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Mistakes People Make With Their Retirement Savings

When you are approaching retirement, this is no time to gamble around with your retirement savings. You have had a hard time earning retirement funds. Now, this is not the right age to blow your money unless you’re Warren Buffett. But this is also applicable for those who have just landed their first job.

If you invest poorly and do not pay attention you will end up paying a lot of unnecessary fees that can derail your retirement altogether. Therefore, you need to avoid these 5 common mistakes that most people do with just a little bit more diligence and better planning.

Avoid these mistakes and you won’t be in murky waters whether you are in your 60s or in the 90s.

Don’t invest retirement savings in something you don’t know about

New investment schemes come and go and they bring along a range of different rules and policies as well. If you are not familiar with then don’t consider them at all. Even if they tell you to attend that free seminar and dinner! This can definitely be a deceptive scheme.

You shouldn’t trust anyone who pressurizes you to hand over your retirement savings. You need to learn about these schemes first and take your time and then invest in new areas with small amounts of money at a time.

Investing in Stocks Greedily

How much retirement savings are you going to invest in stocks? Do not invest a large portion of your retirement money in a stock that is marketed as the next-big-thing or a can’t-miss-opportunity. Beating the market is not that easy; if it was then there would have been a lot of millionaires walking around.

Smart people take long term trades because they are less risky. A day trade is far risky than a long term trade. Don’t go all-in hastily or get prepared for a disappointment.

Ignoring your Employer’s retirement saving Plan

The 401(k) plan that employers offer is partially made of free money. The contributions in your 401(k) are free of tax for investing in your future. This is not the scenario when you take a part of your after-tax income and invest it in the stocks.

You will be taxed when you take the returns later. But you will be in the lower tax bracket at that point. If your employer is matching your contributions in your 401(k) then it’s foolish to ignore their potential.  The contributions are equal to income and passing them is just like telling your employer that you are willing to work for less money. But the 401(k) shouldn’t be your only retirement saving plan.

Making risky loans excessively with your net worth

Private loans are capable of 10% plus yields. However, they also come with serious risks. You don’t need to put all your eggs in one basket if you are going for this volatile option. The company that is making loans can go bankrupt and you might end up losing more than what you thought.

It is better to diversify and not put all the money into a single strategy. Private loan investments should only take a minor portion of your retirement money.

Putting too much into real estate

Some of the real estate deals make promises of high percentage returns but you need to keep in mind that they are not liquid. If a project goes down then you can’t do much about it apart from hoping that it sells and you get a small portion of the money back. In such a scenario you will have no income and a frozen asset that remains useless until the real estate market gets back on its way.

Final thoughts

You must keep in mind that your retirement money is not for you to gamble with. You need to produce a steady and reliable income stream with those funds. Therefore, you need to take some time and chalk out an investment plan. Take it seriously when you are considering a new scheme. Otherwise, you will lose your retirement future for good!


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