Five Common Retirement Investment Mistakes to Avoid
Only about 14% of American workers say they are “very confident” they will have enough money to live comfortably throughout retirement.1 To help reduce such uncertainty from your life, consider these five common investment pitfalls – and how to avoid them.
The sooner you start contributing the maximum amount allowed by your employer-sponsored retirement plan, the better your chances for building a significant savings cushion. By starting early, you allow more time for your contributions – and potential earnings – to compound, or build upon themselves, on a tax-deferred basis.
It is difficult to create an effective investment plan without first targeting a specific dollar amount and recognizing how much time you have to pursue that goal. To enjoy the same quality of life in retirement that you have become accustomed to during your prime earning years, you may need the equivalent of up to 80% of your final working year’s salary for each year of retirement.
It is true that stock investments face a greater risk of short-term price swings than fixed income investments. However, stocks have historically produced stronger returns over the long term.2 In general, the longer your investment time horizon, the more you might want to rely on equity investments.
Some investors try to base investment decisions on daily price swings. But unless you have a crystal ball, “timing the market” could be very risky. A better idea might be to buy and hold investments for several years and invest for the long term.
Investing in just one fund or asset class could subject your investment portfolio to unnecessary risk. Spreading your money over a well-chosen mix of investments may help reduce the potential for loss during periods of market volatility. Diversification may offset losses in any one investment or asset category by having exposure to growth opportunities elsewhere.3
Learn more about saving for retirement or call 1-800-DREYFUS to speak to a Dreyfus representative.
Investors should consider the investment objectives, risks, charges, and expenses of any mutual fund carefully before investing. Download a prospectus, or a summary prospectus, if available, that contains this and other information about a fund, and read it carefully before investing.
Asset allocation and diversification do not guarantee a profit or protect against loss.
1. Source: Employee Benefit Research Institute, 2012 Retirement Confidence Survey, March 2012.
2. Source: Standard & Poor’s. Stocks are represented by total returns from Standard & Poor’s 500 Composite Stock Price Index, an unmanaged index generally considered representative of the U.S. stock market. Bonds are represented by annual total returns of long-term (10+ years) Treasury bonds. Indexes do not take into account the fees and expenses associated with investing, and individuals cannot invest in any index. Past performance is no guarantee of future results. With any investment, it is possible to lose money.
3. Diversification does not assure a profit or protect against loss in a declining market.