It’s easy to chalk your nest egg’s successes and failures up to the stock market. When it’s up, you’re up. When it’s down, you’re down. Whaddya gonna do about it?
Well, the truth is you can do a lot. Like it or not, your choices impact your retirement savings—maybe even more than the stock market. You may not set out to wreck your nest egg, but research shows many people do just that by making poor investing choices.
Are you to blame for your nest egg’s downfall? Here are five common mistakes to help you decide.
You Wait Too Long to Start Investing
When it comes to investing, you can’t make up for lost time. That’s why you should invest early, no matter how small the amount, to take advantage of compound interest. For example, a $2,000 lump sum invested when you’re 40 years old can grow to $40,000 by the time you’re 65. But that same $2,000 investment could be worth $237,000 if you invest it 15 years sooner. That’s the power of compound interest!
You Don’t Invest for Retirement at All
A recent survey by Deloitte Center for Financial Services found that nearly 60% of preretirees don’t have a retirement plan, and 20% expect to live on their Social Security benefits alone in retirement. The average monthly benefit from Social Security is only $1,294, so it’s clear that any savings are better than no savings. No matter how far behind you think you are, make a plan and start investing now for a better retirement.
You Don’t Invest Enough for Retirement
The same survey showed that while saving for retirement is a main goal for most people, they want to split their disposable cash between paying off their home, saving for a child’s college fund, and socking away cash for retirement. Multitasking with your money is fine, as long as you first invest 15% of your income for retirement. Why? A paid-for home won’t help you cover your expenses in retirement. Neither will paid-for college tuition. Junior can get a part-time job to avoid student loans, but there’s no scholarship for your golden years! Focus on retirement investing first, then you can tackle your other financial goals.
You Cash Out or Take a Loan Against Your Retirement Savings
Roth IRAs and 401(k)s allow you to withdraw or borrow funds under certain circumstances. But doing so will not only lower your balance, you’ll also miss out on that money’s growth potential. You could also be subject to taxes and penalties. Pay off your debt and build an emergency fund before you start investing, and use that cushion to pay for unexpected expenses. Keep your retirement fund for retirement only!
You Invest on Your Own
Investing on your own may seem like a great way to save money, but you could lose more money in the long run by not hiring a pro. That’s because you simply don’t have the time or expertise to find the best funds or understand the market’s cycles. As a result, you’re more likely to jump in and out of the market at all the wrong times, knocking big percentage points off your returns. Dave is as hands-on as it gets when it comes to money—but even he knows the value of a pro in growing his investments.
There’s Still Hope for Your Nest Egg
Maybe you’ve made some of these mistakes already. That’s okay! One wrong turn won’t doom your future as long as you grab hold of today’s opportunity to choose differently. Ask a pro how you can improve your retirement outlook. An experienced advisor can look at where you are today and guide you toward a confident tomorrow.
Be confident about your retirement. Find an investing pro in your area today.
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