What Common Errors Could Derail Your Retirement Plans? Avoid These 5 Retirement Mistakes
By Saghir A. Aslam
Rawalpindi, Pakistan
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities.)
Understand your options
Making retirement planning mistakes at any time, but especially when there’s economic uncertainty and market volatility, can create difficulties in achieving your long-term goals. Her are five common, and potentially costly, errors you’ll want to avoid.
MISTAKE # 1: Getting out of the market after a downturn
When the market takes a big hit, you may be tempted to sell investments in your retirement portfolio and hold the proceeds in cash. If you do, you’ll likely miss the gains if the market turns around. Consider talking a long-term approach by keeping a strategic mix of asset classes in your portfolio: stocks, bonds, and cash alternatives. The combination that’s right for you will depend on a variety of factors, including how comfortable you are with market volatility (risk tolerance), what you’re investing for (objectives), and how long before you’ll need to tap into your accounts (time horizon).
At least once a year or whenever there are dynamic changes in the markets, consider rebalancing by checking your accounts to see if market activity has shifted your investments away from desired asset allocation. If it has, you may want to buy and sell investments to bring your accounts back into alignment.
Mistake # 2: Not taking full advantage of retirement accounts
Consider contributing up to the maximum allowable amount into your qualified employer-sponsored retirement plan (QRP), such as a 401(k), 403(b), or governmental 457(b) plan. This would help fund your retirement as well as reduce your taxable income.
If you are unable to contribute the maximum amount and your employer offers a matching contribution program, try to contribute at least as much as the match - otherwise, you are leaving free money on the table.
Mistake # 3: buying too much of your company’s stock
If your employer’s stock is an investment choice in your 401(k), you may want to consider keeping your allocation to no more than 10% with your salary already tied to your company’s fortune, you may not want a sizeable part of your retirement saving to be similarly dependent.
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale.)
