Believe it or not there are many mistakes that can be made along the way when it comes to financial retirement savings and investing.
Unfortunately a good many of these mistakes center around the 401(k), which can be a tremendous boost to your retirement plans when used properly in order to build your portfolio.
The problem is that the mistakes are often the only things we hear when it comes to retirement plans and investing.
I suggest begin with the mistakes so that we can move along to better information and advice in the near future.
The Opportunity Cost of Non-Participation
The most significant 401(k) blunder isn't a poor investment choice - it's choosing not to invest at all.
Your employer-sponsored 401(k) represents a powerful tool for building long-term wealth and security. Even plans with less-than-optimal features typically outperform having no retirement strategy at all.
Most crucially, bypassing employer matching contributions amounts to declining free money - a decision that can significantly impact your retirement savings over time.
Risking too Little
The next big mistake when it comes to your 401 (k) is risking too little. Rewards come with risk. If you aren't taking any risks with your investment then you are by and large throwing money down the drain.
In addition to that, it is nearly impossible to meet your retirement goals without taking some risks, and some hits along the way. This doesn't mean you should be reckless but along the way you are going to need to take some calculated risks in order to receive the bigger payouts that most of us hope for when investing in their retirement funds.
Risking too much
There are many risks involved when investing in the stock market. There are a few that deserve a little more mention than others.
First of all, stocks present a fairly large risk, particularly to the uninitiated. While it is true that great rewards are most often the product of great risks you do not want to risk the bulk of your retirement by investing it all in stocks.
Another thing you want to avoid doing if at all possible is investing in your company stock. We've seen too many lives destroyed when companies go under taking the financial stability of their employees along with them.
Many companies offer incentives to employees for investing in their stock, which may be tempting but I recommend investing as little as possible in your company stock whenever possible as this could lead to problems down the road.
Borrowing Against 401 (k)
Finally, the worst thing you can do for the health of your 401 (k) is borrow against it.
There are so many ways in which this could go wrong and the penalties for this are more than a little prohibitive. They are designed to be that way so that you will use the funds for their intended purpose.
If you absolutely have no other option is the only way I would recommend borrowing against your 401 (k) and I would seriously consider selling a kidney before doing that.
When it comes to your financial retirement, 401 (k) mistakes can be far more costly than you may realize.
Work to avoid these common mistakes and you should be well on your way to a successful retirement.