The following are some of the common mistakes that people seem to always make with their retirement accounts. Pay attention and avoid them.
Not Being Responsible for your Own Plan
During the “good old days” people were able to rely on their employer to manage their pension plan and safely cash out when they retired. However, that is not the way that it works anymore, and considering the way in which many people’s pension plans were mismanaged and stolen, it’s probably a good thing.
Nowadays, the onus is on the employer to be responsible for their own retirement plan. The company HR person is not going to come looking for you, and they are not going to tell you where to put your money. If you are not sure if you should be maxing out your 401k or looking for a different option, then ask.
Being too Responsible for your Own Plan
Ok, now that I just spent the last paragraph telling you to be involved, let me take this time to tell you to not be that involved. Many people make the mistake of going overboard and trying to micromanage their retirement plan. While the basics of retirement planning are fairly simple, the mechanisms themselves are often complicated. This means understanding how to get the most out of your Roth IRA rollover has nothing to do with inherent intelligence, and everything to do with research, training, and on the job experience.
If you want to experiment with retirement planning, which usually translates into playing the stock market, then do so with funds outside of your professionally managed plan. Making some extra money through smart investing can be an exciting and rewarding experience. However, it is not something that you want to do at the risk of your future.
Using Your Retirement Money as an “oops” Fund
For some people, the idea of large sums of their cash just sitting in an account, slowly growing for use 35 years into the future is a little difficult for them to deal with, especially if they are experiencing financial speed-bumps in their everyday life. However, even though it is usually easy to borrow money from your future to pay for today, it is a terrible idea.
Money sitting in a retirement account of some sort exists for a specific purpose; making sure you don’t have to move in with your grandchildren when you get older. While it is tempting to tap into those funds now, it shows a lack of discipline and foresight. Instead of cashing out your future, it is probably a better idea to try and cut out some spending or manage your budget a little more efficiently.