Top 10 All Too Common Investment MISTAKES To Avoid
ฝัง
- เผยแพร่เมื่อ 30 มิ.ย. 2024
- Social Security Quick Calc: www.ssa.gov/OACT/quickcalc/
Inflation Calculator: smartasset.com/investing/infl...
00:00 Intro
00:41 Not Having A Retirement Account
02:53 Missing The Match
04:19 Leaving Before Being Vested
05:43 Only Using Employer Retirement Plan
06:57 Early Withdrawals
07:57 Following The Wrong Path
09:29 Ignoring Taxes
10:32 Ignoring Inflation
11:18 Checking Accounts Daily
12:18 Aiming for $1,000,000
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Disclaimer: Please note that this video is made for entertainment purposes only and not to be taken as financial advice. Always make sure to do your own research.
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As an employer most of my adult life it just shocked me how many people would not take advantage of the retirement plans offered. One can lead a horse to water...
Seriously! At my last job we had a voluntary enrollment program with a Fidelity 401k. And I would literally go to great lengths to talk the new employees (or young employees) simply to open the account and capture the match.
People just don't believe it. They feel its too cumbersome or they don't have enough money. At work. I literally had to sit 10 people down a month. Mostly new employees or open enrollment to show them. Companies really just mention it briefly. After working many jobs over the last years and helping many people. The problem comes in just they don't want to be responsible for making a mistake. People have that much faith in the ability to do something. With all the stories of people losing wealth through investments or people mis managing their money. They just don't think or believe it's that easy. Unfortunately society has made people dependent to professionals for every thing. That's what I've got in the trenches. And Companies don't emphasize how easy it is. I mean it takes some understanding but honestly it's easy compared to the actual work they are doing. I had to convince people people that the company will match you 5 percent. So put the 5 percent in. Again they don't trust themselves doing it.
@@ErinTalksMoney You're hilarious Erin. So genuine and earnest, that you'd actively pursue new employees to make sure they do what's right for their retirements...(p.s. My wife swears by her Fidelity account, it's done fantastic for decades already). Oh, great video again. Keep hammering away at the basics, you're helping the most people in the most effective way possible.
I managed a team of well educated professionals for many years. While I couldn't give them direct financial advice or force them to participate in the 401k, I did offer them my 1993 copy of Jane Bryant Quinn's Making The Most of Your Money. All the "secrets" to financial success were in the book if they wanted to do the work to read it. I was happy to help with any questions they had after reading the book. It's probably the only personal finance book I ever read and followed. It may be the most valuable gift I was ever given. Our son gets a personally authored two volume set of instructions from Dad. It's all the JBQ book concepts I put in practice and embellished with actual examples he's grown up with.
No one encourages or educates the benefits of doing so. So no wonder no one utilizes the benefits available.
I cashed out a 401k to buy my house. Big mistake, I'll never make up what I lost. Plus the tax penalty the following April was a shock too. I took advise from the bankers. All they wanted was to get me into that mortgage, no matter what the cost.
ouch!! Yes, bankers want to close their mortgages
Best way to get them back is to tell EVERYONE that story. Thanks for sharing. Hang in there, compadre - I'll bet you're doing better than you think! Watching Erin's stuff means you're at least thinking in the right direction, right?
@@billy2807 I try to share that story with anyone who will listen. Hopefully it will help someone so they don't make the same mistake I did!
Hopefully you purchased the home before the rise of interest rates .
Don't underestimate the value of locking in your housing expense especially in high inflationary periods .
I have a strong suspicion that purchasing your home could end up being a great financial move
No matter what the cost to you. They probably got commissions and bonuses. But I do agree with Sergio’s comment above. You will probably end up very well.
Boy - I clicked on this video feeling pret-ty confident that it was going to be about crypto and day trading and meme stocks...none of which I partake in...anymore. I was ready for that WAVE of voyeuristic self-satisfaction that I get when I'm done working out and then go watch My 600 lb. Life (sometimes I order a pizza first, ngl).
