Whether you’re in your 60s or your 20s, avoid these common retirement investing mistakes. Take the time to learn as much as you can first, then invest in new areas in small steps with just a little money at a time. Investment isn’t just about guessing on the future value of a company. Investing is a process, and that process has a name: asset allocation. As exciting as the thought of big gains can be, think of putting the bulk of your retirement money into an unproven company as the equivalent of going to Las Vegas and betting your retirement money on red or black. Yes, you could win big, but the odds are not in your favor. If you love the thrill of gambling in the stock market, do it with small amounts of money you can afford to lose, not with the bulk of your retirement funds. Contributions to your 401(k) are a tax-free way to invest in your future. That’s not the case if you take a portion of your after-tax income and invest in stocks. Yes, you’ll be taxed when you take distributions from your 401(k) down the road, but presumably you’ll be in a lower tax bracket then. It’s especially foolhardy to ignore the potential of a 401(k) if your employer is matching your contributions. Those contributions are the equivalent of income. There are limits to how much you can contribute to a 401(k) each year, so you do have room to invest in other opportunities. Many types of investments offer high yields. Private loans are just one of them. Diversify if you’re going to go with a high-yield strategy. Risky investments should compose only small portions of your retirement money, and you should be sure you understand your risk tolerance. By the same token, don’t overload on safe investments, either. “Safe” can translate to “risky” over the long haul because safe investments typically don’t earn as much. You could end up shortchanging yourself if you lean too far in this direction as well. For example, if inflation completely eats away at your interest-rate return, it’s not a good investment. Real estate can be a good addition to a retirement portfolio, but it’s important to consider your risk assessment when it comes to an investment in which you have so little control. Consider investing in a real estate investment trust or purchasing an investment property with a modest operating account that can be used to take care of problems when they arise. Depending on your investment vehicle, it might make sense to change plans if your fees and costs skyrocket or if you realize they’re higher than you thought. It’s always better to have a firm idea of costs right out of the starting gate. Brokerages don’t always advertise their fees, so be careful. You might have to ask repeatedly to get the answers you need, but your persistence can actually save you tens of thousands of dollars down the road. You might be just making ends meet on $4,200 a month now, but odds are that you won’t need that much once you retire. Look at your current budget and cross out the items you won’t be spending money on when you stop working. Commuting costs and lunches on the go come to mind, not to mention the portion of your paycheck that you’ve been funneling to retirement savings. Moreover, you’ll likely fall into a lower tax bracket. That’s fewer dollars that you’ll have to give to Uncle Sam. For many people, retirement doesn’t mean not working at all. Some retirees are bored when they leave the workforce and want to continue working part time. You may not want to continue that 50- to 60-hour grind in your 70s, but you might decide to pick up a part-time job just to get out of the house for a few hours a week. Whatever income you earn means using your savings a little less. Having more saved than you need is always better, but for a variety of reasons you might not need as much as you think you will.
