10 Ways Americans Squander Their Retirement

4 Minute Read

At Dave Ramsey’s we see people every day who are squandering their retirement without even knowing it. Could you be guilty of any of these retirement killers?

1. Too Much Mortgage

Homeownership is an important part of a solid financial footing, but most of us go about it the wrong way. The average American mortgage for $220,000 costs $158,000 in interest over 30 years. But if you pay off that mortgage in 15 years, you save $86,000 in interest, you’re out of debt 15 years sooner, and you free up $1,600 a month to build up your retirement.

2. Blowing Your Bonus or Raise

Everyone loves a raise or a bonus, but few ever get any real benefit from it. That’s because when most of us get paid more—we spend more. If we just had the discipline to put that money toward retirement, we could stop worrying whether we’ll have enough money for our golden years.

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3. Car Payments

Americans are a car-crazy bunch. As proof of our obsession, USA Today recently reported that a growing number of car buyers is signing up for seven-year loans! It’s bad enough to go into debt for a car at all, but a $28,000 car loan will cost at least $4,000 in interest over seven years. Here’s an idea: Save up and buy a good used car for $10,000 and invest the rest. It could easily add as much as $375,000 to your retirement fund.

4. Eyeballing the Budget

The budget is a powerful tool for saving money—but only if you follow it. If you have trouble sticking to your budget every month, try the envelope method. Each budget category gets its own envelope with the appropriate amount of cash. Once the cash is gone you stop spending! With this built-in accountability, you won’t spend the money you should be saving.

5. Credit Card Debt

Credit card debt can be sneakier than other types of debt. A $50 charge here or a $200 charge there seems harmless, so you promise yourself to pay it all off when the bill comes. But 40% of Americans don’t pay off their credit cards each month. Soon their payments are eating up their income, and there’s none left to save for the future.

6. Overindulging in Special Treats

How many people do you know who fret that they don’t have any money to save for retirement, but they eat out three nights a week, take two or three vacations a year, and stop for gourmet coffee twice a day? When you’re out of debt and have retirement and college savings well underway, you can afford to splurge on nice things. Until then, keep your priorities straight.

7. Student Loan Debt

This year, college graduates will leave school with an average of $35,000 in school-related debt. That alone will keep the class of 2013 from saving for their future any time soon, and they won’t be able to make up for the lost time. Waiting 10 years to get started investing could reduce their nest egg from a potential $1.8 million to just $544,000.

8. Supporting Adult Kids

Almost 60% of parents admit to providing financial support for their adult children who are no longer in school. More than a quarter of them went into debt and 7% delayed retirement to do it. Listen, we know you love your kids. But the best gift to give them is a secure retirement—for you! That way they don’t have to support you because you are unable to support yourself.

9. 401(k) Loan

Of all of these poor choices, none literally squanders your retirement like a 401(k) loan. When you borrow from your 401(k) you’re taking money that’s meant to support you in retirement and use it to solve today’s problems. You lose the growth potential of that money, and if you lose your job, you’ll have just 60 days to pay off the balance.

10. Bad Investing Decisions

Most investors can’t separate their emotions from the dollars-and-cents side of investing. As a result they panic in the bad times and are overly enthusiastic in the good times—and lose money nearly all the time. A professional investing advisor like those Dave recommends through his Endorsed Local Provider (ELP) network can help you make wise investing decisions and stick with them for the long term. Find your ELP today.

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