How to Prevent Putting Your Retirement Money in the Wrong Place

It seems like it’s fairly easy to save for retirement. However, you can make mistakes that will cost you dearly over the long run. Fortunately, with a little bit of education, you can avoid committing those unforced errors and have plenty of money in your retirement account when you reach your golden years.

Follow these tips and avoid having to learn the hard way by putting your retirement money in the wrong place.

Don’t Keep All of Your Money in Cash

It might seem tempting to keep all of your money in cash so that you can avoid getting burned in the event of a market downturn or some economic cataclysm. However, if you do that, you’re really just making things worse for yourself.

For starters, if there is a major recession or depression, you’re probably going to lose your cash anyway. That’s because the money is kept at a financial institution that’s going to be hit particularly hard in the event of a market crash.

Second, you’re losing money by keeping all of your retirement savings in cash. Thanks to inflation, a dollar today will be worth less a year from now. So, if you keep your money entirely in cash, that money will actually depreciate in value over time.

The best way to save money in retirement is to invest in mutual funds that have a proven track record of good returns. Of course, you’ll want to reallocate to less risky investments as you get closer to retirement. Also, diversify some of your money with bonds and a little cash. However, keeping it all in cash is a bad idea.

Watch out for Fees

All mutual funds are not created equal. Some offer better returns than others. However, some mutual funds also have higher fees than others.

Remember, mutual fund companies aren’t charities. They’re not providing you with investment options for free. They get paid for the service that they provide.

Before you put your money into any mutual fund for retirement, be sure to check its fee structure. You might find that you’ll get hit with significant fees that eat into your returns. Those fees could add up and hurt you significantly when it comes time to retire.

Making Risky Investments

You might be one of those people who wants to retire very well. To that end, you’ll chase risky investment opportunities with your retirement account that might end up leading you to bankruptcy court.

While it might seem tempting to go after a hot stock that everybody is buzzing about or chase a penny stock that you’re certain is going to be the next Amazon, such investments often lead to disaster.

It’s this simple: You’re not Warren Buffet. You won’t be as good at picking stocks as he is. Even if you were, you’ll find that he invested in solid companies and didn’t often take senseless risks.

Affordable retirement is a possibility. However, you might face an uphill climb if you make mistakes in your younger days. Follow tried-and-true investment strategies and you should do well.