December 10, 2023

Financial Mistakes To Avoid Prior To Retiring

Financial planning is an important part of preparing for one’s future. It is important for people who wish to enjoy a fruitful retirement. But over the course of planning for one’s financial future, there are certain financial blunders that can end up compromising one’s retirement goals. Here are some of them.

Continuous Support For Kids Beyond Adulthood

One of the common mistakes many would-be retirees make is by using their future retirement fund in order to provide extended support to their adult kids. While it may be something parents do in order to help a family member in need, it can have an effect on one’s retirement future. You can still provide support to your kids if you wish. But make sure that you do not need to dip into your retirement fund in order to do it. If not, you may end up compromising your retirement dreams. 

Borrowing From Your 401(k)

While borrowing from your 401(k) makes sense for most people since it is their own money, it can be a mistake. Taking out a loan from your 401(k) can sometimes lead to reduced or even suspended contributions that can last for several months or even years until the loan is fully paid for. This can affect how much your account can earn in terms of employer contribution matches. Your 401(k) can miss out on the investment growth from these missed contributions and employer matches. Try to explore other borrowing options before you consider touching your 401(k).

Making Early Social Security Claims

While it may be okay for people to claim Social Security benefits once they comply with the age requirement, financial planners urge that you probably shouldn’t. With the earliest age for getting the benefits starts when you reach 62, be aware that you may be receiving reduced claims as much as 25 percent for the rest of your life. You will only get 100 percent of your benefits if you claim them at full retirement age of 66 or 67. However, if you hold off claiming benefits until you reach the age of 70, you can enjoy a 32 percent boost on your Social Security benefits, thanks to delayed retirement credits.

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