By Ross Biesinger
To most of us, the idea of retirement is a mix of fantasy and dread. On the one hand, it is easy to imagine a life where you won’t have to clock into a nine-to-five day in and day out and you can live your life the way you want with enough free time to accomplish it. The dread, on the other hand, comes from figuring out how to create a large enough nest egg to make this all happen. Start planning ahead by staying away from these top 4 regrets by current retirees.
Currently, only 52% of families in the U.S. have retirement accounts. While it may be tempting to hold off on retirement until the kids are out of the house or until you’re more established in your career, don’t. The longer you hold off saving for retirement, the harder it will be later on.
On the other hand, the earlier you save for retirement, the easier it will be for a bigger payout. There are more opportunities to contribute more money and more compound interest to accumulate over time. If you have an employer-sponsored plan with matching, that is more free money from which to benefit. For instance, if your employer matches 100% of 3% of your 401(k) and you have $100,000 by the time you retire, then your employer will give you an additional $3,000. For the same benefit, if you have $200,000 saved up, then your employer will give you an additional $6,000.
While it’s always a good idea to be careful with your money, it does not mean “playing safe” is always the answer, especially when you are starting early. Investing in low-interest safe investments, such as CDs, would minimize the growth of your money over time and would result in a lower nest egg. According to Bankrate, the current rate of a 1-year CD is only 1.09% and a 5-year CD is only 1.85% in California.
Saving earlier in life affords you the opportunity to invest in moderate to aggressive stocks, allowing for more compound interest growth and affording enough time to recover should the market take a temporary downturn.
Just how being “too safe too early” is not recommended, being too risky too close to retirement age is not a sound strategy either. While investing in aggressive stocks can have the potential for a greater influx of money with bigger opportunity to “catch up” on growth, there is also great risk of losing money without recovery. Moving money to lower risk and moderate investments (such as bonds) is recommended to safeguard your money as retirement day approaches.
With Americans moving from their households an average of 11.7 times in their lifetime, it’s no wonder that 44 percent of Americans between the ages of 60 and 70 have a mortgage when they retire, and as many as 17% of those surveyed say they may never pay it off. Getting rid of your mortgage payments will be one less bill to worry about and pay for in your retirement. Try to pay it off as soon as you can and keep refinancing to a minimum.
As outlined above, planning for retirement involves a lot of care, strategy, and timing. No one can predict the future of the economy or the market, but we at Cypress Wealth Services can help you put a plan in place to ensure the best use of your money while providing the best safeguards available. To seek expert advice from one of our financial planners, call our office today at 866.888.6563.
Cypress Wealth Services (CWS) is an independent Registered Investment Advisory (RIA) firm that provides proactive financial advice and investment management for high net worth families, business owners, and institutions. Cypress Wealth Services comprises professionals with diverse backgrounds and extensive experience, qualifications and is uniquely qualified to serve a broad range of client needs. CWS’s experience and expertise have been the foundation for their proactive client service process and client Standard of Care. CWS’s multi-generational approach focuses on efficiently protecting and growing wealth while providing proactive financial advice as a client moves through each new stage of life. With offices in Palm Desert, CA, and Anchorage, AK, the firm serves clients across the country. For more information: visit www.CypressWS.com or call 760.834.7250