Special Report

14 Mistakes That Can Wreck Your Retirement Plans

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7) Blowing off employer offers of matching funds.

While you keep hearing that you are on your own, many employers match their employees’ 401(k) contributions. This can vary in percentages or in dollars per year, and it may be a one-to-one match (100%) or a portional match (say 50%) up to a certain part of your income. Some employees think they cannot afford to contribute to their 401(k) plans, and others may decide to spend the money rather than invest it. Think about this scenario: You invest $5,000 into your 401(k) and your employers puts in the same exact amount as matching contribution to your retirement. Another employee is earning the same amount but chooses to only invest $2,000 per year. That employee, by not investing the same $5,000, just told the employer he or she did not want a free $3,000 put into a retirement plan.

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8) Trying to time the markets.

Chances are high that any given saver is bad about timing the financial markets. Many investors panicked about their 401(k) and retirement funds in late 2008 or early 2009 during the financial crisis. The financial media had already dubbed this period as the Great Recession, and some financial pundits were predicting an outright implosion in the stock market. Some of those investors sold out of their stocks at the bottom and went into cash or short-term bonds, and did not get back into equities until the markets had fully recovered. This means they made close to zero while the stock market rose more than 100% from the bottom. Some years in a bull market have only seen the biggest gains take place from a handful of days in any calendar year. There are very few market wizards who win year in and year out.

Source: Thinkstock

9) Ending annual retirement contributions.

While timing the markets can be challenging, there is an even worse offense in deciding to stop your annual 401(k)/IRA contributions. This mistake is quite common and understandable. Maybe it was because a worker was laid off, or maybe an unexpected illness kept someone out of work. But some investors and savers become discouraged over the years, or maybe they become so cynical about the markets that it’s an excuse not to save and invest. Imagine if a saver in his 40s stopped putting in new money in the market at the end of 2008 and did not start contributing again until the rally of 2017. That person missed the second-greatest bull market of modern times. Even if they let their old investment fund money grow, they missed out on potentially tens of thousands of dollars (or more) that could have paid for their retirement.

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