6 Simple Oversights That Can Ruin Your Retirement Plan

School of Saving and Investing

The letters ‘401K’ made from gold blocks are on fire, meant to indicate an oversight has ruined a retirement plan.

With fewer companies offering pensions, it is the responsibility of most Americans to save for their retirement years. That’s one key reason why it’s never too early or too late to start planning for retirement.

In fact, an informed retirement plan, with an effective savings strategy, can provide a sense of comfort that your needs will be met when the time comes. But how do you know if your plan is effective? For starters, be sure your plan avoids these common mistakes that can ruin your retirement.

Retirement Planning Mistake #1: Failing to Enroll in Your Company’s Retirement Plan

According to data gathered in 2014, only 68% of companies automatically enrolled employees into their employer sponsored retirement plans. This presents a huge problem for those employees who aren’t paying attention.

Those who don’t enroll in their company’s retirement plan are missing an opportunity to grow their nest egg before they get paid. This means they can’t accidentally spend the money without significant hurdles. In addition, it stands to reason that those who aren’t participating in company sponsored retirement plans are likely not saving elsewhere.

Smart savers will enroll in company sponsored retirement plans and contribute at least as much as will be matched by their employers – see mistake #3 below. Further, the savviest savers will max-out contributions to tax-advantaged plans to ensure they are reaping the largest benefits possible.

Retirement Planning Mistake #2: Leaving your 401k on Autopilot

When you enroll, or are automatically enrolled, in your company’s 401k plan, your contributions are typically placed in the default investment – unless you specifically choose otherwise. In some cases, the default investment is a cash position which gains minimal interest. In other cases, it is a retirement date fund chosen based on your age. In most cases, neither of these options is tailored to your specific financial objectives and may not accurately reflect your risk tolerance.

In addition to investment options, allowing your 401(k) to invest the default percentage of your income can lead to a shortage of retirement savings and lost money. Recent data shows that 63% of workers who were automatically enrolled in their 401k plans were enrolled at a contribution rate of 3% or lower. In many cases, employer matches are higher than these thresholds. In addition, nearly a quarter were enrolled at just 1%. While any level of savings is better than not saving at all, most people need to save 10-15% of their income to achieve their retirement goals.

The best way to gain confidence that your investments are appropriate for your situation is to speak to an experienced financial professional. Here at Meld Financial, our team of financial, legal and tax professionals can develop your Financial Fingerprint™, a comprehensive wealth management plan that is quick to assemble, easy to understand and simple to modify as your circumstances change.

Retirement Planning Mistake #3: Leaving Your Company Match on The Table

According to CNBC, 20% of people are not saving enough to qualify for their full company match. This means a shocking 1 in 5 people are declining free money – a huge mistake for those seeking wealth.

If your company offers to match your retirement contributions, you should invest at least enough to get the full match – after all, it’s free money. Taking advantage of your company’s matching contributions can help your retirement savings grow faster and give you a key advantage over traditional saving.

Retirement Planning Mistake #4: Waiting to Start Saving

Starting early with retirement planning and saving seems obvious, but half of people between 18 and 34 are not saving at all for retirement. Those who start saving at age 30 must invest over 50% more each month to achieve the same retirement goals as those who start saving at age 25.

The fact is: the most successful savers start early. As soon as you start working, you should start saving for retirement. In addition, you should work with an experienced financial professional to determine the amount you need to save to meet your retirement goals.

Retirement Planning Mistake #5: Having a One-Dimensional Portfolio

A portfolio too heavily weighted in one industry or company can expose you to excessive risk. In addition, an unbalanced portfolio can prevent you from profiting in sectors where you don’t have exposure.

Investing in different industries and different types of products can help you take advantage of market upswings and can provide a buffer during market downturns. Further, having a diversified portfolio that is tailored to suit your risk tolerance can help you achieve your goals without taking on unnecessary risk.

Building a properly diversified portfolio is no simple task, and that’s why an experienced financial professional is critical to an effective retirement plan. So, work with an experienced financial advisor to ensure your portfolio is properly diversified and designed to maximize the return for your risk appetite.

Retirement Planning Mistake #6: Not Having a Plan

This is often the biggest mistake of all, because if you don’t have a plan, you probably aren’t saving. And if you are saving without a plan, you’re probably leaving money on the table. To give yourself the best opportunity for success, create a detailed plan for your retirement that takes your specific needs into account.

An effective retirement plan will consider when you want to retire, estimate your expenses in retirement, work to minimize taxes, and determine how much income you will need to meet your goals. The easiest way to determine where you stand regarding your retirement goals is working with the team at Meld Financial to develop your Financial Fingerprint™.

Contact Meld Financial to Get Your Financial Fingerprint™

Working with an experienced team of wealth managers here at Meld Financial can help alleviate the stress of retirement planning. Our team of financial, tax, and legal professionals will work with you to understand your current financial situation and establish a plan designed to achieve your retirement goals.

Through our decades of experience managing clients’ wealth, we created a unique financial planning process called Financial Fingerprint™. Your Financial Fingerprint™ is a comprehensive wealth management plan that is quick to assemble, easy to understand, and simple to modify as circumstances change. We look forward to leading you down the road to a comfortable retirement. Contact us today to get started.

Trending Articles

Weekly Economic Update presented by Meld University
Weekly Economic Update

School of Financial Wellness

Stocks slumped. The FOMC held interest rates steady and updated projections. Existing home sales and home builder confidence fell.

Wealth managers are key to your investment strategy.
5 Characteristics of a Quality Wealth Manager

School of Financial Wellness

Looking for a quality wealth manager? We pulled together our list of the 5 most important qualities to consider during your search.

A desk with a calculator, glasses, money and 3 blocks with IRA, 401k and ROTH written on them. These are meant to represent a guide to the many different kinds of retirement plans.
Retirement Accounts: A Comprehensive Guide

School of Saving and Investing

There are so many different types of retirement accounts, it can be difficult to keep track. This handy guide makes it easy.

Why Meld Financial?

Meld Financial, Inc. is an independent wealth management firm located in Birmingham, AL.

We specialize in financial planning, investment management, employee benefits and executive benefits for individuals, families, trusts, foundations and institutions.

We provide independent and objective services melded with customer-driven financial goals.

Mark McGarvey - Founder - Meld Financial

“We will always recommend the same course of action we would choose for ourselves, given the same circumstances.”

-Mark McGarvey, Founder