Early planning makes for more relaxing retirement

Steve Vaught is senior vice president with Springfield Trust Company.

Decisions you make today about retirement could significantly affect your future lifestyle. By avoiding the following mistakes, you may improve your chances for a financially secure retirement.

Waiting too long to start saving.

While it may be tempting to put off saving for retirement until you buy a house and pay for your children's college educations. Time is critical to the growth of your retirement account.

If you put other goals first and wait to start saving for retirement, you will miss out on the benefits of compounding during all the years that you weren't saving. It's almost impossible to make up the difference once you get a late start.

The ideal time to start saving for retirement is as soon as you are eligible to participate in your first employer-sponsored retirement plan.

Start with a small amount every payday and increase it as earnings increase. With a good budget and a little discipline, you may be able to save enough to buy a house, send the kids to college, and enjoy a comfortable retirement.

Following the crowd.

Your investment plan should be based on careful research and an understanding of your risk tolerance and investment time frame. Once your plan is in place, it is unwise to make spur-of-the-moment changes based on the latest trend.

When you are saving for a retirement that is years in the future, you are a long-term investor and should stick to your long-term plan.

Becoming discouraged by short-term losses.

As a long-term investor, you should seriously consider including stock investments in your portfolio. Stocks offer the best chance for long-term returns that will stay ahead of inflation and help you achieve your financial goals. However, stocks are risky and investors should be prepared for losses as well as gains.

It would be a mistake to take money out of an investment that you believe is experiencing a temporary decline because you might then miss out on the eventual rebound. If you have a significant number of years before retirement, investments have a lot of time to recover from declines.

Underestimating your future needs.

With people living longer, healthier, more active lives, you may need more money during retirement than anticipated. Depending on your lifestyle, you could need 80 percent or more of your pre-retirement income for many years after you stop working. And don't forget about inflation's potentially crippling effect.

Figuring out how much you may need for retirement should motivate you to save as much as possible in your company's retirement plan. The more money you save the more money you are likely to have at retirement.

Forgetting to review your retirement plan.

If your personal or financial situation changes significantly, it may affect your retirement investment strategy. So, once a strategy is in place, don't forget to review it periodically to make sure it still suits your needs. Make sure to review strategy after a death, divorce or employment change. Also, as retirement draws closer, you may want to shift some assets from more volatile investment to more stable.

Retirement should be relaxing and enjoyable. Don't let poor planning turn the golden years into stressful ones.