Dave Ramsey's Investing Minute • October 2, 2013 | DAVERAMSEY.COM
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  |  | | 3 Mistakes That Can Sabotage Your Retirement Last month, in our series One Year to a Better Retirement, we discussed your options for covering medical costs in retirement. With a combination of long-term care insurance and tax-free savings in a health savings account, you can protect your retirement funds from one of the biggest risks you'll face. | | Another risk to a secure retirement, one that plagues many would-be investors, is a lack of discipline in the face of our I-want-it-now culture. Saving for retirement is about behavior, not head knowledge. That means anyone can save for retirement—as long as you kick these habits to the curb. Staying in debt Debt does not help you build wealth for retirement, nor does it save you money. Debt is not a tool that builds prosperity. Every day you're in debt is a day you sabotage your retirement.
If you want to be rich when you retire, then do what rich people do. According to Forbes magazine, most rich people agree that the best way to build wealth is to become and stay debt-free.
Pay off your debts from smallest to largest using the debt snowball. Next, save up an emergency fund of three to six months of expenses. That will put you in position to truly start building wealth. Forgetting about taxes Some people mistakenly believe their retirement account is all theirs and Uncle Sam can't lay a finger on it. That's not entirely true.
Unless you have a Roth IRA or a Roth 401(k), you will pay taxes on the money you withdraw from your retirement or investment accounts when you retire. That means your nest egg can easily be 25–30% less than you're expecting. Failing to plan Many people assume that by simply making monthly deposits into their 401(k) or IRA, they'll be able to retire with dignity. That's not really a plan. These people are playing a risky game of roulette with their retirement.
Even if you've done the math and know that you and your spouse should have $2 million for retirement if you save a certain amount each month, that's still just half a plan. What if one of you isn't around next year?
Reliable retirement planning prepares for all the risks in life. From making sure you've got term life insurance to having long-term care at the appropriate age, you need a plan for it all.
That's why using a professional financial advisor is such a great idea. Not only do they help you pick the best mutual funds for your situation, they also prepare you for all the risks you don't even know exist. Even Dave gets advice from a trusted financial advisor! | | | |
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