Danielle LeChard Article Q3 2025 Frank Talk Newsletter

Table of Contents

Avoid These 7 Retirement Investing Mistakes

Employer-sponsored retirement plans — such as 401(k), 403(b) and 457 plans — are among the most effective savings vehicles available. Unfortunately, it's all too easy for investors to make missteps that substantially reduce their balances. Here are seven common mistakes to avoid.

1. Choosing the Wrong Plan

In recent years, many workplace plans have allowed participants to choose between traditional and Roth options, or even to split their contributions between them. Contributions to traditional accounts are pre-tax (tax-deductible), but withdrawals are taxable. Roth plans accept after-tax (nondeductible) contributions, but qualified withdrawals are tax-free.

Which option or combination is right for you depends on your financial circumstances. For example, if you're in a high tax bracket and expect to be in a lower bracket in retirement, the upfront tax savings generated by deductible contributions may outweigh the benefits of tax-free withdrawals in retirement.

2. Passing Up Matching Funds

Many organizations with retirement plans provide matching funds as an incentive to contribute. A common approach is to match 50% of your contributions up to 6% of your salary. For example, if your salary is $200,000 and you contribute 6% ($12,000) to the plan, your employer would chip in another $6,000. This is essentially free money, which you'll leave on the table if you don't contribute enough to maximize your employer's match.

3. Departing Before Vesting

Depending on the terms of your plan, matching contributions may be subject to a vesting schedule. You may need to work for your employer for a specified period before you can keep the matching contributions. It's critical, therefore, to understand your plan's vesting policy. Keep in mind that your contributions always vest immediately. (See "Changing jobs? Weigh your retirement plan options" below.)

4. Forgetting to Review Allocations

You should regularly monitor your investments to ensure the asset mix aligns with your risk profile, time horizon and financial needs. For instance, when you're in your 20s or 30s, you might invest most of your funds in riskier, growth-oriented assets, such as stocks. As you approach retirement, however, you might gradually shift your investments into less risky assets, such as bonds. One option is to invest in target date funds, which automatically adjust the level of risk over time.

Be sure to review the asset allocation in your account regularly and rebalance it if necessary. Say your retirement funds are invested 60% in stocks and 40% in bonds. If stocks outperform bonds for an extended period, the allocation may shift to, say, 70% stocks and 30% bonds. At that point, you should rebalance your investments to achieve your desired allocation and risk level.

5. Reviewing Too Often

As much as it's a mistake to forget about your investments, there's also risk in reviewing them too frequently. Checking your account balance every day can create anxiety, particularly during periods of market volatility. Such anxiety may tempt you to reduce or even stop contributing. But saving for retirement is a long-term endeavor. To increase your chances of reaching your goals, it's important to stick with your plan, even if your account loses some value in the short term.

6. Overlooking Fees

Because you don't write a check for management fees, it's easy to overlook them. But fees erode the returns your investments earn over time, so paying attention to your plan's annual fee disclosure statement is important. If your plan's fees are high, consider investing the minimum amount to qualify for the full employer match and investing other funds in a lower-cost IRA.

7. Withdrawing Funds Early

Only withdraw funds from your retirement account before you reach age 59½ in an emergency. In most cases, early withdrawals will trigger a 10% penalty on top of income tax. Some plans offer loans or hardship withdrawals, but you should try to avoid taking even these options. They may generate fees, plus you'll lose out on returns the funds would have earned if you hadn't withdrawn them.

With some research and careful planning, you can avoid common retirement plan mistakes. To help maximize your chances of a secure retirement, discuss your goals, timeline and risk tolerance with a professional advisor.

Sidebar: Changing Jobs? Weigh Your Retirement Plan Options

If you're changing jobs, you'll need to decide what to do about your former employer's retirement plan. Generally, unless your account balance is less than $7,000, you'll be able to leave funds in the old plan. Alternatively, you can:

• Roll the funds over into an IRA,
• Roll the funds over into your new employer's plan (if the plan allows it), or
• Withdraw the funds, subject to tax and, if you're under 59½, a 10% penalty.

To determine the best course, compare the plan's investment options and fees with those available through an IRA or your new employer's plan. Keep in mind that funds in a qualified employer plan often enjoy greater protection against creditors' claims than funds in an IRA. However, an IRA may offer greater control over the timing of distributions.

© 2025

Important Disclosures

Investment advisory services are offered through Planned Financial Services, LLC, dba Return on Life^® Wealth Partners, an SEC-registered investment adviser. Registration does not imply a certain level of skill or training.

The views expressed are current as of the date of publication and may change without notice. The strategies and concepts discussed in this article are provided for informational purposes only and may not be suitable for all individuals.

Investing involves risk, including the possible loss of principal. This article does not constitute individualized investment, legal, or tax advice. Individuals should evaluate their own circumstances and seek guidance from qualified professionals — including financial advisors, attorneys, or tax advisors — before implementing any strategies discussed.

For more information about our services and regulatory disclosures, please visit our Form ADV: https://adviserinfo.sec.gov/firm/summary/112879.