Home Personal Finance This is the biggest mistake when planning for retirement [Video]

This is the biggest mistake when planning for retirement [Video]

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From the wrong investments to the wrong savings account, Americans can make many mistakes when planning for retirement.

But one expert says that far too many people fall victim to certain mistakes.

“All my clients want us to start sooner,” Katherine George, financial advisor at Wealthstream Advisors, said during an appearance on Yahoo Finance Live (video above). “Compounding interest means starting very early and growing your money, and that is the most powerful tool.”

Here are some reasons why starting early is important:according to government compound interest calculatorwith an initial investment of $20 and monthly contributions of $40, an investor could earn over $38,000 over 30 years, assuming a 6% return and a 3% variance.

“The regret that many investors face is wishing they had started saving sooner and more often,” said Randy Bruns, founder of financial planning firm Model Wealth. , “The problem is that when we have one of the most important scenarios for asset formation, [number of] It takes years to compound interest, even when your economic capital is at its lowest. ”

(Photo: Getty Creative)

When it comes to calculating the ideal “retirement numbers,” George said things can get complicated. He explained that the right number is highly dependent on factors such as an individual’s risk profile, stock-bond mix, and cost of living. She pointed out that medical expenses are increasing at a higher rate than other living expenses.

“There are all kinds of rules of thumb out there, and I don’t like any of them. It’s really hard because everyone’s personal situation is so different,” she said.

George said he advised Americans not only to plan early, but to consult a professional five to 10 years before retirement. She explained that financial planners might say they need to save more than they realize when they still have time to adapt to it.

Read more: Money Market Accounts vs CDs: Which is Best for Savings?

“You really need to work with a professional who has a knowledge base of how to grow your wealth, how to think about inflation, how to supplement your lifestyle from a tax perspective as well. Money in your retirement account.” It’s a lot different than the money inside,” she said.

Investors who wait too long to prepare for retirement run the risk of having to work later in life, said Jordan Benold of Benold Financial Planning.

“Work at some level is not only mental but also physical in nature. There will come a time when the body will not be able to do what it used to do, and it will be a stay-at-home order that you can rely on to earn an income.” It’s very important to have a ,” he says. “Time is the greatest asset anyone invests in. Time is almost the only way to ensure you have the right amount of money you need in retirement.”

If you wait too long to plan for retirement, you may end up with a significant lifestyle downturn.

“It’s people who are approaching their retirement date or have already retired who have to make some of the toughest decisions, like downsizing their home or cutting back on spending, and they wish they had planned earlier. You might think,” George said. “So seriously consider making plans before you reach retirement age.”

“If you got off to a late start and you’re still late, it’s time to get back on track and sacrifice a little more take home pay for the future,” says Peter T. Parion, a financial adviser in East Norwich, N.Y.

“If you start at, say, 30 or 35 … you aim to make some level of contribution to make up for lost time, and when you reach retirement age at the end of the day, you are more likely than you would have been if you had started earlier. , it’s not going to be significantly less money,” Parion said.

Brandon Gibson of Gibson Wealth Management says that in more dire circumstances, older Americans who don’t have enough savings can turn to reverse mortgages and home equity conversion mortgage lines of credit as “lifeboats.” said.

“You can have some degree of retirement planning in almost any situation,” he said.

But in the end, nothing beats planning ahead, according to Trust Tree Financial’s Brandon R. Opre.

“Plans will evolve and undoubtedly change over time, but you need a goal and something to work towards,” Aupre said. “The sooner people develop this vision, the better their lives tend to be, and the more convinced they are that they have taken steps to protect the nest eggs that support their retirement lives.”

Dylan Kroll is a reporter at Yahoo Finance.

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