5. Diversify!There's a reason they tell you not to put all your eggs in one basket. Drop it and you're out of luck. So, too, with your retirement nest egg. It doesn't matter how old you are or how big your paycheck is, it's vital to spread your risk by owning a mix of investments.
"Diversification can be your best friend," says Ellen Rinaldi, director of investment counseling and research at Vanguard, a mutual fund company. "If the market takes a drop and you're not diversified, you could take a significant hit that causes you to work longer."
These days, so-called lifestyle or life-cycle funds make it easy for even novice investors to diversify their investments, says Rinaldi. That's because they automatically reallocate assets to suit participants' age or retirement target.
As you get older, and near retirement, you'll likely need to do more personalized fine-tuning and asset rebalancing to hit your specific goals. For that reason, don't just rely on the funds to do your rebalancing. Use them as a guide but think about specifics like your personal savings targets, your tolerance for risk and the kind of money you need to save for a comfortable retirement.
Says David Wray at PSCA, lifestyle funds are "a generic solution. For young people they're a great place to start. But as you get into your 50s, you have to get involved."
6. Don't touch savingsIdeally, assets in your nest egg will remain intact and grow well into your retirement. Then again, life is never perfect, and there will be times when you're tempted to tap into your retirement accounts.
Yep, you can guess what's coming next.
Don't! It's not just the fact that you'll cut into your overall balance. You reduce future savings potential, too. For example, say you had $10,000 earning 10 percent annually. If you kept the money intact, you'd have $11,000 by the end of the year. Now, let's say you raid your account and reduce it by $1,000 to $9,000. It would earn $900 by year's end leaving you with a total of $9,900. That's a $100 earnings shortfall on top of the $1,000 you took out.
That's just the beginning. Most retirement accounts -- including 401(k) and 403b plans and IRAs -- generally levy a hefty 10 percent penalty for cashing in before you're 59½ in addition to income taxes you may owe.
The upshot: You may need money badly, but consider other options before turning to retirement savings to bail you out. A home equity loan that comes with certain tax breaks and less rigid repayment terms may be a better choice. If it's college you need to fund, consider low-priced college loans, a work grant or going to a cheaper institution. Even a second job can wind up being a far better way to address today's expenses while preserving your savings for tomorrow.
7. Control spendingDick Bellmer, chair of NAPFA, once had a client who earned well over $600,000 a year but was in debt so badly he could barely write a check for everyday expenses. So Bellmer helped the man consolidate loans and put him a budget that allowed him to pay creditors and get by.
What did the client do with his newfound access to cash? "He bought a boat," says Bellmer.
An extreme case of a spendaholic? Perhaps. But there are still many of us living way beyond our means. Today, the current credit card balance for those who carry lingering debt hovers between $12,000 and $13,000, according to Consumer Credit Counseling Service.
Those kinds of debts take years, and thousands of dollars in interest, to pay off. According to the Bankrate minimum payment calculator, for example, you'd spend $17,615 in interest and it would take 400 months to be rid of a $12,000 balance if you just stuck to minimum payments and were paying 18 percent interest.
If you've got high-cost debts, make paying them off your No. 1 priority.
"The best investment you can make is to pay off the credit card debt," says Steve Brobeck, executive director of Consumer Federation of America.
You may be able to get yourself free and clear of lingering debt by making minor compromises. Maybe that means eating at home for a few months instead of going out to your favorite restaurant or steering clear of department stores. Or it could require drastic measures like getting a second job or finding a roommate to split the rent.
If you feel overwhelmed, get help. A legitimate counseling service won't charge hefty fees to negotiate with creditors on your behalf, create a budget you can live with and help you get spending under control. Not sure where to find a reputable firm? Check with the National Foundation for Credit Counseling, a network of accredited non-profit counseling centers, for help near you at www.nfcc.org.