Retirement Planning and Saving: Mistakes to Avoid

Millions of working Americans find it’s a challenge just to pay for their house, car, insurance, child care and other expenses each month. So how can people even think about setting aside money for their retirement 20, 30 or even 40 years away? We can’t predict the future, but we can help you learn from the past. Here’s a list of common mistakes and miscalculations on the road to financial security — wrong turns we want you to avoid.

Saving too little.  How much of your money should go to retirement savings?

When in doubt, perhaps the simplest approach is to try to put 10 to 20 percent of your income each year into money toward your retirement. Regular, automatic savings programs also help make it “painless” to set money aside.

Starting too late. The sooner you begin saving, even with relatively small amounts contributed year after year, the faster you can develop a solid retirement fund. Through the magic of compound interest, a little bit of money saved over a long period can grow to be a lot of money.

Not diversifying enough. Putting all your (nest) eggs in one basket can be a problem if the approach you take doesn’t perform well or actually loses money. Consider a mix of savings and investments that might perform reasonably well under any economic or market conditions.

Not doing your homework. A wrong move can cost you thousands of dollars in taxes, fees, penalties or bad investments. Learn as much as you can about planning and saving for retirement.

Falling for retirement rip-offs. If you get a call, letter or visit from someone peddling financial products with features that seem too good to be true, trust your instincts.  If you think you’ve been approached by a con artist or you’ve been victimized by someone offering a financial product or service, report it to the Federal Trade Commission (visit ftc.gov/complaint or call toll-free 1-877-FTC-HELP). If the scam is internet-related, send an email to the federal government’s Internet Crime Complaint Center.

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Teaching Suggestions

• Ask students if anyone has started to save for retirement. What was their motivation to start early?
• Ask students to prepare and share a list of resources that can be used to learn more about retirement planning and investing for retirement.

Discussion Questions

1. Why is it important to start early and save for retirement even when you are in your 20’s?
2. What should you do if a financial product and its features seem too good to be true?
3. How even a little bit of money saved over a long period of time can grow to be a lot of money at retirement?