First Person: We're Putting Our Retirement at Risk

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Overall, I think we're reasonably knowledgeable in regards to what it takes to one day achieve our retirement dreams. We're financially responsible people, hard workers, and pay attention to our money and the financial world around us. This however doesn't mean that we haven't made our share of mistakes when it comes to our personal finances. And some of these mistakes will have major implications on our retirement picture and my even end up delaying our eventual retirement.

Employer Sponsored Retirement Accounts

Neither my wife nor I currently contribute to our retirement accounts. It's not that we don't necessarily want to, but certain items have come up lately that just haven't made it that feasible. First off, we just bought a home and had another baby, which ate up almost all of our available liquid cash. Second, I'm self-employed and don't have an employer-sponsored retirement plan or matching contribution. Third, my wife's employer does offer such a plan but with an extremely minimal matching amount, which we felt made it more beneficial over the past few years to work at staying out of debt rather than paying into her retirement fund.

Unfortunately though, if we don't get back to making contributions of at least $2,000 each (or $4,000 combined) every year for the next 30 years at a 6 percent rate of return, we could cut our retirement account total by over $300,000 by the time we're ready to retire.

Incorrect Housing Market Timing

We probably had close to some of the worst timing possible for buying our first home. We ended up buying at the beginning of 2008, and selling in 2011. Unfortunately, in the process, we cost ourselves over $100,000. While I know that we are far from alone in the boat of huge housing market losses, and it's just one of those experiences in life we have to take and learn from moving forward, it could end up delaying our retirement significantly. Being out that $100,000, had we instead invested it at 6 percent over the next 30 years, could cost us nearly $575,000 in possible retirement funds.

Limiting Risk

For many years, I felt it was a good thing to limit risk, and in many ways, it was for us. By limiting risk, we were able to protect our money, have that money work for us, and in turn pay off debt, have children and buy a home outright. However, by playing it safe and limiting risk to an extent, we may also have diminished our investment returns.

Going for a guaranteed 3 or 4 percent on our returns leaves us feeling secure and not worrying about our money, but it can also decrease our ability to save enough for retirement. By going back to the inflation numbers I mentioned previously, a safe 4 percent return might seem well and good at first, but factoring in inflation at 3 percent, and we're left making headway of just 1 percent. And a 1 percent return on investment isn't likely to get our retirement accounts where they need to be by retirement. Therefore, we're looking to diversify into a bit more risk moving forward.

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