Top Financial Mistakes that you Must Avoid When Entering the Retirement Phase of Life
It goes without saying that the smartest decisions that you can ever make about your future begin at the very stage when you land your very first job. The planning, though starts at an extremely early stage, can bear the most fruitful results especially during retirement. However, even if you do start early and reach the stage of retirement eventually, you can face issues that will have a crippling effect for the years that will follow. With the economy being extremely unstable, predicting the future can be a fairly risky venture. Buying homes with a mortgage loan and cars with the instant car credit is the most feasible option available at your disposal. However, even if you are cautious in these areas, there are other financial mistakes that can take you down. They are listed below.
1.) Be dependent on a professional for any kind of financial advice:
Financial advice can skyrocket your career and other aspects of life. However, the source of your financial advice also plays a massive role. Friends and family members may give you the most impressive advice based on their past experiences, but you also need to realize that what worked for them may not necessarily bring the ball in your court too. Planning your retirement with a professional financial adviser is the first step to correcting your mistakes that can cause more harm than good.
2.) Understanding the role of tax in retirement:
It is important to start an IRA, which is short for an Individual Retirement Account. There are several advantages associated with it, one of them being the eventual earnings that you receive without any tax levied on the same. However, it is equally important that you perform the activities in the right manner to enjoy these benefits. When you look into this type of an account, you need to make sure that you remove the money at the appropriate time to avoid being levied with tax penalties which will do no good for the amount you earned from the retirement. Retirement rules are pretty strict, to say the least and it is very important to stick to them as one wrong move in judgement concerning the withdrawal of the money can make all the difference.
3.) Keeping tabs on the retirement plan:
Just because you have reached a stage wherein you can happily retire does not make it a time that will not involve any kind of risk whatsoever. You can never rule out the risk factor at any given point of time. Getting rid of the equities involving higher risk to settle for bonds of lower risk can be considered as one of the most unforgiving mistakes that you could make. While you may not find any error in doing so, you need to realize that these bonds are not created to sustain and protect your finances on a long term basis. Therefore, it is required that you rely more on the assets with a heavy equity for best results.
4.) Familiarize yourself with the distribution of the income:
If at all you must transfer the money into your personal account from your retirement account, you must do so with caution. Essentially, it would only make sense to transfer the funds that are not eligible to tax penalties. Just like you need to be careful with the instant car credit, you also need to learn more about the 401 (k) retirement plans. Messing with this rule can easily have you pay 20 % in penalties. Devising a strategy for the distribution of the income and the effective and appropriate transfer from the current pre retirement account into the account that will be used for all future transactions on retirement is important.
Author’s bio:
Merlin Turgot is a financial adviser and planner giving advice on topics ranging from instant car credit to 401 (k) retirement plans. She has a professional background in finance and commerce and is also a freelance writer.
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Category: Retirement
