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Basic Investing Mistakes to Avoid with Retirement Saving

The idea of investing may seem intimidating for beginners. However, the reality is that retirement investing doesn't need to be overly complex. According to Patrick Geddes, an experienced investment professional and author, the most challenging aspect of retirement investing is overcoming emotional impulses. Successful retirement investors demonstrate prudence by removing emotions from the investment process, often opting for a steady and perhaps seemingly unexciting strategy, and steadfastly adhering to it.

Not Maxing Out Your Employer Match

If you are lucky enough to work for a company that offers 401(k) matching, it’s a huge mistake to not take full advantage of your employer’s generosity. A similar retirement plan called a 403(b) is offered to full-time employees at nonprofit organizations, public schools, and government jobs. There are several advantages to participating in a 401(k) or 403(b). The first is that your contributions to the retirement plan are “pre-tax.” That means that the amount of money you choose to invest each pay period is subtracted from your taxable earnings. So not only are you investing, but you’re lowering your tax burden in the process.

Tweaking Your Investment Strategy

Retirement investing is about playing the long game, say 30 or more years. It’s not about tweaking your investment strategy in response to every short-term stock market surge or crash. The safest place to put your retirement savings is into a 401(k) or another type of set-it-and-forget-it retirement account like an IRA. You are far less likely to make emotion-based decisions if money is automatically coming out of your paycheck (or checking account) each money and being invested in diversified index funds. Free from your meddling, your money will grow.

Not Paying Attention to Fees

If you invest in funds with seemingly “low” fees of just 1 or 2 percent, those fees could add up to tens or hundreds of thousands of dollars in lost retirement savings. Compound interest is a beautiful thing. With enough time, it can grow even modest investments into substantial retirement savings but it also includes fees.

If you’re shopping for your retirement account, perhaps a traditional or Roth IRA, then look for funds with very low fees or even zero fees. If your company’s 401(k) carries higher fees, try to convince your boss to switch to a different plan.

Obsessively Checking Your Retirement Account Balance

The accessibility to check your balance anywhere and anytime is both a bane and a boon. It also allows you to obsess about how much you have in your account every single day. What can cause you to stress over whether it’s going to be enough to help you reach your retirement goals? During those times, your retirement account balance might stall out or even shrink. If you’re checking your account daily, your brain is going to see that negative growth rate and start to panic. However, there’s nothing worse than pulling out of the market when prices are low.

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