5 signs that you are sabotaging your own retirement

How would you like an opportunity to burn your financial security in retirement?

Most people would respond to that with “Are you crazy? Why would I ever do such a thing?” If only that were the truth, America’s retirement picture would look a lot less dire. Sadly, I see lots of people sabotage their retirement in ways big and small.

Here are 5 signs that you are putting your future financial security at risk.

#1: You do not have a financial plan.

No, having a general idea about your money situation does not cut it. No matter how smart you are, doing a financial plan “in your head” is a shortcut straight off the cliff. You would not do your own appendicitis surgery or repair electrical wiring in your home, so why would you assume that you have sufficient knowledge of investments, tax rules and Social Security to do your own planning? To give you an idea for how silly that is, know that even the best financial planners hire a financial planner when it comes to their own money situation. Insight by an independent professional is well-worth the fee.

#2: You are tapping into your 401(k) account for “emergencies”.

The beauty of 401(k) contributions is that once you sign up, they come out of your paycheck automatically – rain or shine. Out of sight is out of mind, which is perfect when it comes to savings. However, that approach only works if you leave your 401(k) untouched. A recent study by T. Rowe Price reported that 70% of plans consider “leakage” (early withdrawals) to be a serious problem. When emergency strikes, people tap their 401(k) balances in the form of a loan, withdrawal or an outright cash-out. The best way to combat this problem is to have a financial wellness plan (see point 1) and an emergency savings account with a healthy balance (see point 4).

#3: You spend your windfalls.

There is nothing quite like a big raise, bonus, lottery win or unexpected inheritance from Aunt Matilda to make you feel like an instant millionaire. Since you are swimming in money, why not splurge, right? Small splurges are fine, but be sure to save at least half of that “found money”. Your budget was built without counting on it, and your savings account will thank you.

#4: You do not have a savings account with regular contributions (outside your

401k).
An emergency savings account is meant to bridge the gap when unexpected expenses hit. Many people see the theoretical wisdom in that, but few get around to actually executing on this idea. I recommend that you borrow a page from the 401(k) playbook and set up an automated withdrawal to move a predetermined amount of money from your checking account into a savings account every week. This strategy takes your willpower and memory out of the equation, thus setting you up for success. Your bank may offer tools to set up an automated transaction, or you can use apps like Betterment or Acorns to “set it and forget it”.

#5: You look for investment advice in the wrong places.

The hard truth is that the media (from TV programs to financial blogs) is not in the business of financial planning. They are in the business of views and clicks. And what is the best way to get views? By screaming that you must invest right now – or that the world is veering off the cliff and you must sell right now. The media knows just how to get viewers and readers nervous, and they do it to drive their revenues up. What happens to the value of your retirement portfolio in the process? Well, that is anybody’s guess.

5 signs you are sabotaging your own retirement.

In short, my advice is to take charge of your retirement security by working with a trusted financial planner. Many people are afraid to take this step in the same way they are scared to visit their doctor for the annual physical exam. The truth is that financial and medical check-ups are least painful and expensive if they are done sooner rather than later. Do yourself a favor, stop procrastinating and get some help. In 10-20 years, you will be glad you did.

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