A new survey from MagnifyMoney has found that plenty of Americans are making a lot of mistakes with their retirement savings. Nearly 50% of all the people they talked to said at one time or another, they pulled money from the employer retirement funds. Nearly a fifth of them aren’t adding nearly enough towards their retirement to maximize what their employer can put in. These are mistakes that will cost them in the end.
“The most damning finding of all is that 27% of those surveyed have never thought about how much they’ll need in retirement,” the survey report states. “And while ‘ignorance is bliss’ may hold true when it comes to some things in life, this expression should not apply to your retirement plans.”
A big retirement mistake is taking money out when in a crunch. Often times, this money isn’t replenished. When you save money for retirement, it shouldn’t be like a regular savings account where you can pull out cash anytime you want. It’s going to force you to work that much harder and longer well past the retirement age.
Why People Are Pulling Money from Retirement Savings
The main reason why someone pulls their retirement savings isn’t for the reasons you would think. They do it to buy a home due to the large down payment that’s often required. Many economic experts still recommend putting up at least 20% of the cost of the home up front. This is during a time when a lot of young adults are starting families and at the same time has a lot of student debt still to pay off.
36% of millennials said there was no issues with taking from their retirement fund to help pay for a house. In contrast, only 17% of baby boomers felt the same. Of course, they are near or in retirement already and understand the stakes of pulling money too soon. The other problem with sapping your retirement is the financial cost of doing so. It often requires other taxes and fees, hurting them even further.
By not maximizing the retirement saving options provided by their employer, they’re losing out on a lot of free money. Let’s say you put in $300 of your own money with each paycheck. Your boss would contribute an additional $120. But that’s only if you put in the necessary 10%. The less you put in, the less your employer will contribute.
The best advice here is to consider your retirement savings untouchable. If you want to buy a house, find other ways to save money for the down payment. You may not understand this now, but many people get to retirement and realize they didn’t save enough. They rely on government programs that are quickly running out of money.
