{"id":7817,"date":"2014-06-25T11:38:58","date_gmt":"2014-06-25T18:38:58","guid":{"rendered":"http:\/\/www.marketriders.com\/investing\/?p=7817"},"modified":"2016-12-21T07:28:00","modified_gmt":"2016-12-21T15:28:00","slug":"avoid-common-dangerous-retirement-blunder","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/avoid-common-dangerous-retirement-blunder\/","title":{"rendered":"Avoid This Common And Dangerous Retirement Blunder"},"content":{"rendered":"

Every well-built machine has at least some moving parts. When it comes to\u00a0retirement\u00a0investing, the dangerous moving part is \u2014 you.<\/p>\n

Early on, when you start saving, the problem of one’s own emotions often is subdued. You likely don’t have much money in your\u00a0retirement\u00a0accounts, and if you are in a workplace 401(k), not much say over how you’re invested anyway.<\/p>\n

In time, that changes. One day, 10 years down the road, you will take a look at a quarterly statement from your plan and realize “Wow, there’s some real money here!”<\/p>\n

\"retirement<\/a><\/p>\n

And that, too often, is the undoing of\u00a0many a\u00a0retirement\u00a0plan<\/a>. It’s when the balance “odometer” rolls over a large, round figure, say $100,000, that many people begin to consider borrowing against their 401(k) for a new car, a vacation, debt consolidation, and so on.<\/p>\n

That’s the first mistake many\u00a0retirement\u00a0savers make. Taking money out of your tax-deferred accounts for spending means you just have to pay it back (it’s a loan to yourself) and during those intervening years you lose any market gains.<\/p>\n

But it’s not the biggest blunder. That comes later, after you’ve moved through two or three jobs.<\/p>\n

Workers as they jump from job to job can and should roll over their old 401(k) money into new workplace plans. They also can roll them over into traditional IRAs.<\/p>\n

The problem (and the advantage) of an IRA is that often you have to make your own investment choices. Buying a\u00a0target-date fund or a balanced fund<\/a>\u00a0can help you avoid the risks of a big mistake late in the game, but people often choose a different course.<\/p>\n

Many look at their now-significant balances and figure, “Wow, if that’s what happened from my not paying attention, imagine what I could do by choosing my own investments!”<\/p>\n

So, they do. The result is what financial advisors sometimes call the “yard sale” portfolio. A little of this, a little of that, piles of other things. There is no rhyme or reason to many of the investments, no rebalancing, no asset allocation \u2014 just a lot of investments in one account.<\/p>\n

Older investors thus often take too many big chances, owning far more volatile investments than their personalities and time horizons might otherwise suggest. In time, a big market decline arrives, like clockwork, and the stage is set for the final big blunder.<\/p>\n

Locking in losses<\/strong><\/h2>\n

As the portfolio balance falls, our older, independent investor feels each wrenching slip. Things get worse and worse. A financial advisor might counsel selling some stocks early to get more exposure to bonds, but the solo investor has no such help.<\/p>\n

Then, when the stock market finally bottoms and the pain can be no worse, the investor sells, locking in losses they cannot possible recover. Game over.<\/p>\n

The answer is to own a real portfolio that includes a basket of investments and to\u00a0hold them unemotionally through thick and thin<\/a>. Inching back on volatility as you age can help reduce the risk of an emotional error that will prove a costly mistake when\u00a0retirement\u00a0finally arrives.<\/p>\n","protected":false},"excerpt":{"rendered":"

Every well-built machine has at least some moving parts. When it comes to\u00a0retirement\u00a0investing, the dangerous moving part is \u2014 you. Early on, when you start saving, the problem of one’s … Read more →<\/span><\/a><\/p>\n","protected":false},"author":8,"featured_media":7820,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_wp_rev_ctl_limit":""},"categories":[8],"tags":[43],"yoast_head":"\nAvoid This Common And Dangerous Retirement Blunder | MarketRiders<\/title>\n<meta name=\"description\" content=\"Older investors often take too many chances. 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