Rookie Investment Mistakes to Avoid With Retirement Savings

Investment mistake

It can be challenging to save up enough money for your retirement. You can count on social security payments once you retire, but often they’re not enough to cover all your expenses. This lack of funding is why many people start investing for their retirement. Investing can feel overwhelming, knowing that you could risk your savings and retirement plans if you make the wrong moves or listen to bad advice.

Fortunately, investing doesn’t have to be complicated or scary. Getting investment help from financial and investment experts and learning the investing mistakes to avoid can help get you on the right investment path for your retirement savings. 

These tips can help you create a healthy long-term investment strategy so you can meet your retirement goals. Here are the most common investment mistakes to avoid with your retirement savings. 


Investing Without a Plan or Goal

Before you start investing, develop an investment plan with financial goals in mind. If you’re investing for retirement, your goals may include saving enough to take a specified monthly retirement income. Understanding the purpose of your investment and your timeframe for this goal helps you plan a better investment strategy. 

It allows you to plan for the length of your investments and what you may want to invest in based on your timeframe. A 60-year-old may not want to invest in bonds that take more than a decade to mature, while someone in their 40s may be open to the idea.

Having a plan also helps you analyze your investment performance. If you aren’t meeting investment benchmarks along the way, you may need to change your investment strategy. Consider working with a financial advisor to identify your financial goals and develop an investing strategy to meet them.


Not Understanding Your Personal Risk Tolerance

Everyone has their tolerance when it comes to financial risk. Your age, income, savings, and personal preferences factor into your risk tolerance. Younger adults have more time to make up for significant economic losses from riskier investments than adults approaching retirement. 

Others may pick stocks and assets based on what’s popular on social media without understanding the risk level involved.

New investors need to determine where they fall along the risk tolerance spectrum. More conservative investors have a lower tolerance for risk and prefer smaller returns that offer fewer risks. Moderate and aggressive investors are willing to accept more risk from their investments. Make sure your investment strategy aligns with your risk tolerance. 

An investment advisor helps balance the risks and rewards of your retirement investing through asset allocation. This strategy allows for a custom investment portfolio based on your financial goals and risk tolerance.

It’s perfectly acceptable to have a more conservative investment strategy, even if you’re young. You need to make investment choices that are within your comfort zone.  Financial losses happen in investments, and you should never risk more than you can afford to lose. Having a boring investment portfolio isn’t a bad thing. 

Index funds are one type of conservative investment. Unlike the stock market, which can quickly experience significant increases or decreases in value, index funds are more steady. They’re designed to grow slowly but consistently over a more extended period. Index funds are a great way to diversify your portfolio, especially if you’re saving for retirement.


Checking Your Accounts Too Often

Easy access to online investment and retirement accounts has benefits and downsides. Apps on your phone and websites allow you to quickly change your monthly contributions or seek customer support no matter the time of day. 

However, it can also be tempting to check your account too often, leading to increased anxiety and obsession over the performance of your investments. 

Stock prices and index funds are affected by day-to-day changes in the stock market, which may cause you to feel stressed about your investments. Understand that these daily fluctuations are normal and remember to focus on the long-term picture instead. The last thing you want to do is pull your assets after a few bad days when the market is low. 

Investing for retirement requires patience and understanding how a longer timeframe affects investments. Avoid putting an investment app on your phone and stick to checking your online accounts monthly or quarterly. 


Not Paying Attention to Fees

Investments of all kinds are associated with fees. Often these fees are small percentage charges based on your earnings. Retirement accounts such as traditional IRAs, Roth IRAs, and your company’s 401(k) can carry fees. Even low fees can add up quickly and take a bite out of your retirement savings. Many rookie investors aren’t aware of these fees and have no idea what their total fees will cost.

The good news is that investment fees are transparent. Once you know the type of investment plans you’re interested in, you can shop around for more favorable fees. Remember to take these costs into account when setting your financial goals.


Relying on Friends or Family for Stock Advice

Unless your friend or family member works within the personal finance or investment industry, never rely on them alone for investment advice. Your sibling or best friend may be quick to tell you their investment successes but might leave out their mistakes or failures. It’s fine to consider ideas and advice, but use it as a starting point for your research instead. 

Researching stocks helps you understand their risk profile, performance history, and whether it’s a good investment for you. You can get information on your own, but it’s smart to run any ideas past a certified financial advisor before taking action. Relying on non-expert advice is a rookie mistake you’ll want to avoid.


Not Maxing Out Your Retirement Contributions

Many companies and organizations offer their employees retirement contribution matching as part of their benefits package. For-profit businesses usually provide their employees a 401(k) retirement account, while non-profit organizations use a 403(b) retirement plan. 

Both plans allow employees to make pre-tax contributions to their accounts. This means your monthly contribution is not taxable, and it lowers your current tax burden. Employers offering matching benefits contribute the exact amount you do to your retirement account each month, up to a specified limit. 

It’s a smart investment to max out your monthly contributions to also raise the amount your employer is providing. Matching benefits vary by employer, and some only match 50% of employee contributions while others match it fully. Read over your benefits package so you can take full advantage of any employer contributions.


Get Financial Advice 

If you’re new to investing or have been at it for a while but aren’t sure you’re making the best choices, a financial advisor can help. Financial advisors are professionals who want to create investment portfolios that match your needs and risk tolerance. Consider working with Finance is us.

We help you make informed financial choices. Our banking, car insurance, mortgage, and investment services make the most out of your money. We have financial advisors with the expertise you need to plan and carry out an investment strategy to meet your retirement goals. Contact us today for assistance with your retirement investing. 


Disclaimer: All content on this site is information of a general nature and does not address the circumstances of any particular entity or individual, nor is the information a substitute for professional financial advice and services. 

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