- Wait to start saving for retirement until you’re 28. The 10 years between 18 and 28 don’t really matter, so focus on going to an expensive university, taking out student loans and “treating yourself a little”. You have the rest of your life to save for retirement and it’s not like you’ll save that much more towards your retirement in those 10 years. In fact, the little compound interest is barely worth bothering.
- Wait until your company offers you money before you start saving. It’s not really worth it to put your own money into a retirement account unless you have a substantial amount of money to contribute. If your employer puts some money in a 401k or 403b for you, that should be good enough. The $50 a month you could put in your retirement fund wouldn’t move the needle much anyway.
- Don’t bother with the company “match.” Similar to my advice above, but If your company is only matching 1 percent of what you contribute into your account it’s probably not worth your time to deal with the paperwork and hassle. So stick that money in a good old-fashioned savings account with a 0.0001% interest rate (OK it’s slightly better than that, but not much).
- Don’t start saving for retirement until you’re making over $50k. When you start making a better salary you can start to think about retirement investing. For now just focus on your day-to-day bills because you’re “too broke” to start saving now. You can worry about catching up with your retirement later. You’re only 25, any none of your friends are saving for retirement either. Plus there’s always social security. We all know how well our politicians manage their money, why not let them manage yours!
- Choose the investments in your retirement account without researching them. Just stick with the “average investors” plan that the company offers you. You’re not a financial expert so don’t bother trying to do any research or figure out what each of the options mean. Ignore the informational packet HR gives you about “high risk” and “low risk” investments. It doesn’t really matter and you’ll probably fair just as well guessing which percentage of your money to put where.
True Story! I’m ashamed to admit that these retirement “don’ts” are based on my own experiences. Because I was in a lot of student debt, I didn’t even think to start saving for retirement until all of the debt was paid. Even then, I didn’t have a lot of extra money and I didn’t think that $50 or $100 a month would really make much of a difference in the long-term (boy was I wrong!).
Truth be told, I didn’t even have a retirement account until 2 years ago. That’s when my company began putting money in a 403b for me. I work for a non-profit and after 2 years of service to the company, my employer starts to save a percentage of each employee’s annual salary for them in a retirement account. It’s not a lot of money, but it’s “free” money. “free money” that made me realize I needed to start saving on my own.
When I did start saving I chose my investments based on a little brochure that was included in my informational packet. I had no idea what I was choosing, or why, so I took the standard plan that they “make” for your and hoped that I’d made a good decision. Not exactly one of my wisest financial moves, but, thankfully it all worked out OK.
I’m certainly not a retirement expert now, but I am much better informed about retirement savings than I was 2 years ago. So if you’re just starting out with retirement savings, please learn something from my mistakes. And here’s some real (and good) advice that was given to me by someone who is far more wise and knowledgeable when it comes to retirement savings: Save Early and Save Often!
Are You Saving for Retirement? Have You Made any Mistakes Along the Way?