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Retirement Investment Mistakes To Steer Clear Of

For many, investing appears to be a daunting task best left to skilled and intelligent experts. However, the vice chairman of Berkshire Hathaway, Charlie Munger, has a different approach. It isn’t about making the best, most intelligent moves but avoiding the dumb ones.

By avoiding dumb mistakes, there are often only good choices left. Over the decades leading up to retirement, a thousand good decisions will ultimately result in great golden years. Here are some dumb mistakes to be wary of.


Not Saving Enough Or Any

It should be a no-brainer that not saving anything is the worst mistake you can make. However, not saving enough is also fatal. Everyone will have different positions and needs. Someone who wants to retire at 67 instead of 62 won’t need to invest as much. Someone starting later, say 32 instead of 25, will need to invest more. Everyone should carefully tailor their plan for whatever their goals are, which leads to the next point.


Not Having An Investment Plan

Attempting to invest in retirement without a definite plan is a tragic mistake. A solid portfolio of investments won’t magically appear without careful consideration. You must develop a plan particular to your situation and needs and stick with it. You’ll want to ask questions like:

  • When do I want to retire?
  • How much can I save per paycheck/year?
  • What type of investments best suits me?
  • Should I cut spending elsewhere to save more?
  • Am I taking advantage of all possible opportunities?

There are many more questions to ask, and it can be intimidating. A financial planner can relieve some stress because they know what it takes to save money. If they are too costly, utilize the numerous online tools.


Missing Investment Opportunities

There are too many investment opportunities to count, but there are a few easy ways to save that provide the best returns. Many employers offer benefits packages that include plans like 401(k) and contribution matches. A standard company often matches half of your investment up to the first six percent. If you invest six percent, they match it at three percent. This is a 50 percent profit, a crazy amount in the world of investments.

Another pain point is missing out on tax breaks. Accounts like a 401(k), IRA, and 403(b) have tax-deferred (or even tax-free). These plans are great because the more time your money has to accrue interest, the greater amount you’ll have at the end. If you’re unsure about your retirement plan’s tax or matching status, you are entitled to that information.


Investing Too Little Or Too Late

Conservative investments early on or risky investments later in life are two pitfalls. Risky investments are often less risky over time. The stock market may rise and fall month over month or across several years. Across the decades to retirement, though, the market tends to stay in an uptrend. Early risky investments are safer than later ones.


As retirement approaches, people who fail to invest well early tend to “go for broke.” Because the timeframe is smaller, though, they see less return. They might also risk a market crash right when they need the money. So, shifting risky assets to safer ones (bonds and CDs) early mitigates this possibility.


Not Accounting For Fees And Inflation

Inflation and fees can flatten your investment portfolio without you ever realizing it. Fees usually come as part of the deal when investing in certain assets like mutual funds. A one percent fee may look harmless. However, much like taxes, it removes money that could compound for decades. It is a loss of omission.

Inflation is also slow-burning. Static or safe investments like savings accounts, bonds, and CDs generate less interest than risky options. Over decades, their interest may not outpace inflation, which makes each dollar worth less over time. So, early risky investments in stocks and index funds, which yield more, combat inflation.