When it comes to financial retirement savings and investing, believe it or not, there are many mistakes that can be made along the way.
Unfortunately, many of these errors revolve around the 401K, which can be a huge boost to your retirement plans when used properly to build your portfolio. The problem is that when it comes to retirement plans and investing, we frequently hear only mistakes. I propose that we start with the mistakes so that we can progress to better information and advice in the near future.
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First Mistake
The first, and perhaps most serious, mistake that people make when it comes to 401 (k) plans is failing to enroll. Yes, you read that correctly. What most people don't realize is that this is something your employer provides in order for you to have some financial security in the future.
It is a method of putting money aside for the future that should not be overlooked or taken for granted. Even a bad 401K plan is preferable to none, and with strict regulations, those are few and far between. More importantly, if your company offers to match the funds in your 401K plan, not taking advantage of that offer is tantamount to throwing money away.
Next Mistake
The next big blunder with your 401K is risking too little. Risk is associated with rewards. If you don't take any risks with your investment, you're essentially throwing money away. Furthermore, it is nearly impossible to meet your retirement goals without taking some risks and suffering some setbacks along the way. This is not to say you should be reckless, but you will need to take some calculated risks along the way in order to receive the larger payouts that most of us hope for when investing in our retirement funds.
Risking Too Much
When it comes to investing in the stock market, there are numerous risks to consider. There are a few that deserve to be mentioned more than others. To begin with, stocks pose a significant risk, particularly to the uninitiated. While it is true that great rewards are frequently the result of great risks, you do not want to put the majority of your retirement savings at risk by investing it all in stocks.
Another thing you should try to avoid doing is investing in your company's stock. We've seen far too many lives destroyed when businesses fail, taking the financial security of their employees with them. Many companies offer incentives to employees for investing in their stock, which can be tempting, but I recommend investing as little as possible in your company stock whenever possible as this can lead to problems later on.
Finally
Borrowing against your 401K is the worst thing you can do for its health. There are numerous ways for this to go wrong, and the penalties for doing so are more than a little severe. They are intended to be that way in order for you to use the funds for their intended purpose. I would only recommend borrowing against your 401(k) if you have no other options, and I would seriously consider selling a kidney before doing so.
When it comes to your financial retirement, 401K mistakes can cost you far more than you realize. Avoid these common blunders, and you should be well on your way to a prosperous retirement.
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