While saving for retirement is important for everyone, far too many people save and still find that they don’t have enough to fully retire. This is largely because there are flaws in retirement planning strategies that many still don’t recognize. For instance, relying on the stock market to grow wealth too often leads to the loss of savings for many people. Additionally, here are more flaws that can inhibit your ability to grow a decent retirement nest egg.
Paying Too Much in Fees
While a fee of just 1% annually may not seem like a lot, it adds up quickly when you’re earning a 7% return on your investments. Over a span of about 35 years, the Department of Labor estimates people are paying out at least 28% of their savings in fees. Now that laws have been passed that require financial institutions to disclose their fees more openly, people should start looking for opportunities to reduce the amount they pay in fees.
Unvetted Fund Administrators
There are a few problems with fund managers, which can affect your ability to grow your wealth for retirement. First, few fund managers are qualified to be in those positions. They don’t have any formal training or education, and, in many cases, were promoted to those positions without having to meet basic qualifications. Additionally, they may receive bonuses for signing up new investors, which means they may be recommending poorly performing funds just to get a bigger bonus.
If you’ve ever had a 401k or IRA account, you already know the IRS regulates your participation in those accounts. There are rules restricting how much you can contribute, when you may access those funds, and when you must start drawing on the accounts. This can inhibit your ability to grow your savings, and it can keep you from working until you’re ready for retirement.
In addition to these flaws, there are also restrictions on borrowing from retirement accounts and applying income taxes that can cost you more than you realize. These restrictions can make it much more complicated to save up enough money to retire on, which is why many retirees continue working a part-time job. You can avoid this situation by working with a qualified financial advisor with years of experience and knowledge of current tax laws. A skilled professional can help you create a plan that reduces your fees, taxes, and penalties, while maximizing the wealth you can grow.
David A. Noyes and Co. is a DBA of Sanctuary Securities, Inc., Investment products and services are offered through Sanctuary Securities, Inc., Member FINRA and SIPC.