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What Are The Biggest Mistakes People Make When Investing for Retirement? Experts Explain

  • By Jenna Gleespen
  • Aug 05, 2022

Investing properly for your retirement can be a daunting task. So, what are the biggest mistakes people make when investing for retirement? We spoke to some experts to get their take. See what they had to say!

Not Investing Early Enough

Jennifer Spinelli, Founder & CEO of Watson Buys, says: 

What Are The Biggest Mistakes People Make When Investing for RetirementWhat Are The Biggest Mistakes People Make When Investing for Retirement

“One of the biggest mistakes people make when it comes to retirement investing is not starting early enough. The sooner you start saving and investing for retirement, the more time your money has to grow.

If you wait until later in life to start saving, you may find yourself behind the eight ball and struggling to catch up. There are a number of ways to start saving for retirement early.

If your employer offers a retirement savings plan like a 401(k), make sure you’re contributing at least enough to receive any employer matching contributions. You can also open an individual retirement account (IRA) and make regular contributions to that.

Another mistake people make is not investing enough money. If you want to retire comfortably, you need to make sure you are putting away enough money each month to reach your goals.

Depending on how much money you need to save, this could mean setting aside a large chunk of your paycheck each month. If you are having trouble meeting your investment goals, there are a few things you can do.

First, take a look at your budget and see if there is any room to cut back on expenses. This will free up more money that you can put towards retirement savings. You may also want to consider increasing your income by taking on a side hustle or working overtime.

When it comes to investing for retirement, diversification is key. This means investing in a variety of different asset classes, such as stocks, bonds, and real estate.

By diversifying your investments, you can minimize your risk and maximize your potential returns. One mistake people make is investing too heavily in one asset class.

For example, if you invest all of your money in stocks, you could lose a significant portion of your nest egg if the stock market crashes. On the other hand, if you diversify your investments and hold a mix of asset classes, you can weather any market downturns and still come out ahead in the long run.”

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Not Planning Ahead 

Kshitij Nigam from Cheef Botanicals says:

“Investing for retirement is a complex topic. Here are some common mistakes that people make when they’re first starting out: Not saving enough: This may seem obvious, but many people overlook this step and end up with nothing saved at all.

It’s important to plan ahead and set aside as much money as possible each month, even if it’s just $20 or $50 per month—that money will add up over time!

What Are The Biggest Mistakes People Make When Investing for Retirement

Investing in risky stocks: Stocks can be risky investments, especially if you’re investing for retirement income rather than short-term gains.

If you have a high tolerance for risk and think you’ll do well with this type of investment strategy, then go for it, otherwise stick with safer options like bonds or CDs (Certificates of Deposit).

Investing too much in one company: The stock market is full of companies—some will do well, others won’t.

You should always diversify your portfolio so that if one company tanks, your other investments are still doing well enough that they’ll carry you through until things turn around again!”

Not Considering How You Want Your Retirment to Go

Patrick Wilson, Hiring Director of Skill Courses, says:

what are the biggest mistakes people make when investing for retirement

Not having a set plan is the biggest mistake one can make when investing for retirement. People tend to just save up for retirement without having any clue about the future.

So, you must carefully consider where you see yourself after retiring. Do you want to travel? Do you want to build generational wealth? 

Knowing the answer to these questions is the first step you must take to avoid investment mistakes. This will give you a clear idea of how much you can save to accommodate your future lifestyle.

Seeking help from a financial planner is also beneficial to help you make the right investment choices.”

Not Adjusting Your Portfolio

Matas Jakutis from Forcefield Digital tells us: 

What Are The Biggest Mistakes People Make When Investing for Retirement

“The main investing mistake that retirees make is not adjusting their portfolios based on their retirement status. For example, when you’re actively working and bringing in a steady income, your investments should likely reflect a high-growth, low-dividend strategy.

This allows you to optimize growth when income isn’t a worry. When you officially retire, however, your investments should yield higher dividends to supplement your now reduced income.

To avoid retirement pains later in life, be sure to readjust your investments based on your work status and income level.”

