Top 3 Deadly Mistakes Retirees Make

It’s no surprise that most baby boomers are facing gloom in their retirement. With the way the economy is going and the slashes in healthcare benefits, there isn’t much to look forward to when it comes to retirement. Aside from the economic factors that just can’t be controlled, there are even three deadly mistakes that roughly half of American retirees are making. Find out what they are, and find out how you can avoid them:

1. Using Social Security Benefits Too Early

The longer you keep yourself from using your Social Security benefits, the higher the amount you can get. Unfortunately, according to Social Security’s Annual 2010 Statistical Supplement, 47 percent of Americans who retired in 2009 started using their Social Security benefits at the young age of 62. This is the youngest possible age for benefits to start, but it also gives the lowest possible benefit.

Having a Social Security income can matter a great deal. After all, you’re being paid a monthly benefit for the rest of your life, no matter how old you get or how bad the economy becomes. But the longer you wait to use the benefits, the higher the payments you can get. Just don’t delay using them after the age of 70 though, because the payouts plateau at this age. Again, delaying claiming the benefits can result to bigger payouts. If this can be done, then it’s better to actually discipline yourself.

2. Using Up Retirement Savings Too Quickly

The moment Americans retire, they start spending their retirement savings as if they’ve won the lottery. They tend to underestimate for how long the savings are supposed to last to meet their current and future needs. 36 percent of retirees have no set plan of how much to withdraw and when to withdraw the savings, leaving a much to fear when they have medical emergencies or if they live too long.

The best thing to do is plan just how much you’ll be needing, planning for at least 20 years or more. It can be scary to think about the consequences of outliving your retirement savings.

3. Not Having Enough

And finally, even before Americans retire, most of them don’t really know just how much they will need once they retire. According to the 2011 Retirement Confidence Survey made by the Employee Benefit Research Institute (EBRI) only 42 percent of Americans have calculated just how much they will need upon retirement. This could mean under saving for retirement, leading to a low retirement savings just when they need it most.

The best thing to do is calculate ahead how much you will need in the future, and don’t forget to include inflation.

Not caring about retirement can lead to some shocking consequences that can be difficult to remedy because of the lack of opportunities that are presented to one once he gets older. To offset the possible risks, the best thing to do is plan early, save early, and spend less.

Why you Should Start Saving for Retirement Now – Even When You’re 20

When you’re in your 20’s, it feels like the world is at your feet. You’re single, you have a regular job (and sometimes even high paying, if you’re smart), and you have a lot of cash to burn. It only seems natural to go ahead and get that car loan, rent a classier apartment, spend your dollars on shopping or vacations, and live a financially carefree life.

You tend to think, “I’m still young, I have loads of time to start saving”. But before you know it, you’re at your 40’s or even 50’s, with a never-ending house loan, and kid’s college to think about. You look at your account and sweat starts pouring down your forehead. With only 10 more years to start saving for retirement, the future is starting to look bleak.

Before you find yourself in this tight situation, it’s time to use that brain of yours and realize the importance of saving for retirement now. Do you know that the best time to start saving is when you’re at your 20’s? And if you only could, you should’ve even started saving when you were 10!

And this isn’t only because of the length of years you have until you turn 60, but this is because of the power of compounded interest. If you haven’t heard of the term before, compounded interest happens when interest is added to the principal, and as time wears on, the interest gained will also earn interest.

To illustrate this concept, let’s say you put $1,000 in the bank with 20% annual interest. By the end of year one, your money would have earned $200, for a total of $1,200. By the end of year two, your money (which is now $1,200), will earn another 20%, earning you a total of $1,440.

If you’ve made the connection, the more number of years you keep your money where it earns a steady percentage of interest, the more money you get!

Let me drive home this point. If you started saving that $1,000 at age 50, by age 60, you would get $6,191.73. But if you started saving that $1,000 at age 40, by age 60 you would have.. (drum roll please).. $38,337.43. Shocking difference? Try calculating if you saved that $1,000 at age 20. You would probably faint.

When people advise you to start saving when you’re young, it’s not for naught. And aside from saving young, you also have to know where to put your money to get the best interest rates. Whatever happens, don’t put off saving for your retirement. Or else there will be nothing left for you but regret.