Turns out I was making AT LEAST three of these mistakes. Ignoring taxes, ignoring inflation, and aiming for a million. Before you ask.
This weekend will include a couple hours revamping the strategy a little bit. Erin, of course and as usual, thank you for your insight. You're seriously helping a lot of people, and I hope you feel great about that.
(I check my investment, work equity, and 401k accounts like every day. I feel smug when they're up and I have a huge masochistic chuckle when they're down. I dollar-cost-average, and I'm committed to the long haul, so it doesn't scare me short term when they look bleak. The money isn't...real almost? Like it's not "there" yet. If that makes sense.)
Having an eye towards the future. So many people I knew in my late 20’s/30’s only cared about today/near future. I had one friend of mine at work that I mentioned how well our 401k was doing and he had no idea what I was talking about. He was contributing to it but didn’t know it. I showed him how to login to it and he immediately withdrew everything and bought a bunch of consumer garbage…. No interest in what he was going to do later in life…. Now I’m 54 and retired and he’s never going to retire….
Regarding the issue of not checking your retirement account frequently. There are exceptions. For instance, 5 times in the past decade money was automatically withdrawn from my payment for deposit into my 457 account and, for unknown reasons, the money was not deposited into my 457 account. If I did not check it each pay period, perhaps it would not have been caught. The problem is we contract out the management of the 457 account, so there are a lot of hands involved, increasing the chances of an error being made. Ever since the first instance and trying to figure out who was the point of contact (our HR or the 457 servicer), I check my account each pay period to ensure the deposit was made and also annotate that deposit in my own spreadsheet. With that said, in general, I do agree with you on not checking the performance of the account as that can absolutely cause stress (as you said).
This is a great video and I thank you. Full disclosure, I check my investment accounts daily, just out of curiosity (and OCD). Not that I would do anything whether up or down.
- Only 30% of US households even have an IRA -
With this statistic number I am curious of why use the word "households" while counting "Individual Retirement Account".
Thank you Erin, for the great videos and your calm and yet lively way of delivering all this Financial information.
My best guess is that many married couples file their taxes jointly, so they are household, but just because one spouse has an IRA doesn't necessarily mean that the other does. Or both spouses might have an IRA but it is still counted as this one household checking the box of having an IRA.
Thanks 🙏 for watching!!
Watch fees also. Taget date funds are generally expensive. A good SNP fund like VOO or SCHB, ect will be charge a less expense ratio. Save like social security won't be there, and if it is, consider it a bonus.
Absolutely!!!
My employer started with offering a pension and a 401k but over time froze the pension plan once I had about 12 years in it, and within the 401k they match the first 5% so if you contribute 5% pre or post tax they match with 5% pretax for a total of 10%.
I really love a pension - but at least they have a good match!!! (PS - I like the new profile pic!)
@@ErinTalksMoney thanks, I chose it because I'm getting into fitness, walking, jogging, running, hiking, and biking. Whatever I can do safely... I have lost almost 30 lbs. on purpose since May. I have been getting 12,000 steps a day since May. I'm striving for a long-term goal of jogging a 10k, two or three times a week. Anything more is not evidence-based to be beneficial to long term health. I favor jogging because I was a cross-country runner a long-time ago in high school and used to jog up and down a "mountain" to train. It also can be a symbol of the slow climb toward a long-term goal like financial independence or the idea of it.
@@educatedwanderer9293 Good to stay active. While being stationed in Japan I ran up Mt Fuji twice. Just over 12,000 feet. Still run every day. My motto is 10K a day!
@@educatedwanderer9293 That's so awesome! I'm so proud of you!!! 👏 I like to spread my fitness routine between weight lifting and jogging - I jog a 5K three times per week, do weight lifting 3 days a week....and one day to sleep in 😂
Good luck on all your fitness goals!!!
Another mistake is paying financial advisors a percentage of your asset under management (AUM) annually.
If you live a debt free lifestyle, this could be your greatest expense in retirement. So avoid this mistake. Figure the total cost, not just that it is 1-2 % or less.
