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Retirement may seem a long way off and far removed from your day-to-day concerns. And yet, this is actually the best time to start planning and saving — that is, when you still have time to accumulate the money you’ll need.
Here are some common mistakes that throw people off course in their retirement planning. Knowing these pitfalls should help you steer clear and save more.
If your company’s 401(k) plan offers a company match (meaning that your employer pledges to match your contribution up to a certain percent of your salary), you have an extra incentive. If you neglect to invest enough to receive the full company match, you’re leaving money on the table. If you get a raise, consider increasing your 401(k) contribution.
When the market takes a big hit, you may be tempted to pull out all the stocks in your retirement portfolio. If you do, you’ll miss the gains if the market turns around. You want to keep a good mix of asset classes in your portfolio: stocks, bonds, and cash. And once a year, you should rebalance to keep your asset allocation on track.
If your own company’s stock shares are an investment choice in your 401(k), you may want to consider keeping your allocation to no more than 10 percent. You’re not being disloyal; even the mightiest of companies — think Enron and WorldCom — can falter. With your salary already tied to your company’s fortunes, you don’t want a sizable part of your retirement savings to be similarly dependent.
Many 401(k)s allow you to borrow from your account. Unless you need the money for an emergency, try not to. Borrowing can be an expensive choice, in two ways:
Some crucial factors to take into account:
Find out with My Retirement Plan, an online tool that makes it easy to see if you are on track. After you answer a few questions, My Retirement Plan will calculate your retirement savings goal and recommend personalized next steps.
This article has been prepared for informational purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Investing involves risk including the possible loss of principle. Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. The accuracy and completeness of this information is not guaranteed and is subject to change. Since each investor's situation is unique you need to review your specific investment objectives, risk tolerance and liquidity needs with your financial professional (s) before a suitable investment strategy can be selected. Also, since Wells Fargo Advisors does not provide tax or legal advice, investors need to consult with their own tax and legal advisors before taking any action that may have tax or legal consequences.
Retirement Professionals are registered representatives of and offer brokerage products through Wells Fargo Clearing Services, LLC (WFCS). Wells Fargo Advisors is a trade name used by WFCS and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company. Discussions with Retirement Professionals may lead to a referral to affiliates including Wells Fargo Bank, N.A. WFCS and its associates may receive a financial or other benefit for this referral.
Wells Fargo Bank, N.A. is a banking affiliate of Wells Fargo & Company.