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As you’re preparing for retirement, it’s easy to get caught up with the big questions: How much should I save? What age should I retire? When should I claim Social Security benefits?
While these are all important questions, it’s equally critical that you’re thinking about the more subtle aspects of retirement planning as well. These three mistakes are easy to overlook, but they could cause serious problems down the road.
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1. Waiting too long to begin saving
Your savings rely on compound interest to grow. Compound interest means you’re earning interest not just on your direct contributions but also on all the returns you earn on your contributions.
The longer you wait to begin saving, the less time compound interest has to do its job. As a result, you’ll need to do more of the legwork by contributing more money to your retirement fund each month.
Say, for instance, you started saving at age 25 and had a goal of saving $750,000 by age 65. If you were earning average stock market returns, you’d need to invest just over $300 per month to achieve that target. But if you had waited until age 40 to start saving, all other factors remaining the …
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