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This Mistake Could Cost You $344,000 In Retirement Income

This Mistake Could Cost You $344,000 in Retirement Income

For years, workers have been warned to save independently for retirement rather than rely on Social Security alone to pay the bills. While Social Security should replace a good 40% of your pre-retirement income, most people need at least 70% to 80% of their former earnings to stay afloat financially once they stop working. And new data from the Employee Benefit Research Institute tells us that in the early years of retirement, nearly 50% of households wind up spending more money, not less, than they did during their working years.

If your goal is to sustain a comfortable lifestyle in retirement, then you’ll need to make a solid effort to save as much money as you can, as early as you can. But if you don’t invest your savings wisely, you’ll risk coming up short.

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Getting aggressive pays off

The beauty of tax-deferred retirement accounts such as IRAs and 401(k)s is the ability to grow your savings without having to pay taxes on your investment gains year after year. This allows you to reinvest those gains in full and take full advantage of compounding. The problem, however, is that most Americans are saving too conservatively for retirement and limiting their investments’ growth in the process.

According to a 2016 Wells Fargo study, 60% of savers in their 30s, 40s, and 50s are so focused on minimizing losses that they’re not capitalizing on growth opportunities. Or, to put it another way, more people than not are shying away from stocks at a time in their lives when that added growth could have a huge long-term impact.

Of course, the risky nature of stocks has long been a considerable barrier to entry for otherwise cautious investors. And it makes sense. Stocks are among the most volatile investments out there, and if you’re the risk-averse type, you’re probably inclined to put your money elsewhere. But there’s an upside to taking on the…

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