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5 dumb retirement savings habits

By Jennie L. Phipps ·
Thursday, September 9, 2010
Posted: 3 pm ET

The first step toward smart retirement planning is opening a retirement savings account.

You have a retirement savings account at work and every time you look at it you groan. Join the club. The brave new world of being your own retirement planning strategist can be ulcer-producing.

Take it a step at a time. The first step toward smart retirement planning is opening a retirement savings account and managing it. Here are five basic things that retirement savers often do wrong, as well as some better approaches.

  1. Saving the minimum. Chances are your employer offers a minimum savings suggestion -- often 3 percent. There's nothing magical about this number. It's generally chosen because it is so low that it won't scare off even the most reluctant savers. Go for the gold. Up your savings until the total percentage between what you save and  your employer match is at least 10 percent of your earnings -- 15 percent is better.
  2. Having no savings goal. It's like driving with no destination in mind. How do you know when you've arrived? Use's retirement savings calculator to estimate how much you'll need, then set your savings goal accordingly.
  3. Failing to understand your investment choices. Company-sponsored retirement plans are offering an increasing number of investment choices, but they often duplicate and overlap each other. Spreading your money around indiscriminately is not diversification. Take time to read about and understand your choices. If your plan offers exchange traded and/or index funds, that's often a good place to start because they mirror the market and provide opportunity as well as some likelihood of safety. Also, if you have access to someone who is really expert in your company's plan, consider seeking that person's advice.
  4. Having no allocation strategy. Devising an allocation strategy is a critical next step. A conservative approach is 60 percent stocks and 40 percent bonds. If you stick to this basic division and rebalance your savings account to adhere to it at least a couple of times per year, you may not have a whiz-bang portfolio, but you'll be automatically buying low and selling high.
  5. Being paralyzed. Too many choices. Too much at stake. If you can't bring yourself to even open the quarterly 401(k) report, it's definitely time to seek help. This is your life. Get moving.
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Phil Jones
September 14, 2010 at 2:08 pm

While I don't think mike's end-of-life plan is completely thought out, I do agree with his assessment of the banking industry. Wall Street has created a virtual economy based on perception and speculation producing no real product. Investing in the stock market is gambling and current election finance laws have allowed the game to be rigged. Consider using bonds, t-bills, CD's, and savings accounts to offset the risk of investing in stocks and be sure any deposit is FDIC insured. The bank will invest your money, but the risk will be theirs. Also, the money raised by state and federal bonds usually funds programs that benefit the community. The private sector is focused on profit. Bankers don't drive economy cars. As for the politics, tax breaks for billionaires do not help small business. Eliminating the already massive and still growing cost of healthcare for employees, lowering interest rates to refinance crushing debt, and closing loopholes that allow off-shore companies to avoid taxes will. Most important is investment in education. The information age and the economic boom it created was born in America's univerities.

September 14, 2010 at 9:50 am

Democrats have this notion and dividends, capital gains are in the domain of the rich!!
The only way for government to stimulate the economy is through public works projects with building/rebuilding infrastructure like highways.

September 14, 2010 at 5:53 am

yeah, after they destroyed the savings of millions of people, investment bankers are all preaching to maximize our savings, so they can re-load their coffers, AGAIN at our expense. so they can steal our money again. so they can preach to start saving again. so they can steal it again. i've done that cycle already, no thanks. I will spend my own money on my own vices, while I'm still young enough to enjoy them, I'm not funding anyone else's party again.
my new retirement plan is simple: a 12-ga. when i run out of money, the 12-ga goes in my mouth. A side benefit is, I don't have to worry about spending years wasting away in an old folks home. I actually have much less anxiety now.

September 12, 2010 at 11:01 pm

yeah I am going to add a comment my first cment didn't come threw so here it is again,consulat your lawyer and accountant what you want and what you need first the lawyer to draw up the pappers for it and to make sure your accountant don't steal from you go to the B.B.B. to look if its litjet and then talk over 401k's and stocks and all that garbage to go with it then pay attebtion to what they got to say if you don't think homeless if you don't pay attention with your money at all times.

Ranch Lakha
September 09, 2010 at 8:27 pm

I know you are correct, because lots of retiree need income that's why well planed retiree in stock market and invested in dividend paying stocks. Democrats and Obama loose in next election for raising taxes on dividends and capital gains. That needs to be kept where it is today and also to stimulate the economy Tax cut will be beneficial. Small business survival is like saving your own back so you can walk straight and longer. Don't you think that every one like to do.
That means current government taking steps in to wrong direction.
Thank you for allowing me to express my view.