Retirement Account Mistakes Happen. Just Make Sure You Correct them.

The rules surrounding retirement savings accounts can be complicated. As such, it’s not uncommon for people to make mistakes when it comes to saving for retirement. Luckily, the rulemakers realize this also and allow for corrections of many retirement savings account errors and mistakes. It should be noted however, that many mistakes are not penalty free, regardless of whether you correct the error in a timely fashion or not. However, taking the steps to correct an error can keep those penalties to a minimum and potentially save you thousands of dollars in both taxes and penalty fees. Furthermore, the corrective measures themselves can be complex and confusing, especially if you are not good with taxes. Again, though, putting the time and resources into correcting the error is most likely much more cost efficient than taking the penalty. If you have made an error with your retirement savings (i.e. made an excess IRA contribution) you will want to take steps to correct the error as soon as possible and as efficiently as possible. Your best bet to do so is by speaking with a certified financial planner or–if you already know that the correction will involve a tax hit–a tax professional who can help you properly calculate what the tax will be. This is also another good reason why you want to track your retirement account transactions and check to make sure they were processed within a reasonable time because once an error occurs there is only so much time to correct it before it becomes a costly mistake. If you have questions about your retirement account or think you may have made an error and want to correct it, again, you should speak with a certified financial planner and retirement expert.

Don’t Forget About Inflation

If you are early in your career and just starting to think about saving for retirement, don’t forget to consider inflation as you save. The value of the dollar changes over time thanks to inflation, which means that by the time you retire, a dollar may not be as valuable as it was when you first started saving. In other words, you money may not go as far as it once did. Therefore, if you have a ways to go before retirement, you may want to track the value of the dollar over time as well as adjust your retirement savings from time to time to make sure you have enough saved to meet your goals.