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.