Not Choosing the Right Retirement Account

Fiona Lewis, Co-Founder of Notta, explains: 

“Choosing the wrong account, asset allocation that doesn’t fit your risk tolerance, not diversifying your investments, and not staying actively involved in your retirement savings plan are all common mistakes that can have serious long-term consequences.

To avoid these mistakes, make sure you choose the right account — whether it’s a 401(k), Roth IRA, traditional IRA, or other savings plan — and diversify your investments to reduce risk.

What Are The Biggest Mistakes People Make When Investing for Retirement

Stay involved in your retirement savings plan and reassess your asset allocation as your circumstances change over time. And lastly, don’t ignore the benefits of saving for retirement during your working years.”

Not Understanding Your Goals

Charles Bender, owner of Fiduciary Wealth Management, says: 

Probably the most common mistake is not clearly identifying their goals. Saying “I want to retire at 65 years old” isn’t a goal.  By doing some quick and easy calculations people should make their goals “SMART”.  

The goals should be: Specific, Measurable, Attainable, Relevant, and Timely. “I want to retire at 65 years old with a monthly income of $$$ from my investments, $$$ from social security, and have enough left when I pass to leave for my children.”

What Are The Biggest Mistakes People Make When Investing for Retirement

Going through life with “recency bias’ is more pervasive than people think. The tendency to believe what has happened over the past year or two will be what occurs in the future severely hampers people’s ability to consider that a return to long-term trends is likely to occur.

There is a saying that people should consider when planning for retirement. It’s Different This Time are the 4 most costly words a person can utter.

So, when trying to finance that perfect retirement, consider the very long terms trends of valuation, interest rates, and taxes and use those as your assumptions.”

Investing Too Conservatively

Cameron Toole, the Chief Finance Officer at IBRinfo.org, tells us: 

What Are The Biggest Mistakes People Make When Investing for Retirement

“When it comes to investing for retirement, there are a few key mistakes that people often make. One of the biggest mistakes is not starting early enough.

If you wait until you’re in your 50s or 60s to start saving for retirement, you’re going to have a much harder time accumulating enough savings.

Another common mistake is investing too conservatively. If you’re only investing in safe, low-yield investments, you’re not going to make as much money as you could be making if you were taking on more risk.

Another mistake people often make is not diversifying their investments. If you invest all your money in one stock or one type of investment, you’re taking on a lot of risk.

If that investment goes sour, you could lose a lot of money. A more diversified portfolio will spread your risk out and make it less likely that you’ll lose everything if one investment goes south.

Finally, one of the biggest mistakes people make when it comes to retirement investing is not revisiting their plans regularly. As your life changes, so will your retirement needs. You should be revisiting your retirement plan at least once a year to make sure it’s still aligned with your goals.

If you want to avoid making these mistakes, it’s important to get help from an expert. A financial planner can help you create a retirement plan that’s tailored to your specific needs and goals.

He or she can also help you stay on track with your investments and make sure you’re taking on the right amount of risk.”

Not Diversifying Enough

Praful kumar from Planet Fish says: 

“There are many mistakes that people make when investing for retirement. One of the most common mistakes is not having a plan. It is important to have a plan in place before you start investing so that you know what your goals are and how much money you need to save.

Another mistake is not diversifying your investments. Diversifying your investments will help reduce risk and give you more options for growth.

What Are The Biggest Mistakes People Make When Investing for Retirement

There are many ways to avoid mistakes when investing for retirement. One way is to invest in a diversified portfolio of stocks, bonds, and other investments.

Another way is to invest in a 401(k) plan or IRA account or invest in a financial plan created by an investment professional.”

Investing in the Wrong Companies

Luka Juretiic from BuzzLogic explains: 

“Ever since I finished my degree I have slowly been investing for my retirement, and I believe that everyone who is able to do so should as well.

That said, people often do not know where to start and what investments would prove beneficial long-term. Usually, mistakes include not having a diverse portfolio, not investing in the S&P 500, etc.

