Be Careful, These People Have the Power to Destroy Your Retirement Plans
Are you on track to enjoy a comfortable retirement? Will you be able to retire at all? Approximately 66% of working households miss conservative retirement savings targets for their age and income, according to the National Institute on Retirement Security.
Some of the reasons so many Americans are missing the mark is because they’re helping family members, trying to keep up with the Joneses, or putting their trust (and money) in the hands of people who don’t have their best interests at heart. One retirement roadblock some pre-retirees fail to see is other people. Here are six types of people who will ruin your retirement if you don’t make careful financial decisions.
The boomerang kid
Once your child graduates from college and secures steady employment, he or she usually moves out and embarks on the exciting journey toward independence. Then, next thing you know, your child gets laid off and asks to move back home. If you’re in this situation, you have some company. A Pew Research Center study found the most common living arrangement for people ages 18 to 34 is living with their parents. Unfortunately, if you’re the parent of a boomerang kid, this living situation could put your retirement at risk.
Another study, by market research firm Hearts & Wallets, found people 65 years and older who are the parents of financially independent children are more than twice as likely to be retired than parents of the same age who provide financial support to their adult children. And this support tends to be quite hefty. Roughly 30% of parents spend up to $5,000 annually supporting an adult child, according to a Money magazine survey. This money typically goes toward costs, such as utilities, phone bills, and health insurance.
What you can do
Don’t sacrifice retirement savings, so you can support adult children. If your children have decided to move back home or remain in your household after graduation, it will be important to have rules in place, so you don’t jeopardize your ability to save.
- Decide how much you can realistically give. Sit down, and calculate how much you can afford to help your children. If you conclude you’d have to borrow money or cut back on retirement savings in order to help, you’re giving too much. Recalculate an amount that fits your budget and stick to it.
- Set boundaries. Promote independence by not allowing your children to live rent-free indefinitely. If they aren’t employed, encourage them to take on at least part-time work, so they can contribute to household expenses. Living with boomerang children means bigger grocery bills, electric bills, and other household costs.
- Find alternative ways for the kids to help. Until your children land steady employment and are able to help out, negotiate non-financial ways they can chip in. For example, set a schedule where they take turns cooking, taking out the trash, and helping to keep the house clean. Remind them your home isn’t a bed-and-breakfast.
You would like to believe your employer has your best interests at heart, but a lot of the time that isn’t the case. Some employers are so desperate and greedy they’ll pilfer from their employees’ retirement accounts. Sadly, this type of theft is more common than you might think.
During 2015, Employee Benefits Security Administration investigators recovered more than $4.9 million in retirement contributions that were stolen from employees. If you don’t pay close attention, this could be happening to you right now without your knowledge.
What you can do
If you don’t read your retirement account statements, now is the time to start. Go through each statement to make sure the money you contribute each pay period is being deposited into your retirement account. Even if your contributions are being deposited, you should also make sure it’s the correct amount. Some employers try not to get caught by placing partial amounts into their employees’ accounts.
If you notice contributions are partial, late, infrequent, or not being made at all, contact the Department of Labor. Make sure to have your account statements in front of you, and be prepared to fax or email all of the questionable statements. Under the Employee Retirement Income Security Act of 1974, the Labor department can conduct civil and criminal investigations. If you were stolen from, someone can investigate and help you recover the stolen funds.
You might not want to think about it, but at some point your parents might not be able to care for themselves. There are roughly 40.4 million unpaid caregivers of adults ages 65 and older in the U.S. Among that group, 9 out of 10 are taking care of an aging relative, according to Pew Research Center.
Some workers, particularly women, even decide to leave the workforce early, so they can dedicate more time toward caring for an elderly parent. Unfortunately, this can result in lost wages and reduced retirement savings. The average female employee who leaves work to care for a parent stands to lose roughly $350,000 in wages and Social Security benefits, according to Met Life and Fidelity Investments research.
What you can do
Instead of retiring early, look for services that might be able to help you balance work and care-taking responsibilities. One resource to consider is Eldercare Locator, sponsored by the U.S. Administration on Aging. This service can assist you with finding local eldercare services.
In addition, if you have siblings, ask them to help. When an elderly parent needs assistance, it’s not uncommon for one sibling to bear the brunt of the financial and care-taking responsibilities. Preserve your retirement nest egg by making sure you aren’t the sole caretaker. Arrange to meet with your siblings, so you can outline each person’s responsibilities. This will reduce the chances of resentment and broken relationships later on down the road.
Love is a beautiful thing — except when your once red-hot relationship crashes and burns. Did your marriage go south? One thing you might not be aware of is your spouse could be entitled to part of your retirement fund. Depending on the length of your marriage, your spouse could use your retirement money to pad their own nest egg as part of the divorce settlement.
What you can do
The easy solution? Don’t get married. If it’s too late and you’ve already tied the knot, there might not be much you can do unless yours is a special case. If you’re divorced and want to marry again, all the advice we can offer you is to choose wisely the second time around. Do what you can to make sure it lasts this time. Hopefully, you’ll be able to retire with your true love. Or you can just stay single, and save yourself the aggravation.
If you didn’t trust politicians before, you certainly won’t trust them now. Surprisingly (or maybe not so surprisingly), politicians have the potential to destroy your retirement dreams. Your retirement could get a lot less comfortable due to the Trump administration’s proposed cuts to Medicare and Medicaid and the possibility of suspending the benefit of pre-tax 401(k) plan contributions.
What you can do
Save as much as you can for retirement. Also, take advantage of the retirement tools available online. If you’ve gotten off track with retirement savings or you haven’t started at all, it would be a good idea to get in touch with a certified financial planner. He or she can provide direction by helping you come up with a financial plan that works for your goals and budget.
Your friends and neighbors
It might be tempting to try to keep up with your neighbors, but this behavior could ruin your finances and the quality of your retirement. One thing you might not think about is that Mr. and Mrs. Jones could be borrowing the money they flash around town. What will your retirement look like if you continue to spend, so you can look like your acquaintances? Keep in mind the long-term consequences of your spending habits.
What you can do
Run your own financial race. Don’t pay attention to what your friends, family, and acquaintances are doing. Chances are they’re pretending to be more well off than they really are. There’s no way to get the real deal on someone’s financial situation. All you have to go on are appearances. So instead of spending money to keep up with your neighbors, sock that cash away for a satisfying retirement. You’ll come out the winner in the end.
Follow Sheiresa on Twitter @SheiresaNgo.