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Do these numbers surprise you?
Making financial mistakes has a greater impact on the middle class.
We recently spoke with Erin H., who lives in a suburb of Cincinnati.
All those years working and paying Social Security and Medicare taxes are finally benefiting me.
I didnt know that taking Social Security too early reduces the monthly amount I receive.
you could start receiving Social Security benefits once you reach age 62.
However, the Social Security Administration doesnt consider 62 to be full retirement age.
If you were born after 1960, the full retirement age is67.
Social Securitybenefits are reducedby 5/9 of one percent each month before normal retirement age.
By taking Social Security benefits at age 62, I was reducing my monthly income, Erin added.
Benefits slowly increase each year you delay until you reach age 70.
Prioritizing Saving for Retirement Too Late
Have you ever heard someone talk about compound interest?
Although compound interest might seem foreign, saving for retirement as a middle-class individual is crucial.
Lets say you put $100 in an account that earns an average of 10% interest each year.
After ten years, you would have $271.
Letting the initial $100 contribution grow for another ten years results in $733.
What happens after 40 years?
That initial $100 you put into the market is now worth$5,371.
The more time you let your money sit, the greater the earnings potential.
Missing a High Savings Rate Due to Debt
There seem to be conflicting opinions on debt.
Some gurus say debt is leverage, while others argue to avoid debt at all costs.
I experienced this firsthand, Erin said.
When I was taking out the debt, it seemed immaterial.
Did I really need to finance a new phone?
How about upgrading my car or purchasing furniture on credit?
Dont make this same money mistake.
After all, times have been good for so long; they wont change, right?
I learned this money lesson the hard way by taking ontoo much riskduring the Great Recession, Erin said.
My portfolio contained too volatile positions.
I should have rebalanced my portfolio according tomy retirement goals.
This means taking on less risk as I near retirement age.
As you age and work toward retirement, take the time to shift your portfolio allocation.
The Bottom Line
Have you made these money mistakes before?
If not, consider yourself lucky and use Erins mistakes as a learning lesson.
Retirement doesnt have to be impossible for the middle class.
If you are unsure where to start, reach out to aqualified financial advisor.
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