When it comes to your retirement savings, you want to do everything possible to maximize your earnings and ensure that you’ll have enough money for the rest of your life. However, even the best investors sometimes make mistakes, and sometimes those mistakes can have lasting consequences. To help you avoid some of the most common investment mistakes that affect retirement, keep reading to learn about the three worst things you can do with your retirement savings and how you can avoid them to help secure your future.
Not Saving Now
Saving for retirement is a monumental task. For younger investors, it’s easy to get caught up in excitement over new opportunities and forget about saving for retirement. Resist that urge! Setting aside even a small amount of your income regularly can have far-reaching implications down the road; if you can’t save money now, there’s no way you can save enough to retire when you hit 65. So make sure to start saving as soon as possible—you’ll be glad you did.
Not Having A Financial Plan
Having a financial plan and working towards it regularly can help you avoid many of these common mistakes. So many people make mistakes with their retirement because they’re not planning for it at all. Many of them simply don’t have a solid idea of what they want out of retirement or how much money they will need to sustain their desired lifestyle. It’s difficult to save money if you don’t know what to do with it, after all. If you have goals for your personal care in retirement and see yourself taking certain steps along the way to achieve those goals—such as contributing a certain amount each month or year into your 401(k)—you won’t be as likely to veer off course when something unexpected happens.
While investing is a great way to grow your money, you don’t want to make unwise investments. One of the top mistakes people make with their investment portfolio is making up for the lost time when they have not made regular contributions throughout their working years. It may be tempting to try and regain what you feel you have lost by putting money into riskier options. If your nest egg feels too small now that you are heading towards retirement, find a good financial planner who can help walk you through some of your investment options and help ensure that your future looks brighter than it does today.
Not Rebalancing Your Portfolio
Over time, stock market indexes tend to grow at different rates. For example, if you own a 50/50 mix of stocks and bonds, your portfolio will probably have a higher weighting in stocks as it grows because stocks grow faster than bonds over time. The key is to ensure that your mix remains consistent with your risk tolerance and investment goals. Rebalancing involves purchasing assets that have grown in value (stocks) and selling assets that have declined in value (bonds). This keeps your overall allocation more closely aligned with where you want it to be. If you invest for growth and aren’t rebalancing appropriately for that purpose, you’re setting yourself up for losses over time.