People make mistakes. There’s no avoiding it. The key to success in retirement planning (and in life itself) is to avoid making huge, outrageous, absurd, mind-numbingly stupid mistakes.
With that in mind, we’ve listed a few retirement moves you should avoid like the plague.
1. Planning for retirement, but not death
Sure. You might live forever. But it’s crazy to plan on it. Yet lots of people apparently do.
And the I’ll-never-die crowd tends to make two really awful moves in retirement planning. First, they put their cash into things like variable annuities and taxable funds and such, essentially destroying portions of the wealth they could have left to their heirs.
Even more dangerous, they neglect to buy life insurance. So that when they get hit by a bus at the age of 32, two years into their surefire plan to retire with millions and millions of dollars, they leave their spouse and kids with two years worth of mutual-fund contributions and nothing else.
2. Putting your investments into your company’s stock
We like loyal employees too. We think those guys are the salt of the earth. Really. We admire them.
But we also think they’re as dumb as dirt.
If you’re one of those people, all we can say is smarten up!
You can do a Web search of dumb things to do with your money and this will always come up at the top of the list. Heck, you can go to the local library, have them dust off that old microfiche machine and do some research from before the Web, and you’ll find that investing in your company’s stock was considered a bad idea before you were born.
Not convinced? OK. We give up. Maybe this guy can convince you.
3. Declining free money
Not all companies offer a 401(k) match. That’s too bad. It’s really a wonderful thing. You put a $1 into your retirement fund, and the company puts $1 in too. Then both of those dollars grow tax free.
If your boss is the kind and benevolent sort who is willing to match what you save, stop by his office and say “thanks!” (While you’re there, ask him if he’s hiring. If so, drop us an email.)
Yet we can’t blame companies for not matching 401(k) contributions. Doing so is expensive. And as we’re sure you’ve heard: money doesn’t grow on trees.
But we will blame employees who don’t take advantage of such plans. Such people make our skin crawl. They say and think crazy things like “I can’t afford to save $1” and expect sympathy because they don’t realize that what they are actually saying is “I could buy $2 with a single pre-tax dollar, but my cognitive abilities are such that I can’t see what a clearly wonderful thing that is.”
To such people we can only say … actually, we can’t think of a thing to say to those people.