As you may have noticed, I'm a huge believer in planning for retirement. And the key word here is "plan." So many people get caught up in saving for retirement that they don't have a big picture plan of what they are trying to accomplish. Saving is good. It is an important part of most retirement plans. That said, random savings will never be as effective as carefully considered choices regarding a whole range of topics that include savings. There are three planning mistakes that most people make while they are saving for retirement.
Having A GoalYou can't reach a goal if you haven't defined it. For retirement planning purposes, most people define a goal as a dollar amount, with some sort of modifier to account for the changing value of dollars. For example. you might have a goal to have retirement income of $4,000 per month, in 2016 dollars. This would mean you would have income that is the equivalent of $4,000 in today's purchasing power.
You can figure your goals all different ways, but a good goal must be measurable. Saying, "I want to have enough money to retire comfortably" is a pretty lousy goal, because it can't be defined and it can't be measured.
Knowing Where You StandOnce you've set a goal, the next step is to know where you are now. Take an inventory of all your retirement assets that are available to apply towards your goal. This might include Individual Retirement Arrangement (IRA) accounts, Thrift Savings Plan (TSP) accounts, military retirement pay, civilian pensions, civilian 401(k) accounts, other savings, and other investments. Hopefully, you're well on your way to meeting your goal. Even if you're not, you can't get closer unless you know the current situation.
Taking Baby-Steps Towards Your GoalSince most of us haven't already accomplished our retirement income goals, it is important to continue taking small steps towards your desired end-state. There are a million ways to accomplish the task. Whether it is working another day towards military retirement, or saving another dollar in your IRA, or building a business that can provide income, each little step builds upon the rest to fill your retirement bucket. It is easier to make a little progress each month than to suddenly decide, "goodness, I need to save $1,000 every month!"
Preparing for retirement is a lot more effective if you are actually planning, vs. just randomly saving. Knowing where you stand, setting a goal, and taking baby steps will make your plan actually work.