Time and again I see the same mistakes when it comes to my clients’ retirement accounts.
The belief that you should pay taxes later instead of now.
In short, most tax deferred investment vehicles, in my opinion, just don’t work. For illustrative purposes let us look at the investment vehicle most of us are familiar with, the 401(k). What happens when you have to draw out money from a 401(k)? Given that taxes and inflation have never gone down, you can rest assured you are going to need more money to live on at the time of your retirement. By this time you have limited or no deductions to protect you from the taxes now due on your withdraws! The key, maximizing returns and minimizing taxes! If I had to choose between a 401(K) or a ROTH I go for the ROTH! The only time I go for a 401(K) is with matching contributions by employer and only on what they are willing to match.
Mistake number two; Saving for retirement while living in debt.
This has to be, by far, the single largest mistake people are making. I will put this very succinctly, there is NO WAY your investments can match or outpace the interest rate you are paying on your debt! In my humble opinion you should not be saving anything until you pay those damn credit cards off! Granted, this does not apply in every single circumstance, but from what I have seen in my career and from what I continue to see, it is the majority. Wait till you read the details on this!
Mistake Number Three; Life Insurance!
Oh pipe down! I can hear the moaning and groaning from here. Honestly folks, any good retirement plan must have life insurance as part of the plan. I have seen it happen all too often as to what the repercussions are for not having life insurance. What good does it do you to have the perfect retirement plan only to die sooner that you expected and leave your spouse with a huge burden of debt, no retirement plan and no way to pay for any of it? The fact of the matter is that most families carry the largest burden of debt at the same time that they are trying to save for retirement! Make sure you protect your family!
Mistake Number Four; Discipline, false assumptions and cash flow.
Most people just are not disciplined enough to control themselves or even worse have false assumptions in regards to a matter at hand and will not take the time to check the facts. The number one killer, hidden FEES! 12b1 Fees being the worst! Check everything!
Mistake Number Five; Diversify, Diversify Diversify!
When I refer to diversification I am talking about diversification over multiple platforms and not just in underlying stock based investment vehicles. Try putting some money in REITS (real estate investment trusts), precious metals, overseas, ETF’s that trade in Foreign currency (high risk) and in municipal bonds and you have to have more than one retirement vehicle!
If you click on the links they will take you to an article I have written to expand on what I have said here. I am willing to bet that many will not agree with me. Please read the additional information before you make a post.