SACRAMENTO, Calif. —
Banking on your 401(k) to fund your retirement? Don’t get caught by three common mistakes.
Kathryn McCall, CAPTRUST vice president and financial adviser, says some of the biggest problems arise after someone takes a loan against their investment account.
“In addition to giving up earnings growth on that money, there are tax implications of the loan because you have to pay back the loan with after-tax money and then when you take the money at retirement you get taxed on it again. That makes the value of the loan double-taxed,” McCall said.
McCall also pointed out you lose out on company matches on loan repayments.
The second biggest mistake is not taking advantage of a company match. McCall called employee matches “free money” and reminded employees that 401(k) matches are part of your benefits and compensation package.
And the third mistake to watch out for is failing to invest your 401(k) money properly.
McCall said, “Remember to go into your company’s retirement site to make sure your account is invested for appropriate long-term growth. If you are younger and have a long horizon towards retirement, consider having a higher allocation to stocks.”
People approaching retirement should aim to reduce risk levels. McCall recommended talking with a financial advisor to make sure you are on track for your retirement goals.
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