of it, you need to start. In addition to being potentially tax deductible (more free money), matching contributions ensure that you’re doubling down on your money with every dollar you deposit, and more money contributed now means more money that can be used in retirement.

Don’t Borrow from Your 401(K)

Speaking of 401(K)s, you should treat it as a “set it, forget it” scenario. It can be tempting to dip into your retirement fund when you need money fast, but that’s a mistake.

Assuming that your fund allows borrowing, you’ll usually have five years to pay it back into the fund, with interest. During that period, you’re likely to skip putting in additional savings, which means, potentially, years where you go without adding to the fund and years without your employer matching anything, not to mention potential fees and lost interest.

Do Stay Vigilant

Imagine spending years saving for retirement only to lose it all to a thief. It’s a nightmare scenario, but one that cost seniors $1 billion in 2020. Stay vigilant to the dangers posed by scammers and never give out your account information over the phone or online. In addition, be aware of the following:

• Check your accounts regularly for signs of suspicious activity, including unfamiliar withdrawals and charges.
• Change your account passwords regularly to thwart potential hackers.
• Set up account notifications that can alert you to suspicious activity.

Avoiding scammers ensures that you won’t make a mistake that could cost you a lot of money, and your retirement future.

Retirement preparation is an ever-changing process that is unique to each person. Our local team bankers can help you understand your options. Visit efirstbank.com for a list of branches or call 1-800-964-3444.

“This page may contain links to external websites. These links are displayed for your convenience. FirstBank does not manage these sites and assumes no responsibility for the content, links, privacy policy, or security policy.”