However, with the recent worldwide developments, I would say the most significant mistakes would be investing in any companies that rely on eastern materials and produce for their programs, as well as the buying stock of western branches of eastern companies.”

Being Overly Confident in Your Expertise

Chel Gacrama from Castnoble says:

“There are several mistakes that can occur when investing for retirement. One of the most common is failing to diversify your portfolio, which can result in high volatility and poor returns.

Another mistake is overconfidence in your expertise and skills as an investor, which can lead you to make investments that you should wait on, or which may be too risky for your current financial situation.

What Are The Biggest Mistakes People Make When Investing for Retirement

To avoid these mistakes, it’s important to listen to your instincts about what investments are right for you. You also want to make sure that you’re not over- or under-investing in any particular asset class.

You should also be careful about how much risk you’re taking on when investing—be sure that all of your investment strategies match up with how comfortable you are with risk.

Remember that it’s important not only to invest in stocks but also bond funds and real estate! The best way to diversify a portfolio is through different types of assets; this way, even if one type of investment goes down temporarily because of economic conditions, others will still provide steady income into the future.”

Ignoring the Advice of Professionals

Jason McMahon from Bambrick says: 

“Ignoring consultancy from investors experts and depend only on your ability to assess the market, the portfolio, and the right investment for yourself.

I believe that for retirement investment, we’re looking for good and long-term return and we usually avoid risky one. This for sure needs an expert’s assessment and advice.

Taking On Too Much (Or Not Enough) Risk

Daniel Foley, Founder of Assertive Media, explains:

What Are The Biggest Mistakes People Make When Investing for Retirement

“Allocating investments properly can be challenging. A solid general rule of thumb is to use the stock market’s long-term growth to increase your balance if you have at least five years to allow your money to grow.

You have time to weather market volatility; while your assets may depreciate during a downturn, they will increase in value during a market upturn.

You have the option to accept a bit more danger. For those who will want their money in fewer than five years, the reverse is true.

Too much stock investing might be an issue since you could have to liquidate investments that have depreciated.

Investing with a Robo-advisor is one simple method to get the appropriate asset allocation. Robo-advisors create and manage your investment portfolio using computer algorithms, ensuring that you’re taking on the appropriate level of risk at the appropriate moment.”

Not Saving Enough Money

Aimi Davis, Head of Content at Online Mediums, tells us:

what are the biggest mistakes people make when investing for retirement

“Saving insufficiently might occasionally be caused more by a lack of finances than by error. But there are solutions to the issue, regardless of how it developed.

Prolonged working may be your greatest option if you’re older and close to retiring. This need not include spending extra time at a job you despise.

You might be able to get by with part-time, lower-paying work until you can retire totally. However, keep in mind that it isn’t always feasible to work longer hours. This strategy could be derailed by a health emergency or job loss brought on by life.

Another approach that is effective at any age? Reduce expenditure. Although it might be difficult, cutting costs can significantly positively influence retirement savings.”

Dipping Into Your Retirement Fund

Janet Patterson, Loan and Finance Expert at Highway Title Loans, explains:

what are the biggest mistakes people make when investing for retirement

“One of the biggest mistakes people make is dipping into their retirement fund. People assume it’s okay to use some of their savings since they’re still too young.

But you can never save enough for retirement. Every dollar counts. You shouldn’t tap into your savings until you retire. 

Emergencies happen all the time. But it’s important to have a separate fund set aside for those. You can’t compromise on your retirement for these.

Start saving for emergencies on the side. Cut back on your expenses if you can’t manage to save for two funds.”

 

Final Words: What are the Biggest Mistakes People Make When Investing For Retirement?

Most of our experts seem to agree that starting early, saving enough, and diversifying are all essential aspects of retirement planning. Hopefully, with this shared knowledge, you can find ways to feel more confident with investing for retirement.

Remember, it is always important to seek the advice of a qualified professional before making any significant financial decisions.

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Jenna Gleespen is a published author and copywriter specializing in personal and investment finance. Her expertise is in financial product reviews and stock market education.