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FDIC Consumer News - Summer 2018
25th Anniversary Edition

[1997] Retirement Planning and Saving: Mistakes to Avoid

Excerpted and updated from “Retirement Planning: Saving for Your Golden Years,” Spring 1997.

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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? The answer depends on factors such as how many years until you retire, how much you already have in savings and pensions, what kinds of expenses you foresee in retirement, and the impact of inflation on your future buying power. 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. Unfortunately, too many people delay saving for retirement until they meet other goals, such as saving for a child's college education.

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. A good place to start is with free resources from the public library, your employer's personnel department and governmental agencies. Talk to financial professionals you know and trust. Ask for a clear explanation of the pros, cons and costs of what they recommend, and do some comparison-shopping before you make a final decision. And don’t forget to check your savings and investments regularly.

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. There are many scams designed to trick consumers into giving up cash, checks, credit card numbers or other valuables for little or nothing in return. Common cons involve promising fantastic returns on investments that turn out to be fraud. 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 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.