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7 Financial Slip-Ups That Can Crush Your Dreams of Retiring Comfortably

This original article was written by KATHLEEN COXWELL for The Penny Hoarder.

Preparing for your retirement may not always feel like the most important thing on your mind. Far from it in fact.  But you probably don’t want to try living on Social Security alone in your golden years either.

You won’t need to if you avoid these seven common mistakes and try out the fixes too.

Mistake No. 1: Only Living in the Now

We are living in the era of mindfulness. Meditation apps, yoga studios and Instagram slogans are always reminding us to be in the here and now, and appreciate the moment.

While loads of research suggests mindfulness is a huge key to happiness, you cannot live entirely in the moment. Planning for the future is important. In retirement, you’ll live entirely off of assets you accumulated in the past, so you need to plan now to live in comfort in the future.

The Fix

This may sound odd, but studies have found that one of the best ways to plan for your future is to make friends with the future versions of yourself. Visualize who you will be, what you will be doing, and with whom and where you will live, Then, think about how your decisions will affect your present and your imagined future self.

Your present self may prefer to spend all your income this month, but your future self will regret it big time!

Mistake No. 2: Thinking It Is Too Early to Plan for Retirement

There is one right time to plan for retirement. That time is right now!

It doesn’t matter if you are 22, 35 or in your 50s; it’s never too late to plan for retirement — but the earlier, the better.

Think about it; you will probably live in retirement for around 30 years — from around 65 until perhaps 95 and beyond — and most of us only have a little over 40 working years. So, saving enough money — especially when accounting for inflation — is a gargantuan task that’s best to begin when you’re young.

The Fix

Put a detailed retirement plan on paper right now. Include how much you want to spend, when you’ll start Social Security, where you’ll live and more. Carefully analyze how much you need to save. Make sure to update this plan yearly until you are in your 40s, then quarterly thereafter.

Maybe make it easier to remember by doing it when filing your taxes.

The NewRetirement retirement planning calculator makes it easy to start a personalized financial plan. Enter some initial information about your current finances and your goals for the future to see where you stand. From there, you can make changes to see what is possible — every time you update your data, you’ll get detailed feedback about how your finances change.

This makes it easy to learn through the experience of documenting and manipulating your data. It can even be kind of fun, like a game.

Mistake No. 3: Not Knowing What You Don’t Know About Personal Finance

A recent Fidelity survey found that financial literacy is low across all ages and socio-economic backgrounds. Researchers asked more than 2,000 people questions in eight retirement categories. On average, people answered a mere 30% of the questions correctly. Absolutely nobody got all the questions correct, and the highest overall grade was 79%. Can you do better than average?

The Fix

Personal finance can be complicated, but it’s not impossible. Perhaps the best way to get your hands around your money is to focus on the personal aspects. Take a very detailed account of your money now and where you want it to be in the future.

You don’t need to read complicated books about municipal bond ladders and commodity futures to achieve a more secure retirement. You just need to understand your own situation.

Mistake No. 4: Not Saving and Not Knowing How Much You Need to Save

The vast majority — about two-thirds — of American workers don’t know how much they should be saving for retirement, according to research by TransAmerica Center for Retirement Studies. And 42% of American workers don’t have a retirement strategy, let alone an estimate of how much they will need.

The Fix

How much you need to save is dependent on many factors: how old you are now, when you hope to stop working, how long you will live, how much you want to be able to spend in retirement and more.

A good retirement calculator can help you get a personalized estimate. More generally, financial advisors usually recommend that you save 10-15% of your income, starting in your 20s and be sure it is invested effectively. You need to save more if you are older.

Mistake No. 5: Not Increasing Savings Rate Each Year

OK, let’s assume you’re saving for retirement already. If you are not, then you’ve got to get going!Simply not saving did not even make this list because, well, it should be obvious: You should be saving for retirement!

Less obvious than saving each month is the fact that you must remember to increase your savings rate at least every year — especially when you get a raise.

The Fix

When you get a raise, tax return or other money, be sure to thoughtfully consider how much of this new money can go into savings.

Fist bump if you can save all of any raise and just maintain your existing quality of life.

Mistake No. 6: Not Having an Emergency Fund

A couple years ago, The Atlantic published a surprising analysis from the Federal Reserve Board stating that nearly half of all Americans — including the middle class — would have trouble coming up with just $400 to pay for an emergency.

And not having emergency cash on hand can turn a relatively minor financial need into a long-term debt or, in some more extreme cases, bankruptcy.

The Fix:

The ideal emergency fund is equivalent to three to six months of your income. However, having anything set aside for emergencies is better than nothing, and you can accumulate your funds over time. Open an account and start squirreling away funds.

Mistake No. 7: Not Having a Plan for Your Future Now

Only 30% of Americans have long-term financial plans that include savings and investment goals.

Furthermore, Americans tend to spend more time on research about vacations than they do on retirement planning, even though retirement planning needs to be an ongoing activity.

When you retire, you are no longer living month to month or year to year. When you stop working, you are dealing with a finite set of financial resources that you need to budget to last the rest of your life. You really do need a plan.

The Fix

Assess what you have and what you need for retirement and in ways to improve your situation. Do it right now.

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