A lot of Americans own retirement accounts, but too many are not optimizing the growth potential of those accounts.
About 58% of Americans between the ages of 56 and 64 own at least one kind of retirement account. Over 77% of Americans are saving money for retirement via their employer-sponsored retirement accounts.
However, many Americans make simple retirement account mistakes that cost them real money. Here are three big ones.
Not taking advantage of investing opportunities
Making minimum contributions is only one crucial part of owning a retirement account. To make your money grow as much as possible, you must personally choose investment opportunities offered by your retirement plan.
The investment opportunities connected to your retirement plan depend on the type of account you own. An IRA offers many kinds of investments. You can even choose individual stocks with an IRA.
If you own a 401(k), then your employer and plan provider chooses your specific investment options.
The point is that if you don’t choose investments relative to your contributions, then your money will never grow.
Neglecting to accept employer’s matching contributions
This is one of the biggest mistakes that aspiring and retired people make all of the time. They either don’t ask if their employer matches retirement plan contributions or take advantage if they do.
An employer might only match a specific percentage of your salary contributions to your retirement plan. Some employers will match 100% of every penny you contribute. Other employers will contribute to your retirement plan even if you contribute nothing.
But unless you know about matching contributions, and ask, they won’t happen.
Too conservative investing
How you invest via your retirement account is up to you. You should consult with an investing professional to help you make investments that make sense for you and benefit your portfolio.
While you should always invest wisely and pay attention to market conditions, you should refrain from investing too conservatively as well.
Whether it is stocks, municipal bonds, real estate, or mutual funds, you should endeavor to create a well-diversified investment portfolio but one tilted toward long-term growth.
At the very least, having a well-diversified retirement account investment portfolio is an excellent buffer against financial market volatility. It is also worth noting that your retirement account value will grow very slowly if you don’t try to bring in returns.
You should only consider investing ultra-conservatively once you retire, relative to your personal financial circumstances.