Waddell & Reed

Pitfalls

Many people avoid thinking about retirement, and many feel they are already starting late, so why bother? Still others mistakenly think that they will be able to maintain their current lifestyle, although they clearly have an inadequate amount of funds set aside to fund that lifestyle. Even those with the best intentions fall prey to these retirement planning pitfalls.

Assuming your nest egg is big enough

Even if your retirement accounts contain lots of zeros, it doesn’t necessarily mean they can sustain you throughout your retirement years, especially with inflation eating away at it.

Cashing in your 401(k)

When people leave their jobs, many of them either spend their 401(k) plan assets or leave them in their former employer’s plan. Neither of these options is ideal because spending plan assets may leave the investors with unnecessary taxes and penalties, and leaving them with a previous employer may limit investment choices.

Putting off retirement planning

If you don’t plan and save, you may not be able to retire at all. According to a recent Retirement Confidence Survey, only 13% of the U.S workforce feels “very confident” they will have enough saved for a comfortable retirement. (Source: Retirement Confidence Survey, Employee Benefit Research Institute, 2013.)

Assuming you will get more from Social Security

Many people, regardless of age, have inflated ideas of how much Social Security is going to give them monthly when they retire.

Taxes are deferred until withdrawal. Early withdrawals before age 59½ are subject to income tax and a 10% penalty.

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