Identify and briefly discuss the three biggest mistakes people tend to make when setting up retirement programs.

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The three biggest mistakes that people make in retirement planning are a They start too late b They put away too little c They invest too conservatively Many people simply do not start thinking about retirement until they are in their 40s or 50s by then it may be too late to produce the kind of retirement nest egg they want As a result many people just have to make do with less in retirement Likewise people do not put enough away for retirement Americans are not known for their strong savings habits and it shows in their retirement plans Obviously the less put away prior to retirement the less we are going to have in retirement Finally too many people treat their retirement plans like savings accounts rather than investment vehicles by placing most or all of their retirement funds in lowyielding fixedincome securities like US Treasury securities and bank CDs As a result people end up earning dismal rates of return on their money All three mistakes become doubly important when we introduce compound interest because compounding magnifies the impact of these mistakes In compounding we are essentially letting our money work for us Naturally the less there is to work with the less we will have in the future And with compounding it is not just a oneforone tradeoff it could be as much as fiveforone or more To illustrate consider two people one waits until he is 45 before starting a retirement program and then invests 2000 a year at a very conservative ...View the full answer

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