Planning for a comfortable retirement is a significant financial goal for many individuals. However, a recent survey by Bankrate revealed that 57 percent of American workers feel they are falling behind in their retirement savings, with 48 percent of those with a specific retirement goal doubting their ability to achieve it.
While there is no shortage of advice on maximizing retirement savings and catching up if needed, avoiding common retirement investing mistakes can set you on the right path towards financial security in your golden years.
Here are nine retirement investing mistakes to steer clear of:
1. Failing to Create a Solid Plan
A secure retirement requires careful planning. You need to consider factors such as how much you can save annually, taking advantage of all saving opportunities, choosing the right investment options, determining if you can save more, and managing your assets effectively. Seeking the guidance of a financial advisor can help you navigate these decisions and stay on track.
Bankrate’s retirement calculator can also assist in estimating your retirement savings accumulation.
2. Overlooking Tax Breaks
Utilizing retirement accounts like 401(k), IRA, and 403(b) plans can offer tax advantages that help your money grow faster. Taking advantage of tax breaks and credits can further reduce your tax burden and boost your retirement savings.
3. Missing Out on Employer Matches
Neglecting to maximize your employer’s retirement plan match is a missed opportunity for risk-free returns. Ensure you contribute enough to receive the full employer match, as it can significantly enhance your retirement savings.
4. Inadequate Savings
Merely meeting the minimum requirements, such as the employer match, may not be sufficient for a secure retirement. Strive to maximize your contributions to workplace retirement plans and IRAs to ensure a comfortable retirement lifestyle.
5. Ignoring Inflation
Accounting for inflation is crucial in retirement planning to maintain your purchasing power over time. Investing in assets that outpace inflation, such as diversified stock portfolios, can safeguard your retirement funds.
6. Being Too Conservative in Investments
While conservative investments may seem safer, allocating a portion of your portfolio to higher-return assets like stocks is essential for long-term growth. Stocks historically offer higher returns, making them vital for achieving your retirement goals.
7. Paying High Fees
High investment fees can significantly erode your retirement savings over time. Opting for low-cost funds and monitoring expenses can save you thousands of dollars in the long run.
8. Maintaining Excessive Risk Near Retirement
As retirement approaches, gradually shifting to a more conservative investment strategy can protect your savings from market volatility. Rebalancing your portfolio to align with your age and risk tolerance is crucial for a secure retirement.
9. Accumulating Excessive Debt
Carrying high levels of debt into retirement can hinder your financial security. Prioritize paying off loans before retirement to reduce financial obligations and maintain your lifestyle during retirement.
Conclusion
Planning for retirement can be complex, but by avoiding these common mistakes, you can enhance your prospects for a financially stable retirement. Consult a financial advisor and utilize tools like Bankrate’s AdvisorMatch to streamline your retirement planning process.