When it comes to building your nest egg, you can't afford to make any mistakes, especially if your retirement is right around the corner. If you're in your 40s, you still have time but your window for saving is starting to narrow. So it's important to commit to setting aside as much money as possible. Make any of these serious blunders and your retirement-planning strategy could veer wildly off course.
1. Putting Education Savings First
In your 40s you might have a kid who's preparing to head off to college. While it's important for your child to get an education, you don't have to put yourself in the poorhouse trying to pay for it.
Cutting back on your retirement contributions or stopping them altogether so you can cover tuition might save your child from having to take on student loan debt. But it's not going to do you any favors once you hit your golden years. The longer you delay saving, the harder it's going to be to play catch-up down the line.
2. Sticking With Riskier Investments
Any smart investor knows that you can't afford to put all of your eggs in one basket when it comes to your portfolio. Mixing things up by investing in stocks, bonds and mutual funds can make it easier to recover when the market gets a little shaky. One thing you don't want to do in your 40s, however, is keep too much of your money tied up in risky investments.
As you get closer to 50, it's best to start shifting more of your portfolio into conservative assets like bonds. Sure, you're not going to get the same returns as you would with stocks. But you won't risk losing your entire life savings either.
3. Low-Balling Your 401(k)
Getting a raise and having extra cash in your paycheck is great. But it'll go to waste if you're not using it to your advantage. Raising your 401(k) contributions to account for a hike in your salary is a good move if you're gung-ho about saving. Every time your pay increases, consider increasing the percentage of your pay that goes to your 401(k).
Bumping up your savings even just a little can make a huge difference. Avoiding the urge to spend those annual raises and saving them instead can really pay off.
4. Skipping out on Life Insurance
Life insurance might not be on your radar at all. But it's definitely an important thing to consider if you're in your 40s. If you were to die unexpectedly, a life insurance policy could be used to pay off any lingering debt, help cover your child's education costs or soften the blow of any estate taxes your beneficiaries might owe.
Term life policies last for a set amount of time and offer premiums based on your age and health status. The younger you are, the lower the premiums will generally be, so you don't want to put off getting coverage. If you want a permanent policy that lets you build cash value, you could look into getting whole life insurance. Just know that the premiums tend to be more expensive.
The Takeaway
If you've made any of these retirement planning mistakes in your 40s, (or you haven't started saving at all) it's not too late to turn things around. Every penny you can put away now will put you one step closer to being able to enjoy a comfortable retirement.
Photo credit: ©iStock.com/Juanmonino, ©iStock.com/RBFried, ©iStock.com/andy_Q
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