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Retirement Mistakes: 5 Retirement Myths That Can Sabotage Your Plans

There are several retirement myths that could lead to mistakes in your retirement planning. Don't risk sabotaging your retirement by accepting these myths as truth.

https://tickertapecdn.tdameritrade.com/assets/images/pages/md/Risky retirement myths that could cost you savings.
3 min read
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Key Takeaways

  • A 401(k) plan can be a key component of income in retirement, but it might not be enough
  • You don’t have to pay off debt before you start investing for retirement
  • It’s never too late to start saving

Making retirement decisions can feel like a daunting task. The retirement myths that surround the process are partly to blame.

In fact, you might be so caught up in the myths that you’re making retirement mistakes that could cost you in the long run. As you prepare for retirement, here are five retirement mistakes to avoid.

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Retirement Myth #1:

My 401(k) Is All I Need

Americans, in general, love their 401(k)s and other defined-contribution plans. According to the American Benefits Council, the average percentage of eligible employees who have a balance in their plan is 88.7%. About 85% of the approximately 100 million defined-contribution plan participants made a contribution last year. 

This may not come as a surprise. It’s easy to sign up for a 401(k), and your employer might even offer you a match, providing you with extra money to work toward your future. 

Although a 401(k) can be a good first step for retirement savings, it might not be all you need. In fact, it might make sense to consider supplementing your retirement portfolio with help from a traditional or Roth IRA. If you have a small business or side gig, you might consider a SEP or SIMPLE IRA.

In some cases, you might be able to access a wider range of investment choices with an IRA or even take advantage of potentially lower fees and costs. For some investors, it might make sense to include an IRA in addition to a 401(k) to better meet long-term retirement needs and goals.

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Retirement Myth #2:

I Should Fund My Child’s College Tuition Before Taking Care of Retirement

Putting your child’s college tuition ahead of your own long-term financial needs can be one of the biggest financial mistakes you make, depending on the circumstances. It’s possible for your student to get federal loans to help pay for the cost of college, but you might not have access to the same resources to fund your retirement.

For some investors, putting off their retirement savings, or reducing what they put into retirement, means missing out on the potential benefits of compounding returns. Rather than funding college first, consider starting with your own retirement account. Then, if there’s money left over, you might decide that it can make sense to set aside college savings for your children.


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Retirement Myth #3:

It’s Too Much Work to Assess My Retirement Needs

The task of considering retirement can feel too big to tackle. However, you might be surprised at how little time and effort it takes to review your retirement decisions and figure out where you stand right now. 

A TD Ameritrade study found that nearly half of those with a 401(k) do a quick check of their portfolios every few months. Consider reviewing your own portfolio or getting help with rebalancing at least once a year. TD Ameritrade offers a number of tools that make it simple and quick to evaluate your portfolio and see where you stand.


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Retirement Myth #4:

I Need to Pay Off My Debt Before I Save for Retirement

Paying down debt might be an important goal for many consumers. However, one of the biggest retirement mistakes to avoid is assuming that you can’t save for retirement while you pay down your debt

It’s possible to do both if you feel like it’s in your best interest. Consider reviewing your finances to see how much of your available cash flow should go toward paying down debt and how much should be used to invest for retirement. 

The earlier you begin saving for retirement, the more time you have to take advantage of the potential benefits of compounding returns. Although there’s no guarantee that you’ll always see returns in your retirement portfolio, historical data indicates that the chances are good that, over time, your retirement portfolio will likely grow. But remember: Past performance isn't a guarantee of future results. 

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Retirement Myth #5:

It’s Too Late to Save for Retirement

Don’t assume that it’s too late to save for retirement. No matter what your age, there’s a good chance that you’ll be better off if you start saving for retirement. In fact, it’s possible to make “catch up” contributions to your 401(k) and your IRA. With a little extra saving, you might be able to make more progress than you expect.

Consider meeting with a financial consultant from TD Ameritrade who can help you review your situation and help you come up with potential strategies for moving forward and preparing for retirement.

Bottom Line: Avoid Retirement Mistakes

Don’t let retirement myths hold you back from building a better retirement. The first step to avoiding retirement mistakes is to be aware of some of the pitfalls. Carefully consider your own situation and what you might need. Once you’re aware of potential retirement mistakes, you can take steps to make better long-term decisions.

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Key Takeaways

  • A 401(k) plan can be a key component of income in retirement, but it might not be enough
  • You don’t have to pay off debt before you start investing for retirement
  • It’s never too late to start saving
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