The Millstone Times January 2022

FAMILY MATTERS Five retirement mistakes to avoid Retirement may seem a long way off and far removed from your day-to-day concerns. And yet, this is actually the best time to start planning and saving — that is, when you still have time to accumulate the money you’ll need. Here are some common mistakes that throw people off course in their retirement planning. Knowing these pitfalls should help you steer clear and save more. Mistake #1: Failing to take full advantage of retirement saving plans If your company’s 401(k) or other qualified employer sponsored retirement plan (QRP), including 403(b) and governmental 457(b), offers a company match (meaning that your employer pledges to match your contribution up to a certain percent of your salary), you have an extra incentive. If you neglect to invest enough to receive the full company match, you’re leaving money on the table. If you get a raise, consider increasing your QRP contribution. Mistake #2: Getting out of the market after a downturn When the market takes a big hit, you may be tempted to pull out all the stocks in your retirement portfolio. If you do, you’ll miss the gains if the market turns around. You want to keep a good mix of asset classes in your portfolio: stocks, bonds, and cash. And once a year, you should rebalance to keep your asset allocation on track. Mistake #3: Buying too much of your company’s stock If your employer’s stock shares are an investment choice in your 401(k), you may want to consider keeping your allocation to no more than 10 percent. You’re not being disloyal; even the mightiest of companies — think Enron and WorldCom— can falter. With your salary already tied to your company’s fortunes, you don’t want a sizable part of your retirement savings to be similarly dependent. Mistake #4: Borrowing from your QRP Many QRPs allow you to borrow from your account. Unless you need the money for an emergency, try not to. Borrowing can be an expensive choice, in two ways: • Smaller retirement savings: When you take out a loan you are losing the potential for investment growth and that could leave you with a smaller retirement savings. How much smaller? This depends on a number of factors, including the size of the loan, the repayment period, whether you continue contributions during this period, the earnings on your account, and the loan interest rate. Also, if you stop contributing while you are paying back your loan, you won’t receive any employer matching contributions. • Repayment requirements: If you lose your job or take another one, you’ll have to repay the money quickly, usually within 30 to 60 days. However, if not repaid, the outstanding loan balance is generally subject to income tax and possibly an IRS 10% additional tax for early or pre-59 1/2 distributions. The 2020 Coronavirus, Aid, Relief and Economic Security (CARES) Act includes provisions providing greater repayment flexibility for certain individuals affected by the coronavirus pandemic. If these apply to you, you should still consider the potential effects of borrowing from your QRP on your ability to reach your retirement goals. In addition, cashing out of your 401(k) when you move to a new employer might be costly as well. Know your distribution options when changing jobs. Mistake #5: Underestimating the cost and length of retirement Some crucial factors to take into account: • Longevity: If you retire around age 65, you could spend a quarter century or more in retirement. Many advisors now urge clients to save enough to last 25 to 30 years. • Inflation and taxes: Even with relatively mild inflation over the past 25 years, the cost of living has more than doubled. Also consider what taxes you’ll be paying on the money you distribute from your retirement account. • Health care: Even with Medicare, you could have expenses for supplemental insurance, some prescription drugs, and nursing home care. • Lifestyle sticker shock: People in retirement generally need at least 80 percent of their pre-retirement income. If you are looking for a financial advisor who can help guide you through every stage of life, please contact our office for a free consultation with no pressure. A financial advisor can help you set financial goals, so you feel confident that your future plans are achievable. If you’re not on track to achieving your goals, we can help you put the right strategies in place or set more realistic goals.

Investors have survived market swings and corrections befo wondering if you should get another opinion to help confirm we’ve made it as easy as we can to have a complimentary, fac Maybe you just want to know if you’re really on track for reti aligned to your goals. Or in the process of working hard for yo necessary steps to transfer your wealth. Whatever’s on your mind, we’re here to listen, and we’ll help obligation. Then you can decide if your wealth is getting the c Don’t overreact to m

This article was written by Wells Fargo Advisors and provided courtesy of Ricardo G. Rivers, MBA First Vice President – Investment Officer in Princeton at 609-897-8917. Investment and Insurance Products are: • Not Insured by the FDIC or Any Federal Government Agency • Not a Deposit or Other Obligation of, or Guaranteed by, the Bank or Any Bank Affiliate • Subject to Investment Risks, Including Possible Loss of the Principal Amount Invested Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC, Member SIPC, a registered broker-dealer and non-bank affiliate of Wells Fargo & Company. CAR-1221-04547 ©2021 Wells Fargo Clearing Services, LLC. All rights reserved.

Ricardo Rivers, MBA First Vice President - Investment Officer 302 Carnegie Center, Suite 102 Princeton, NJ 08540 Direct: (609) 897-8917 CA Insurance # 4008525

www. 35 Investment and Insurance Products: • NOT FDIC Insured • NO Bank Guarantee • MAY

Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC, Member SIPC, a registere © 2020 Wells Fargo Clearing Services, LLC. All rights reserved. CAR-0720-03330

Made with FlippingBook Ebook Creator