I just found out about Traditional IRA Deductibility Limits. I was contributing and not earning any tax benefit! Limits apply for people who also have retirement plans through work and gross income over 78k
No dancing during February and March 2020, just gut-wrenching daily declines. While I don't disagree that micro-management can be detrimental to mental and physical health, it will teach the importance of removing emotion from finances and also that standing your ground usually works out in the long run vs. panic selling and locking in losses. Experiences in 2000 and 2008 trained me to tolerate 2020 as just another big pothole in the road to the destination goal.
That's why I don't check the accounts when they decline - I don't want to deal with the negativity, hahaha - but you are right, best to remove all emotions for both your physical and mental health!
R u saying politicians are potholes l o l ?
No comment, just doing my part to raise your numbers.
Thanks! 🙏
Great overview! As a retiree, I do confirm that I pay federal income tax on 85% of my SSA benefit, which sure feels like double taxation. At least my state is among the majority of states that does not tax SSA benefits!
my goal is to move back to a state with no income tax - I'm so glad you aren't taxed at the stat level!
I pay Federal taxes on my SSA $ but that's only because between my 2 pensions (yes 2) and our SSA (X2) and dividend income I have too much cash flow. Better to have too much than too little!
So, invest in Costco rotisserie chicken as an inflation hedger, right? 🤣. Also, your mother must have so much joy watching you do your happy dances (on market up days)! ☺️
hahaha, who doesn't love a good rotisserie chicken?!?!? And she really did - sometimes she still says she misses it. (I did write 1/3 on a sticky note and give it to her when I made it a third of the way to my goal and we went out and split a piece of cake - she still has that sticky note and it's something like 10 years later)
Thank you for the inflation calculator. 1 million is no longer enough. I have the 1 million and I think that I need 5 million now 😀
Well, knowing your savings habits, Darrell, I have no doubt you will get there 😊
So hard for me to decide between Roth or traditional IRA as it’s hard to know what our individual tax situations will be like in the future! Thanks for another great video Erin and have a great weekend!
Could always try a bit of both?!?
Have a great weekend Nathan!
BOTH!
Definitely both.
Split depending on how much you make.
The higher your salary the more valuable the traditional.
The farther away you are from retirement, the more valuable the ROTH. More tax free growth over decades is very powerful.
You have to decide what split works best for you.
Good luck. 👍
@@mikephilpot9857that’s probably the best comparison/easiest I’ve ever read! Well said, sir. 👌👍
My employer matches 401k up to 6%, they also have this profit sharing program. On February of every year they also give us a profit sharing bonus that goes to our 401k which can be anywhere between 4% to 7% of our total yearly earned salary, this year they gave me a little over $4k. It's one of the reasons I tend to take all the overtime they give throughout the year, the more I earn the bigger the bonus.
I’m one of the crazy people with a traditional 401k, a Roth 401k, a traditional IRA, a Roth IRA and a brokerage account 😂
Most of it is in the 401ks, because of the matching. It works out to be responsible for about 40% of the total balance! That’s literally 6 figures worth of free money.
Also I use the traditionals to reduce my current tax burden.
Crazy like a fox. I'm in the same boat. As I approach 60 I'm very thankful that I'm sitting roughly half in tax deferred 401k/IRA accounts and half in self-directed taxable accounts. It wasn't planned this way, but it gives me amazing flexibility if I follow through on my plan to retire at 62.
Love it! And I love that once you hit retirement, you are going to have so many different accounts to draw on. That will give you so many options.
@@ErinTalksMoney thanks for the encouragement! Honestly, one of the things I really haven’t planned for is actually using all my savings.
I have the hardest time justifying to myself selling or withdrawing any funds for any reason, even if I know it won’t materially affect my overall financial health. However, I don’t want to spend all my life working and saving, and then not enjoy any of it. It’s a tough balance!
As someone who has spent so much time and energy on saving and investing, I think you can likely relate. I really appreciate your videos and the community around them, because it can feel isolating being a saver/investor when financial literacy is so poor.
