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The 7 "Deadly Sins" Of Retirement You Can't Afford to Make

Are you committing any of these retirement sins? If you are they can cause your retirement plans to fail.

Dear Hard Worker,

As I sit here looking at the blue skyline, townhouses are being built across the street. Builders are working frantically to build new homes. They're moving along a great clip and each day the house is getting higher and higher.

What if they decided to commit a few "building sins?" Things like not putting nails in the right places or incorrectly measuring. And what would happen if the plumbing was put in backwards? You'd have one giant mess on your hands!

Hardworking employees commit the 7 "Deadly Sins" of Retirement each day. These common but costly retirement sins will rob you of a blessed retirement. But redemption is not far off!

Let's take a look at what they are and how to repent and build the right way.

The 7 "Deadly Sins" of Retirement

Deadly Retirement Sin #1: Not Having a Plan

Yes, it's basic and a no-brainer. But you'd be surprised how many people don't have a plan for retirement. When building a house the first thing you must have is a foundation. Without it your house will have nothing to stand on. And if sand is the foundation, guess what? When the financial storms of life hit, your retirement will fall like a house of cards.

The Solution: Sit down with a piece of paper or napkin. Make two lists. One will cover what you want for retirement and the other what you need. This includes where you'll live, healthcare and favorite activities. At the bottom write the words, "Monthly Retirement Income." Now put a number next to it. Once you've listed your wants and needs that number will jump out at you. This is just a rough draft. Now make an appointment with a Financial Planner, Accountant or 401K rep at work. They'll help you to strengthen your foundation. From there you can build a solid Retirement Plan.

Deadly Retirement Sin #2: Lack of Contribution

If you don't have enough materials to build your house, you're in for some drafty nights. The same is true with retirement. In order to fully enjoy the fruits of retirement you must have enough cash. And that's where 401K contributions come in. If you're just starting out increasing your contributions may not seem important. But at age 39 I can attest to something. Time has a way of sneaking up on you like a cougar in the woods. Just yesterday I was 19!

The Solution: If you're contributing the minimum of 3% move up to 5%. Your goal should be to hit a 10% contribution. Depending on your salary, employer contribution and other factors, you can easily have a six or seven figure amount for retirement. Let's take a look at a person earning $45,000 per year. They've got a 401K balance of $5,000 with an annual salary increase of 3%. We'll add in a 5% contribution from their paycheck. The employer is matching them up to 50% at say 6%. And let's be realistic and say they have twenty years to fund this puppy. Finally they're earning 9% compound interest. Here's what the numbers will look like with a 3%, 5% and 10% employee contribution:

Balance at 3%: $159,685.11
Balance at 5%: $247,460.49
Balance at 10%: $409,924.43

I mentioned a seven figure amount. This is contingent on market conditions, 401K performance and other factors. But you get the gist of what's happening here. The more you contribute now can determine what items in your plan will become a reality.

Deadly Retirement Sin #3: Stealing

Okay, stealing is a strong word, but look at it this way. Every time you borrow money from your 401K, you're stealing from your retirement. We all have a "Deserve Gene" in us. I've mentioned this in another article. You may deserve a new boat, car, jewelry or other toy, but it will cost you. Earl Nightingale the genius behind Nightingale-Conant says this, "In order to achieve success, you must be willing to pay the price." Are you willing to back off "deserve purchases" to have a richer retirement? Yes, you can have a boat, but does it have to be a yacht, right now?

The Solution: Use a Mad Money Budget or Fund. This allows you to set aside money to spend. When you use it guilt is out the window! Since you've budgeted for it, your 401K isn't affected.

Deadly Retirement Secret #4: Ignoring 401K Performance

When you're having a house built here's a wise suggestion. Show up and watch the building progress. How's the house coming along? Are boards and doors in the right place? Are construction workers loafing or are the hammers swinging? Do the same regarding your 401K. If you don't track performance you won't know when and why you're losing retirement money.

The Solution: When you get your contribution statement in the mail read it. Track the progress of your investments. Which ones are performing and which mutual funds are tanking? Don't leave the responsibility totally up to your 401K Rep. Call the 1-800 number on your statement and ask questions. If some of the funds in your 401K aren't performing you can replace them. One question to ask is which sector has mutual funds with the best returns?

Deadly Retirement Sin #5: Hesitation

I remember looking for a house once. Man, I was so nervous I was sweating! The process can be daunting and a bit scary. You freeze up on price, location, property taxes and other factors. But sometimes too much hesitation or being overly conservative with investments, will do more harm than good. It's one of the reasons most people don't bother with their 401K when it's set up. Since they don't know much about investing they hesitate to take any risks.

The Solution: Risk in 401K investing isn't bad. The bad comes when you're uninformed and undisciplined. Remember that napkin list I mentioned in Deadly Retirement Sin #1? Read it one more time. Use a balance of conservative and risk investing. Again, always ask your 401K Rep for help. They'll show you the best mix of mutual funds. You'll learn when to be "risky" with your 401K investments and when to stand down.

Deadly Retirement Sin #6: Abandoning Your 401K

Here's a true story I found hard to believe. I dismissed it until I kept hearing about it in other cities. Sometimes folks who have homes or property far away from where they live forget about them! Could you imagine forgetting you had several thousand or more dollars? And on top of that literally walk away from it? Yet it happens with 401k's everyday. The truth is we don't want to hassle with moving our 401K to a new employer.

The Solution: If you leave your job, bring your 401K with you. Typically it's transferred into your name and not your old employers. This is good, because you get more control. Your new employer will have no problem contributing money into it. Now it won't stay stagnant and will earn money for your retirement!

Deadly Retirement Sin #7: Not Paying Off Debt

Imagine your dream house is finally built. The rooms look the way you want and the view from the Master Bedroom exudes bliss. And then one day you discover you have termites. This is what it's like when you don't pay off debt. Having debt will eat away at your retirement money. Remove debt as an obstacle to your retirement. You deserve to enjoy every dime of your retirement income.

The Solution: Start by paying off the smallest debt. Then make your way up. Another suggestion is pay off the debts that can hurt you the most. These include an IRS bill, old bank bill, etc. The faster you pay off debt the faster your retirement money will grow and be protected.

Check to see if you're committing one or all of these 7 Deadly Sins of Retirement. Follow these solutions to ensure a retirement that has a sound financial foundation.

Clyde McDade is the author of the upcoming e-book, "How to Grow More Money for Your Retirement and Child's College Fund." He can be reached at accelcs@comcast.net.

This article is not to be taken as financial advice. Seek the professional advice of a Financial Planner or Accountant. You can find some of the best Financial Advisors and Planners at www.FinancialAdvisor.org.

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