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Seven Slip-ups with Retirement Plans that are common and easily corrected.



 
1. Failure to participate.
Even with credit cards or student loans to pay, it is good to start this habit right away.
2. Money market as default.
Money market funds usually earn less than inflation. Don't use them until a bit before retirement, when they can used as a liquidity cushion. 
3. Quit and cash out.
When you change jobs, take the money with you in a rollover IRA. You may be allowed to transfer to your new Retirement Plan. If you spend this money, you pay tax and a ten percent penalty, unless you are age 59 1/2 or more.
4. False diversification.
Look under the "hood" of the funds you hold. Many may be invested in the same stocks. The "style box" that accompany some mutual fund information can be your guide.
5. Putting away too little.
Social Security, is not enough. You cannot sell shares in your house, if you need money. Having financial assets is important.
6. Too much fiddling.
Make a good allocation, re-balance periodically, and leave it alone. If the stock market fascinates you, get a separate brokerage account for trading and investing.
7. Failing to re-balance.
By re-balancing to your allocation you will maintain your diversification. By re-balancing regularly, you are selling high and buying low. Selling some of your more successful investments seems counter-intuitive, but it works.