Top Five Common Mistakes 401k Investors Make

Kwame Kuadey

When you are investing in a 401(k), you want to get your money’s worth for your investment so that you can retire comfortably. However, there are common mistakes that some 401(k) investors make that cause them not to get all of the benefits from their retirement investment plan.

Here are the top five common mistakes that 401(k) investors make to jeopardize their retirement:

1. Not starting early – A lot of young people that are employed full-time do not think about planning for retirement. They are more focused on other things, such as keeping a job and getting rid of debts. The best time to start investing in a retirement plan is in their twenties, provided they are working a full-time job. The longer that you procrastinate on investing in a retirement plan, the longer it will take you to save for retirement.

2. Lack of diversification – In order for your 401(k) to benefit you, you should have a diversified portfolio. A mixture of bonds and equities will benefit you as far as volatility is concerned. A huge percentage of your portfolio can be invested in stocks that provide a high rate of growth.

3. Do not touch the money in your retirement plan unless it is an extreme emergency. If you just need a loan, then using your retirement fund is not the way to go. If you do take a loan from your 401(k), you will incur a penalty if you are younger than 59 ½. You will end up paying more taxes from getting a loan. Doing this has become a common and costly mistake that 401(k) investors continue to make.

4. If you are at a new job, you can’t leave your retirement plan where it is. You must roll it over to your new job. One common mistake that 401(k) investors make is that they do not roll over their retirement plan. When that happens, they are subject to be taxed at the normal rate. If you are younger than 55 years old, you will get hit with a 10% penalty. You can also open an IRA if the new employer does not participate in the 401(k) investment plan.

5. Even though you have invested this retirement plan, another common mistake that 401(k) investors make is not to branch outside of this plan. That is not a good idea. There are some things that this plan does not have. You will need to invest more in order to really diversify your portfolio.

Imposing limits is a mistake of some 401(k) investors that can hurt them in the long run. Include additional options that can be used as part of your financial portfolio. Some of those other investment options include IRAs, Roth IRAs, stocks or mutual funds.
Kwame Kuadey runs a discount gift card website and a gift card blog. He has written many articles on topics like Bankruptcy and Gift Cards and gift card swap . Kwame is founder of the Ghana Travel Page, a source for Ghana Pictures and more.

Article Source: ArticleRich.com

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