Retirement Saving

5 Ways You’re Breaking Your Nest Egg

Written by Miranda Marquit

You know you should be saving for retirement. You might even be setting money aside each month in an account, building up your nest egg for the future. But are you really doing what you should when it comes to investing for the long-term?

The reality is that there’s a good chance you probably aren’t building your nest egg effectively for your long-term wealth. In fact, a March 2014 survey from the Employee Benefits Research Institute, or EBRI, indicates that even though 57% of workers save for retirement, 60% have less than $25,000 in total savings. While many workers might be saving for retirement, they might not be saving enough.

Before you become too complacent about your retirement savings, stop and consider that you might not be saving enough for retirement. These 5 mistakes can make things even worse:

1. Leaving Money on the Table

This is one of the worst things you can do for your nest egg. First of all, says Rob Drury, the executive director of the Association of Christian Financial Advisors, you need to start investing what money you can as early as you can.

“Time is by far the most important factor in the accumulation of retirement savings,” Drury says.

Don’t leave that money on the table. Even if you think it’s not enough to get started, you should contribute what you can. Don’t forget about employer matches, since that’s free money that can grow your nest egg.

2. Borrowing from Your Retirement Account

“It’s named ‘retirement plan’ for a reason, so stop borrowing from it for other uses — in spite of how important you think they are at the moment,” says Gail Cunningham of the National Foundation for Credit Counseling.

Even when you repay what you borrow, the reality is that you can’t replace the time that your capital wasn’t in your account, working for you.

Additionally, the interest you “pay yourself” when you repay a loan from your 401(k) usually doesn’t beat what you could have earned with the principal in the account. Even worse is when you withdraw early, incurring a 10% penalty and being required to pay taxes.

About the author

Miranda Marquit

Miranda is a freelance journalist specializing in topics related to personal finance, investing, entrepreneurship, and small business. Since receiving her M.A. in Journalism from Syracuse University, her work has appeared on a number of web sites including Wise Bread, U.S. News & World Report, Forbes, AllBusiness, and Huffington Post. She writes for the Equifax blog and the Quizzle blog, and has written extensively about credit, retirement, insurance, and taxes for a number of other corporate blogs and web sites. Follow Miranda on Twitter, @MMarquit, and check out her personal finance blog, Planting Money Seeds.

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