A recent article featured on Yahoo! Finance discusses 4 ways to go broke in retirement. Many American’s may feel ready for retirement emotionally, but may not be financially. Here are 4 ways that you can go broke in retirement:
- Saving too little: How much do you need to save in order to retire? It’s important to know how much to save in order to have enough to live comfortably during retirement. A financial plan can help with this.
- Wrong asset allocation: Your asset allocation depends on your risk tolerance and your risk capacity. It’s important to determine your appropriate asset allocation, to make sure you are taking the appropriate amount of risk. Just as dangerous as taking too much risk is being overly conservative. Complete risk aversion can actually have the unintended effect of loss of purchasing power.
- Raiding your retirement account: Taking early withdrawals from your retirement accounts results in paying taxes, penalties, and interest. This should be a last resort. You also don’t want to miss out on compounding by taking money out of your retirement accounts early.
- Poor health habits: Take care of yourself now, in order to avoid high health care costs during retirement. Otherwise, you may end up using a large portion of your savings to pay for health care costs.
Visit Yahoo! Finance to read the full article here.
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