7 Mistakes You May Be Making With Your Retirement Savings

Saving for retirement is a big financial goal for most people, so you’ll want to

  • Saving for retirement is a big financial goal for most people, so you’ll want to avoid mistakes.
  • Not rebalancing your portfolio, investing irrationally, and ignoring 401(k) matches can hurt you.
  • Other mistakes include not saving enough, considering all your retirement expenses, and more.
  • Read more from Personal Finance Insider.

Retirement is one of your biggest financial goals — and while many of us have years (or decades) to go, small decisions you make now can have a major impact on your golden years. 

According to the Federal Reserve, 44% of non-retired adults believe they’re not on track to retire. One in four non-retired adults say they have no retirement savings at all.

There are some common mistakes savers make that can quickly derail their savings and make it difficult to get back on track. Avoiding these mistakes early on can save you in the long run. 

1. You’re not rebalancing your portfolio over time 

Rebalancing your portfolio can help ensure it’s diversified and is on track to reach your goals. It also helps mitigate against market swings. Most savers will shift their investments to more conservative options as they get closer to retirement age. 

You should rebalance periodically — around once a year — and only make modest adjustments to your plan. If you have multiple retirement accounts, it’s important to consider the allocation of your entire portfolio, not just each individual account. 

Want a more hands off approach? Many 401(k)s give you the option to invest in a target date fund, which helps you automate investing through a fund that adjusts as you near retirement age. 

2. You’re choosing your own investment strategy 

Some savers handle their retirement investment strategy themselves, placing their nest egg in a taxable brokerage account — which can mean lower fees, a wider selection of investments and potentially higher returns.

But actively managing your retirement funds is riskier and more time consuming. We often invest irrationally, and the last thing you want is for your behavioral biases getting in the way of your retirement. Not to mention you won’t get the tax deferral and employer match benefits 401(k)s have if you go it alone. 

3. You’re ignoring the company match

If your employer offers a 401(k) match, take advantage of it! Sign up and make sure you’re contributing at least up to the match amount — after all, it’s free money.

For example, if your employer has a 5% match, make sure you’re contributing at least 5% of your income, as long as you fall below the total contribution limits. 

4. You’re switching jobs too often 

I’m not a career coach, so I can’t tell you whether staying at a certain job is good for your career. But I can say that changing jobs lots of times over the years can mean leaving potential retirement savings behind. 

Many employers offer contributions to your 401(k) plan, profit-sharing plan, or stock options. However, there’s a catch — most must “vest” over a certain number of years before you get full ownership of the money. Most vesting schedules range from three to five years.

Before you put in your two weeks’ notice, make sure you check what your vesting schedule is. If you’re close to the deadline, you may want to consider whether switching jobs is worth leaving that money behind. 

If you do switch jobs, don’t forget to roll your old savings plan into your new one. Moving your old 401(k) into another plan could save you money in the long run with lower fees. You’ll also sometimes have a broader selection of investments in your new plan. 

5. You’re forgetting about tax diversification

Taxes affect how much money you get to keep in retirement, and tax diversification is a strategy to help your money last in retirement. Your retirement accounts contain either tax-deferred, taxable, and tax-free funds. Creating a strategy that accounts for the various tax treatments of your accounts can help you save money and give you more flexibility in how you access your savings.

A good example of this is combining your pre-tax 401(k) savings, which are taxed when you withdraw them, with Roth contributions, which have no tax in retirement. 

6. You’re not considering all your retirement expenses  

We’d all love to stay healthy for the rest of our lives. But the reality is that you may face a health-care related expense or even need long-term care, costs that are vastly underestimated. Some models estimate that a couple retiring at age 65 will need between $197,000 and $285,000 for healthcare expenses alone. 

While it can be difficult to predict what your medical needs will be throughout retirement, estimating your costs and making a plan can help avoid negative financial outcomes. I also recommend looking into long-term care insurance to help cover future costs. 

7. You’re not saving enough 

The biggest mistake I see others make while saving for retirement? That they aren’t saving enough — or at all!

Saving for retirement is something that takes years, and starting as early as possible gives you more time to set money aside, make a plan, and take advantage of compounding interest. The longer you wait to save, the more daunting and stressful it can seem. 

Keep in mind that these are mistakes that many people make when saving for retirement — I have fallen trap before myself! But having a clear plan and sticking to it will help you stay committed to your goal — and ensure your golden years are truly golden.

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