At some point, we all want to retire.
But to do so, you need a plan. And, according to finance coach Dave Ramsey, there are key 401(k) mistakes you should try to avoid.
Key Points About This Article
- When markets get as volatile as they’ve been, don’t panic stay calm.
- The one downside about 401(k)s is that they usually offer a limited number of options.
- Consider adding a Roth IRA to your retirement plans.
- Your future is too important to leave to chance. See if you’re on track for retirement by taking this simple quiz and matching with a fiduciary financial advisor serving your area. It only takes a moment, and is totally free. Click here to begin. (sponsor)
Investors Panic in Times of Wild Volatility
When markets get as volatile as they’ve been, some investors do ridiculous things, such as panic selling. That’s actually the worst thing you can do.
Instead, don’t panic stay calm.
Easier said than done, I know.
But remember, markets are resilient. We’ve come back from far worse. If you panic, you sell. And if you sell, you miss the potential for the recovery rally. We have to remember that markets are resilient and do recover, as they have historically.
As Dave Ramsey told TheStreet.com:
“They jump in and out. They freak out when the market goes down, they stop, they start, they try to time the market,” Ramsey said. “And you and I know that there is tons of research on Wall Street about people that try to time the market. They do not keep up with the person who’s steady — the steady investor.”
“I’m a steady investor and I teach people to be a steady investor,” he said. “Those are the ones that end up with the most money. Don’t try to time the market. The people that are trained to time the market don’t do it well. And you certainly don’t need to do that,” he added.
Investors should add Roth IRAs
The one downside about 401(k)s is that they usually offer a limited number of options.
You might get to pick and choose from just a handful of investments or up to a couple dozen investments. And larger companies might offer a more diverse group of offerings. It all depends on the company, as noted by Ramsey.
Instead, the coach suggests that investors invest in Roth IRAs for their tax advantages.
With a Roth IRA, your money can grow tax-free with tax-free withdrawals. But please check in with your financial advisor before doing anything. Or, if you’re self-employed, look into the Solo 401(k), a variation of the 401(k) plan but specifically set up for those who work for themselves.
In addition, enrolling in a 401(k) plan through an employer is another great way to build your retirement savings. It’s even better if your e employer will match your contribution.
If your employer offers a match up to 6% of your pay, try to max out your contribution. According to Ramsey, eight out of 10 millionaires invested in their company’s 401(k) plan.
Again, before making any financial moves, check with your advisor.
When it comes to your money, it really is easier to be safe than sorry.
The image featured at the top of this post is ©Beth Gwinn / Getty Images.