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The 5 Biggest Mistakes You Can Make With Your Retirement Savings
If you’re starting to save for retirement, you’ve got the right idea. Millions of Americans have little or no retirement savings at all, and the simple act of working toward a nest egg can put you on the right track.
Just because you’re saving doesn’t mean you’re doing it well, and there are thousands of ways to mismanage, miscalculate, and otherwise spoil that nest egg. From improperly diversifying to embracing too much risk, there are many opportunities to make significant missteps without even knowing it.
Thankfully, starting to focus on your retirement planning just after graduating college can allow you a long investment horizon to grow and build your wealth. And if you’ve made a mistake, you can easily correct it with the right knowledge at your disposal. Here are some of the most common and the most damaging retirement mistakes and how to fix them:
- Not having a goal in mind- A rule of thumb for how much you need to save for retirement is to multiply your desired spending in retirement by 25.
- Paying high fees- Take time to calculate how much you’re paying in fees. If you’re paying a financial advisor to manage your investments, you can expect to pay around 1% per year.
- Not being properly allocated- Take time every year to check on your investments and rebalance them if necessary.
- Withdrawing too much- The general rule of withdrawing from your retirement account is around 4% a year for those who retire at 65.
- Taking money out of your retirement account- Unfortunately, people often cash out their 401(k)s when they leave their jobs. Those who do so risk paying an additional penalty on top of the taxes if their withdrawal is not considered a qualified withdrawal.
So while it can be tempting to suddenly receive a huge windfall, the standard advice is to not touch your employer-sponsored plan. The fees and taxes you pay could destroy what you’ve worked hard to build, possibly hindering your future nest egg.
For more information on avoiding mistakes when retiring, access the full article here.
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