3 Monumental Financial Mistakes People Make Before They Turn 50
There are no guarantees when it comes to retirement, but you make these solid preparations.

The saying that youth is wasted on the young may be especially true when it comes to saving for retirement. Too many people wait way too long to start thinking about how much they will need to finance their retirement.

In a way, thatís not surprising. Retirement seems so far away when youíre in your 20s and 30s, and itís easy to think youíll have plenty of time to worry about saving later. Then before you know it you pass 50, and you realize you missed a great opportunity to take advantage of compound interest.

Many young people are making at least three financial mistakes that they likely will rue when it comes time to retire. Those are:

Not participating in a 401(k). Many employers donít offer a 401(k) or similar retirement plan, but if yours does you need to participate. An alarming number of people ignore this savings opportunity that can reap great rewards, especially if you start when youíre in your 20s and faithfully contribute for decades. And if youíre employer is offering matching funds, thatís free money. You need to jump on it.

Saving ONLY in a 401(k). While contributing to a 401(k) is great, that shouldnít be your only vehicle for saving. If you are a younger saver, you are putting all your money into a bucket you canít touch for 20 or 30 years. And when you do withdraw it in retirement, youíll pay taxes because the taxes were deferred. Thatís why itís important to put some balance in your portfolio. A good way to do that is with a Roth IRA, a Roth 401(k) or a health savings account. Withdrawing from those Roth funds in retirement wonít result in taxes because the taxes were already paid when the money went in the account. HSA money isnít taxed if you withdraw it for qualified medical expenses. After you turn 65, you can withdraw it for any purpose, though you will pay taxes on that withdrawal if not used for a qualified expenses.

Failing to embrace risk. When the 2008 financial crisis hit, plenty of investors lost a substantial portion of their savings. The memory of what happened to themóor to their parentsóis still having repercussions. Some people younger than 50 are too conservative with their investments, so their money doesnít grow like it could if they took more risks. Iím not faulting people for that, but what I want to get across is if you are between the ages of 20 and 50, there is no need to panic. Time is on your side. If you suffer a loss, you more than likely have plenty of years to recover before you retire.

Many people nearing retirement probably look back to when they were in their 20s and 30s and wish they could go back in time and make some financial decisions over again. Most people eventually learn that true financial success requires a lifetime of work, responsibility, and attention. The younger you are when you come to that realization, the better.

Chris Heerlein, author of "Money Wonít Buy Happiness Ė But Time to Find It" (, is a Investment Adviser Representative and partner at REAP Financial LLC. He hosts the "Retire Ready" TV and radio shows in Austin, Texas, and has been featured in national media outlets such as Fortune, Bloomberg Businessweek, and Money magazines. Heerlein also is an ongoing contributor to the financial publication Kiplinger.

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