***Don’t Make These Retirement Planning Mistakes

It really doesn’t take much to derail a retirement plan. Most of the errors in planning for retirement are those of neglect, omission or panic. If you don’t know exactly where your retirement plan stands, get some advice from a CERTIFIED FINANCIAL PLANNER™ (CFP®) professional is a good start – to review your overall retirement options and give you some ideas where to start. According to the Financial Planning Association of Washington, DC, here are some common mistakes:

Failing to start: It‘s amazing how many people find convenient excuses to delay planning, but no matter how daunting the debt or other spending priorities may seem, you have to plan and save for retirement on a regular basis… Starting right now!

Failing to evaluate an employer’s retirement options: Benefits can be worth as much as a nice paycheck. It’s possible you might be working for a company that still offers a traditional defined pension benefit plan in addition to a 401(k) plan. If you think you’re going to change jobs, it’s wise to consider the benefits side of the ledger, particularly the timeframes on when various benefits kick in. Know your choices ahead of time.

Failing to consider both kinds of IRAs: The biggest difference between a traditional IRA and a Roth IRA is the way Uncle Sam treats the taxability of each. Money contributed to a traditional IRA may be deductible on your income taxes. In a Roth, you don’t receive the tax deduction for those contributions, but when it’s time to take the money out, you won’t have to pay taxes on it. If you and your spouse are not covered in workplace plans, you may be able to fund fully deductible IRAs. Talk to a tax professional or a financial planner about which options are best for you.

Failing to review and update your beneficiaries: Under the surviving Bush administration tax reform laws, a direct transfer from a deceased employee’s IRA, qualified pension, profit-sharing or stock bonus plan, annuity plan, tax-sheltered annuity, 403(b) plan or a governmental deferred compensation plan to any qualified IRA can be treated as an eligible rollover distribution even if the beneficiary is not the deceased’s spouse. That means your kids or any other designated recipient can inherit your IRAs without all the negative tax consequences. Non-spouse beneficiaries need to check with a tax expert when they must begin distributions from an inherited IRA. Of course, no matter what the investment, make sure your beneficiaries are always current.

Failing to reinvest your tax refunds: Did you know you could deposit your tax refund directly into your IRA? While many people use their tax refund as a bonus to buy a treat or pay off bills, consider filing your taxes a bit early and arrange to e-file a direct deposit tax refund to your IRA by April 15th so you can claim that deposit for the current tax year.

Withdrawing money early from an IRA or blowing a rollover: Money taken out of an IRA is subject to income taxes and a penalty if you are under 59 ½ years of age and do not put it back into an IRA within 60 days. When moving assets, most of the time a trustee-to-trustee transfer can be more efficient and with less margin for error. If the IRA distribution check is made payable to you, there is a greater chance you’ll miss the 60-day deadline and you’ll face taxes and penalties.

Failing to contribute the maximum. Not every employee can afford to contribute the maximum allowed by their respective work retirement plans or individual retirement investments, but it should be a goal.