1 in 5 Americans Still Make This Newbie Mistake When Planning Retirement – Don’t Join Them | Smart Change: Personal Finance
There are many ways you can go wrong with retirement planning. You can significantly reduce your retirement period or spend very quickly once you get there. You can also forget to budget for the expensive but common expenses.
Among the most devastating retirement mistakes is one that is often overlooked because it was born out of a desire to help others. But it can come back to bite more than just you.
Do you have direct financial priorities?
Retirement may be decades away from you, but it’s probably the most expensive financial goal of all. You need all this time to save. Deferring retirement savings in favor of other near-term goals makes your job more difficult once you start saving. However, people do it all the time.
A recent Schwab survey found that 21% of respondents said they considered paying for their children’s education an obstacle to retirement savings. But it must be thoughtless. Retirement should come first, even if it means committing your kids to student loans.
I know this sounds selfish, but it actually isn’t. Think for a moment what would happen if you paid for your children’s education and failed to save enough for your retirement. You can live on your nest eggs for a while, but eventually, that will run out. You might be able to go back to work if you’re healthy and can find a job, but if not, it probably picks up the tab? your children.
They may already be exhausted trying to pay their monthly bills and save for their own financial goals, which might include a new home, their own retirement, or the education of their children. But if they have to divert resources to pay for retirement instead, they may never achieve those goals. They may also have to rely on their children to help retire, perpetuating this vicious cycle.
But if you focus on retirement savings first, you can reduce the risk of this happening. And that doesn’t mean you can’t also save up for your children’s education. It just means if you can’t do both, focus on retirement savings.
Other ways you can help your kids with their college expenses
There are several ways you can help your children pay for their education without paying any cash yourself. First, you can help them identify and apply for scholarships and financial aid programs. If your child already knows what he wants to do, you may be able to find online scholarships specific to his field.
You can also help them get a good student loan deal. Federal student loans are the best if you can get them. They usually have more flexible payment terms and lower fixed interest rates.
Although there are federal student loans for parents, it is best to let your child get the loan themselves. Loans available to parents are usually not as affordable as student loans. If you have extra cash and want to help your kids pay off their debts, you can do it a little bit at a time. But this way, you will not be in trouble with this debt.
It would be nice not to have to choose between our financial goals, but it’s a reality for most of us. That’s why having a clear list of financial priorities is essential. Keep retirement near the top of that list if you want the best chance of enjoying a comfortable future.
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