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From The, August 7th, 2015

By Scott Gamm

NEW YORK (MainStreet) — If you suffer from retirement savings-itis, listen up.

Chances are, your retirement savings plan of attack, if you even have one, needs a tune up.  One of the biggest mistakes is not saving for retirement early enough. You’ve probably heard this before, but the numbers don’t lie.  By contributing to a retirement plan starting at 35, instead of 30, you’re giving up $62,000 over 25 years, per a November 2014 report from the Insured Retirement Institute.  Why? Compounding interest, or interest on interest, which is amplified when you have more time on your side.  Roger Stinnett, managing director of wealth planning, at Irvine, Calif.-based First Foundation Advisors, suggests saving for retirement as early as age 22.  “By the time you start your first job out of college, a savings plan should be developed,” he said. “Think of it as a script for savings — while it may be revised many times before actual retirement – at least you have something to work from and likely have a pretty good idea how it’s all going to turn out.”  On that point, keep in mind basic expenses like rent, groceries and health care are likely to cost more a few decades from now.

That brings us to the second mistake of retirement savings: not taking inflation into account.  “As you calculate your retirement needs, you must incorporate inflation into your planning,” said Tom Mingone, managing partner at New York-based Capital Management Group. “A million dollars today has very different purchasing power than it did back in 1980, when people retiring today started planning.”  Not thinking about inflation causes people to have a false impression of their retirement dollars, Mingone said.  The Bureau of Labor Statistics, which calculates the consumer price index, a well-known inflation gauge, has an inflation calculator, showing $100 in 1980 has the same purchasing power as $289.61 in 2015.

Finally, experts say investors aren’t being aggressive enough when it comes their investments.  “People are just plain scared of the stock market — so cash is the default option,” Stinnett added.  Anyone who hasn’t invested in stocks in recent years is about to read some eye-opening news. The S&P 500 is up over 200% since its March 2009 low.  Stinnett also says people aren’t diversified enough and rely too much on “FANG” stocks, an acronym created by TheStreet‘s Jim Cramer.   Those stocks are Facebook (FB), Amazon (AMZN),Netflix (NFLX) and Google (GOOG).  “The lack of diversification by investing only in these FANG stocks may take a bite out of your portfolio if the technology sector has a downturn,” Stinnett said. “Consider choosing widely diversified mutual funds and ETFs consisting of stocks, bonds, real estate and other alternative investments to develop a long-term, diversified strategy with a less bumpy ride along the way.”

This article originally appeared in August 2015 and certain information presented may have changed. For more current information please contact Capital Management Group.