If I told you that your basement was filling up with water, what would you do? Would you shrug your shoulders and say no big deal as long as it’s out of sight? Or would you leap into action, find the source of the problem, and stop the water from flowing? I’m sure everyone would choose the latter. We all know the problems water damage can cause, but many times we don’t notice a small leak until it becomes a much bigger problem. The same holds true when it comes to your finances, but unfortunately, many people don’t notice they’ve had financial leakage until it’s already wreaked havoc on their portfolio. So, what can you do to help watch out for small leaks in your retirement plan?
Well, one of the best things you can do is to schedule your complimentary, no-obligation financial review. Just like a leak in your house’s plumbing could leave you swimming through your living room, leakage in your retirement accounts can devastate your finances if you’re not careful. We help our clients align their actions with their intentions to help them be better prepared for a financial future that they can be confident in. Too often, people have to face leakage simply because they don’t know what it is, and how to avoid it. That’s where a qualified financial professional comes into play because leakage can be a major problem if it isn’t dealt with before retirement, or at the same instance that the leak occurs.
Financial leakage can happen many different ways, from not keeping up with inflation to outspending your retirement plan. Either way, the long-term effect is the same. If your retirement account is leaking, then you could be at risk of running out of money prematurely. For example, it’s common for people to tap into their retirement account before age 59½ simply because they believed they needed to for whatever reason at that particular time. However, the leakage that occurs here is a 10% early withdrawal penalty in addition to the income tax on the amount withdrawn. Imagine what would’ve happened if people knew the risks of withdrawing from their retirement account prematurely. That money would have continued to grow as it would’ve been in the account longer, rather than being claimed as a penalty by the government.
Ultimately, the best way to handle financial leakage is probably to not let it happen at all. We help people navigate through many different financial issues so you’re not alone if you are suffering with financial leakage in your portfolio. The first step is to schedule a complimentary review so we can discuss your personal situation. Once we come up with a strategy to address those issues, we can move on to longer-term planning on how we can create a plan to help you achieve your retirement goals. So, keep an eye out for small leaks before they turn into something bigger, especially when it comes to the security of your retirement.