4 Biggest Retirement Planning Mistakes

Avoiding these common investment pitfalls now will help bring financial security later.

Most of us know that neglecting to save for retirement is a big no-no. Even if you are in the savers lane, there are plenty of wrong turns you can make on the road to retirement. To stay on track toward a comfortable post-working life, avoid these retirement planning mistakes.

1. The waiting game

One of the most common mistakes you can make is putting off saving and investing until you have more money. The day that you feel you have extra money to put into savings is unlikely to come, regardless of your income. While you wait on the sidelines, your money is missing out on potential earnings. The earlier you start to save and invest for retirement, the better, because it gives your money lots of time to grow. So don’t think of savings as extra money, think of it as any other monthly obligation. Decide to pay yourself a certain amount each month, even if you start small. Because contributions to a 401(k) are made pre-tax, the after-tax impact on your paycheck may be less dramatic than you think.

2. Market panic

When you do begin investing for retirement, try to ignore stock market news — good or bad. Remember, you are in this for the long term. If you have selected your investments based on your goals and tolerance for risk, you should be able to leave them alone when the market swings. Otherwise, you may sell at a low and lose out on the upside if the investment recovers. Annual or bi-annual portfolio check-ins to rebalance your asset levels are a smarter move.

3. Abandonment issues

Leaving a job? Don’t forget to take your 401(k) with you. Roll it over before your exit interview, or within less than two months after you depart. You can move the assets into a new employer’s plan, if you are happy with the investment choices it offers. You can also get yourself a rollover IRA to hold your 401(k) assets without taking a distribution.

4. Early exits

Take your savings seriously and resist the urge to pull your money out early. If you take what is known as an early distribution before the minimum retirement age of 59 and a half, you owe taxes on the money, plus you will likely pay a 10% fine. You lose your tax advantage and your long-term accumulation, and you lose valuable time. So when should you start taking distributions? You can try to determine your life expectancy and create a target savings goal to meet your needs for a specific number of years in retirement. The longer you can extend your working years, however, the better off your retirement will be. If you have an IRA, you are required to start taking distributions around age 70 and a half. But with a 401(k), your account is safe as long as you are working.

So stay invested and keep saving, making increases to your retirement savings contribution as your income grows. Make no mistake, a secure retirement is attainable.

Want to know if you’re prepared for retirement? Find out with the Nationwide On Your Side Interactive Retirement Planner.