Retirement planning should emphasize long-term strategies

Many people make common mistakes when planning for retirement, according to Nick Nefouse, a retirement expert at BlackRock. He highlights that individuals often focus too much on short-term news instead of thinking long-term about their financial future. Retirement planning is a multi-decade process, and staying focused on long-term goals is essential. Nefouse explains that people in their 20s typically save for about 45 years and can expect a retirement that lasts 20 to 30 years. He emphasizes the importance of having a long time horizon in investing. Those who think too narrowly about short-term gains risk damaging their long-term financial health. Another common mistake is misunderstanding risk. People often view risk as only market risk, but it includes other factors like inflation, job loss, and how long they might live. Nefouse suggests a model called GPS — grow, protect, spend. Young investors should aim for growth, while those nearing retirement should consider more stable investments. A significant challenge for retirees is knowing how to withdraw their savings. Many are hesitant to touch their principal, fearing they will run out of money. However, Nefouse stresses that the goal of saving for retirement is to spend that money to maintain a comfortable lifestyle. To improve retirement savings, Nefouse recommends using auto-enrollment features and target-date funds, which adjust investments based on age. He also advises people to start saving, no matter where they choose to put their money. When it comes to various savings accounts, like Roth 401(k)s and HSAs, Nefouse suggests prioritizing accounts that offer employer matches to maximize savings. He mentions that health savings accounts provide a triple tax advantage and should not be overlooked. Today, the concept of retirement is shifting. Many are choosing "partial retirements" or new careers rather than stopping work completely. This gradual transition can help address financial needs and lifestyle changes. Nefouse's key advice is to start planning early. Understanding Social Security benefits and maximizing income sources is crucial. He encourages people to consider deferring Social Security benefits, as waiting can result in significantly larger payments.