Look at how much you are earning per year, as you will likely need at least 80 percent of that income per year during retirement. Once you know how much you’ll need, determine the amount you must contribute from each paycheck to hit that number by retirement.
Boston, MA (PRWEB) February 26, 2019
Many people look forward to retirement and the time they’ll have to travel, find new hobbies, and relax. To have a secure retirement, it is crucial that consumers plan ahead to ensure they have enough money to last – particularly as expenses increase and savings decrease. To help consumers, national nonprofit American Consumer Credit Counseling (ACCC) provides six mistakes to avoid when planning for retirement.
“The number one mistake consumers make when saving for retirement is the failure to map out a plan,” said Steve Trumble, President and CEO of American Consumer Credit Counseling. “Look at how much you are earning per year, as you will likely need at least 80 percent of that income per year during retirement. Once you know how much you’ll need, determine the amount you must contribute from each paycheck to hit that number by retirement.”
According to GoBankingRates, 42 percent of consumers have less than $10,000 saved – falling from 55 percent in 2017. Fourteen percent of these respondents don’t have any funds saved for retirement. When asked why they aren’t saving for retirement, 40 percent of respondents say it is because they do not make enough money, followed by the 25 percent that says they are struggling to pay bills.
ACCC provides consumers with six mistakes to avoid when planning for retirement.
1. No planning – There isn’t one magic number to save that will suit everyone’s needs during retirement. Consumers must plan and decide what they expect to accomplish, what they will do, where they will go or where they want to live.
2. Underestimating how much is needed to live comfortably – It is recommended that consumers replace 80 to 90 percent of their pre-retirement income into retirement.
3. Not starting to save ASAP – Putting off saving for retirement is costly. The earlier consumers start to save the longer their money has to grow.
4. Not taking advantage of retirement accounts – It is important to set up a 401(k) or IRA as most employers will offer a match up to a certain percentage of each contribution. The money that is contributed to a 401(k) or IRA is pre-tax money and will grow in the account the longer it is there.
5. Cashing out early – Cashing out retirement savings too early will result in the income being taxed as well as a 10 percent penalty. Even if a consumer has changed jobs, they shouldn’t cash out the 401(k) they had with their previous employer. That money will have an average growth rate of eight percent per year.
6. Not understanding or underestimating the risk of inflation – The risk of rising inflation is not a huge deal when employed, but in retirement, these risks increase. Medical care costs and Social Security are both affected by a rise in inflation. Because Social Security is indexed by inflation, when there is an increase, medical care costs will rise at a faster speed.
ACCC is a 501(c)3 organization that provides free credit counseling, bankruptcy counseling, and housing counseling to consumers nationwide in need of financial literacy education and money management. For more information, contact ACCC:
- For credit counseling and student loan counseling, call 800-769-3571
- For bankruptcy counseling, call 866-826-6924
- For housing counseling, call 866-826-7180
- Or visit us online at http://www.ConsumerCredit.com
About American Consumer Credit Counseling
American Consumer Credit Counseling (ACCC) is a nonprofit credit counseling 501(c)(3) organization dedicated to empowering consumers to achieve financial management through credit counseling, debt management, bankruptcy counseling, housing counseling, student loan counseling and financial education concerning debt solutions. To help consumers reach their goal of debt relief, ACCC provides a range of free consumer personal finance resources on a variety of topics including budgeting, credit and debt management, student loan assistance, youth and money, homeownership, identity theft, senior living, and retirement. Consumers can use ACCC’s worksheets, videos, calculators, and blog articles to make the best possible decisions regarding their financial future. ACCC holds an A+ rating with the Better Business Bureau and is a member of the National Foundation for Credit Counseling® (NFCC®). For more information or to access free financial education resources, log on to ConsumerCredit.com or visit http://www.consumercredit.com/financial-education.aspx