BTW your channel works because it appears to be genuine and comes from your heart. There’s so many financial scam channels and websites, it can feel impossible to separate the wheat from the chaff. Don’t ever change!
Me too, with an HSA invested. Max out those benefits, it’s part of the compensation package!
Taxing Social Security is such a ripoff 😂 The SS benefit amount is calculated _after_ pre-tax salary deductions
I have found that a huge mistake is not being adequately insured. Getting a long term illness and having no income protection insurance can decimate your your savings, investments and even your retirement savings. It can be a devastating lesson to learn the hard way.
Congratulations on your pregnancy Erin! 💕
Jack Bogle said put the money in the index fund, month after month, year after year, and DON'T PEEK. Then in 20 or 30 years, you can peek. Then your eyes will pop out of your head.
Companies with multiple locations get around that by forcing you to transfer to a new location or lose your match. I lost my match because they closed the location and it was either move to Kentucky or not. Then I lost my match because who wants to move to Kentucky and afterwards they moved it to another account, took the money that they put in and put it in a clearing house account.
Ugh, that’s really frustrating!
100% SP500 send it
I am fortunate my employer matches 6 points to a 401k
Nice!
How to plan for social security: $0/mo.
Come on now. While SS benefits will probably need to be cut, they certainly won't go to zero. There will be some workers paying SS tax in 30 years to fund some of the payments.
@mark.harvey my opinion: we are going to see another round of significant inflation around 2030 or so when SS has almost run out. No politicians are willing to touch it for fear of being voted out, so we will print our way out. Therefore, social security will be essentially valueless, just depends at how you want to look at it.
@@MeltingRubberZ28 luckily SS grows with inflation, albeit annually so it's a bit lagged. Inflation alone won't impact your SS.
@mark.harvey you do realize that at our current rate SS will be flat broke by 2032 right? What's going to solve this?
I check the account daily
Please work on the Bogleheads speech soon!!!
I promise I hear you, I haven’t started yet. But it is on the list.
The government never met a tax they didn't like.
What's a retirement account? 😬
Thank you for the video, I'm still undecided between traditional 401k vs Roth IRA
BOTH!
Like Luke said, you don’t have to choose either or, you can always do a mixture of both
I think both Erin and Tae (Financial Tortoise) have great videos on the 3-bucket strategy: traditional+Roth+brokerage. They'd be a good place to start.
As always, great content. Side note, your hair looks a little frazzle, not sure if its the conditioner or you just didn't spend the time like you normally do. Yes, I know... I focus on odd stuff as my wife would say.
Haha! Too funny! What I can say is that I wash my hair like every three days. On day one it looks pretty smooth. By day three it looks a little fluffier. So how it looks really depends on what day I’m on. 😂 and as far as how much time I spend on my hair. I straighten it on day one, and then I do nothing until I wash it again. I don’t even own a hairbrush.
Shoot, I watch TSLA on a tab in my browser. I watch it all day, every day. My wife thinks I am crazy and simply can't understand how I can watch such a volatile stock like that without being stressed out especially when is such a large amount of my retirement account.
For me it isn't real. It's Monopoly money. So I watch it daily and then research how why it went up or why it dropped on any given day. What news made it go up or down. So far no stress. Also I think that my lifestyle over the years has made me somewhat immune to risk. I used to race motorcycles as an amateur and a professional. Going into turns at 120MPH pitching it sideways and then gassing it to control the slide/turn and all with only a marginal rear brake just seems to teach you that worry doesn't help.😜
At war with Russia like it ain’t no thang.
One of your mistakes is only having employers retirement plan. Well they say to max out 401k @30k yr. there isn't anything else to invest in.
Everyone needs 5 million at retirement to not fail when retiringm. Plenty of money for continuing inflation as well as living expenses. 😊
In todays world of identity theft and hackers, the advice to only check accounts quarterly or less is probably bad advice (unless it leads to stupid decisions). Too many stories of lost funds, etc. Also setup multi factor authentication!
will you marry me? lol
Haha, already happily married 💍