King bell
VIP Contributor
The number one reason people fail to save for retirement is procrastination. They're confident that they have plenty of time, and so buy a new house or car instead. If you're at risk of blundering into the same trap, read on for some retirement plan pitfalls you should avoid.
1. Letting Fees Derail You
As your retirement date creeps closer, you might move your money from funds with higher management fees to those with lower fees – or even no fees at all. Keep in mind that a low-fee fund can still be expensive if its performance is poor. And although there's an exception to every rule, most investors should keep their investments simple and not pay additional fees for "sophisticated" strategies.
2. Having Too Much Faith in Single Investments
In the late 1990s and 2000, technology companies were all the rage; some people invested their life savings in Internet stocks like Amazon.com Inc. (Nasdaq: AMZN) and Cisco Systems Inc. (Nasdaq: CSCO). But their dreams were crushed by the crash of 2000. The moral? Don't put all your eggs in one basket.
3. Not Having Enough Risk Tolerance
Earlier this year, an 88-year-old man became a sensation in financial circles when he lost $3 million of his life savings – his entire retirement fund – in four months' time at the hands of a financial advisor who recommended that he compound his portfolio's return with leverage (expand it by borrowing money). There's no harm in employing leverage if you're well advised, but excessive risk-taking is not advisable either.
1. Letting Fees Derail You
As your retirement date creeps closer, you might move your money from funds with higher management fees to those with lower fees – or even no fees at all. Keep in mind that a low-fee fund can still be expensive if its performance is poor. And although there's an exception to every rule, most investors should keep their investments simple and not pay additional fees for "sophisticated" strategies.
2. Having Too Much Faith in Single Investments
In the late 1990s and 2000, technology companies were all the rage; some people invested their life savings in Internet stocks like Amazon.com Inc. (Nasdaq: AMZN) and Cisco Systems Inc. (Nasdaq: CSCO). But their dreams were crushed by the crash of 2000. The moral? Don't put all your eggs in one basket.
3. Not Having Enough Risk Tolerance
Earlier this year, an 88-year-old man became a sensation in financial circles when he lost $3 million of his life savings – his entire retirement fund – in four months' time at the hands of a financial advisor who recommended that he compound his portfolio's return with leverage (expand it by borrowing money). There's no harm in employing leverage if you're well advised, but excessive risk-taking is not advisable either.
