First Person: I’ve Stopped Sabotaging My Nest Egg

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I almost sabotaged my nest egg recently by cashing out my 401(k) to buy a condo as an investment property. Fortunately, my husband talked me out of it. He persuaded me to crunch the numbers before making an impulsive financial decision based on a feeling I had about the real estate market. I recently read a U. S. News & World Report article that outlined 5 ways people often sabotage their retirement nest egg. I thought about all the ways I've cracked my own nest egg in the pursuit of living in the moment or chasing after get-rich quick ideas. The article inspired me to change my ways before it's too late. I'll probably retire in about 25 to 30 years.

Saving more for retirement

I can't undo the fact that I did not start saving early, but I'm hoping I'm saving early enough. I made regular contributions to my 401(k) in my 30s. I should have maxed out my Roth IRA, but I always had reasons for spending the money. Although I used to pretend I didn't receive a pay raise so that I could save that money for retirement, I haven't received a pay raise in actuality in many years.

Taking out 401(k) loans

Another mistake I've made that has hurt my retirement savings is taking a loan out on my 401(k) plan. Even though I avoided an IRS 10 percent penalty with the loan, I still ended up sabotaging my retirement. I told myself I'd still contribute the 10 to 20 percent of my income. However, once I started repaying the loan, I didn't continue to save new money into my employee-sponsored retirement plan. I no longer take out 401(k) loans.

Using the default investing option

According to the article, it's better to select our own investment lineup rather than allowing your contributions to go into a "default investing option." I know I just let my money accumulate in a target-date fund when I first started working for my company. After years of receiving only a 1 or 2 percent return on my money, I decided to do some research and pick better funds. I figured out that I could tolerate a moderate risk strategy.

Rebalancing my account

I didn't think about rebalancing until I turned 40. I realized that the investments I chose for my 30s were a lot riskier than what I would feel comfortable with in my 40s. I changed around my asset allocation in my 40s so that I wouldn't freak out every time the stock market took a dive.

Ignoring my account

Although it may sound like a bad idea to ignore my retirement accounts, keeping my hands off helped me to avoid over-trading. I was tempted to make frequent trades in my Roth IRA. After totaling up the money I spent on commission fees, I realized I would be better off buying and holding for at least several years. In a sense, I'm protecting my retirement account from myself.

In addition to putting more money aside for retirement, I'm also trying to preserve what I've already saved for retirement. Instead of putting all my money into stocks, I'm saving money so I can buy real estate investments in the future. By the time I retire, I hope to have a diversified portfolio that will carry me through until I'm 100.

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More from this contributor:

My Backup Plan for an Involuntary Retirement

I'm Neglecting my Retirement Account

When Retired People Hit Their Debt Ceiling
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