With the elimination of traditional pensions in many workplaces, Americans are left to their own devices with their 401k plan. For many of them, it’s not going so well. Beyond the often-poor investment decisions that are made, many investors are also raiding the retirement kitty. Business Insider explains:
Dipping into your 401(k) plan is tantamount to journeying into the future, mugging your 65-year-old self, and then booking it back to present day life.
To put that in perspective, consider how much workers contribute to retirement plans on average: $175 billion per year. That means people put money in only to take out nearly half that contribution later.
That’s not good. Saving for retirement is hard enough without stealing your own retirement money. Congress made you an investor whether you like it or not—now you need to figure out how to make the best of it.
Here are a couple of simple guidelines:
- save 15% of your income for your entire working career.
- if you can max out your 401k, do it.
- diversify your portfolio intelligently, by volatility, asset class, and strategy.
- resist all of the temptations to mess with your perfectly reasonable plan.
- if you can’t discipline yourself, for heaven’s sake get help.
I know—easier said than done. But still, if you can manage it, you’ll have a big headstart on a good retirement. Your 401k is too important to abuse.