The 5 [Worst] Retirement Mistakes - Simple Money Tips for Women (2024)

09 Jul 5 Big Retirement Mistakes to Avoid

Does it sound scary or confusing to think about retirement? Or maybe you feel you have a good handle on your retirement because you have an employer-sponsored 401(k) or other investments. Either way, anyone can make big mistakes when it comes to retirement, so read on if you want to make sure to avoid these common pitfalls.

Mistake #1 – Burying your head in the sand

Well, not exactly, but you know what I mean. Some people get so overwhelmed about the idea of retirement that they just ignore it and hope for the best. They figure that it’s a long way off and that they have other things to worry about or deal with right now.

But this is a big mistake. You may think you can put off planning for retirement, but you really can’t. The earlier you start to plan for retirement, the sooner you can take advantage of the tax incentives that compounding interest offers. This can result in more money n more money over time. But no matter how young or old you are, it’s never too late to start making good decisions for retirement.

Mistake #2 – Not matching your employer’s portion

If you are fortunate enough to have an employer-sponsored retirement program, then thank your lucky stars. There are many, many employees who would love to have this benefit but don’t. If your employer matches your contributions up to a certain percentage or dollar amount, but you’re not taking full advantage of this benefit by contributing your portion, then you are missing out on big money. Trust me—you will be kicking yourself when you retire because this is such an easy way to fund your retirement.

It’s easy to do, but it’s also easy not to do. Most companies will automatically deduct an amount you designate from each paycheck to make it as convenient as possible for you. If this is the case for you, then definitely take advantage of it.

Mistake #3 – Not paying attention to previous 401(k)s

Maybe you’ve had multiple jobs in the past that all offered 401(k) programs and they’re just hanging out there in financial space somewhere. This does not help you build your savings for retirement. Because you’re not keeping tabs on these accounts, it’s likely that you’re paying avoidable fees instead of focusing on developing a strong portfolio.

Rather than neglecting these funds, put them to better use. In addition to the options listed here, there may be other options available. You should also consider your other options before rolling over retirement savings. Consider the differences in investment options, services, fees and expenses, withdrawal options, required minimum distributions, other plan features, and tax treatment. If you like the convenience of having all your investments together in one 401(k), then choose the former. If you’re unable to roll over the old 401(k) into your current one, then choose the latter; it’s not difficult to open a new rollover IRA so you can keep better track of your funds.

Mistake #4 – Paying unnecessary investment fees

If you like to invest here and there and try different kinds of investments, then chances are you’re paying a lot more in fees and expenses than you should. Before making any kind of investment, you need to make sure you fully understand the fee structure attached to it.

For example, when it comes to mutual funds, be sure to select the “no-load” ones. This means that there’s no commission attached to your purchase. Also, choose a mutual fund in which the expense ratio is less than 1% because that’s how your fees are determined—based on the percentage of your fund profits.

Finally, understand that managed mutual funds will be more expensive because you’re paying for someone to “babysit” the investments. This fund manager gets paid (by you in the form of fees) to analyze the trends and invest as he or she sees fit. Instead, select an index fund which operates without employing a manager. An index fund is cheaper and does very well as it’s an investment in carefully selected market companies; overall, this is safer and involves fewer fees for investors.

Mistake #5 – Withdrawing money early from retirement accounts

When you have medical bills staring you in the face, need a down payment for a house, or lose your job, it can be very tempting to dip into your retirement account to help with your immediate financial needs. But if you withdraw funds from your retirement account before you’re 59.5 years old, then you will be slapped with big fees and penalties—not to mention the amount of money that you’ll lose out on because now you have less money invested, which means lower profits.

Instead, consider your retirement funds inaccessible, and don’t allow yourself to even consider tapping into them. Otherwise, building wealth will be much more difficult (if not impossible) for you. Don’t let the urgent circ*mstances of today cause you to make a decision that will sidetrack your retirement tomorrow. You have to think long term despite what situations you’re facing right now. This will be challenging, but your “retired self” will thank you for not withdrawing money early from your retirement accounts.

Take action

Now that you understand which retirement mistakes to avoid, it’s time to take action. Without taking action, all this knowledge is just fluff. Take a close look at your retirement plan. Do you even have one? If not, get ahold of the competent and caring people at www.russellandcompany.com right away. They can take a look at your current financial situation, assess your goals, and help you put a doable plan in place to get you on the right track for retirement.

It’s easy to do nothing, but it’s hard to retire on nothing. Make sure that you’re not making any of these retirement mistakes. And if you are, do something about it. If you don’t know what to do, Russell and Company is ready and able to assist you. Whatever you do, don’t leave your retirement years to chance. Take the responsible route, and make the decisions today that will pay off tomorrow.

This material was created to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.

This newsletter was prepared by a third party company to be used on the Russell & Company and Simple Money Tips for Women websites.