Retirement Account Investing | What NOT to Do to Retire Early

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Hey guys it’s a mom and christina for an average journey in this video we are going to be talking about retirement accounts now our channel is all about making money saving money and investing money on the road to financial independence and if you want to get to financial independence you have to have the proper retirement accounts in place so in this video we are

Gonna focus on the top things that you can do wrong with your retirement accounts so if you’re new to our channel we reached financial independence at age 40 and we retired we are now living in lisbon portugal as a retired family of four we have made tons of videos over a hundred videos on this channel and a lot of the videos have been talking about how to invest

For your retirement accounts but in this specific video we want to talk about how not to invest in your retirement accounts so let’s go through the things that you can do wrong when you’re investing in your retirement account so the first mistake that people make is they don’t max out their retirement accounts if you are pursuing financial independence and early

Retirement you must contribute the most you can to those retirement accounts so whatever limitation those are you need to meet those limitations i mean if you want to retire in the most traditional manner then experts say that you should contribute 10 to 15% in order to retire at 67 but if you want to retire a lot sooner than that then you are going to have to

Contribute more to those accounts to give them more time to grow that’s right because the idea is that you want your money to grow as soon as possible and by maxing out your retirement accounts you can do that now a lot of people are talking about this idea behind social security and pensions not being stable in the future so that is another reason why you want

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To max out your retirement accounts as much as possible in every single retirement account that you have yes this idea of pensions in particular i mean general electric just stopped paying pensions altogether on 20,000 pensions they just stopped if those people will rely on their pensions they are in big trouble now the next mistake that you can make with your

Retirement is being too conservative you have so many different options for investing in your retirement account and for us we focus primarily on index funds index funds that track the total stock market but there’s other options you can also invest primarily in bonds if you wanted to but that is way too conservative in terms of our opinion for us the way we grew

Our accounts to the amount that they are now to the amount that allows us that allowed us to retire early is by being more aggressive with our accounts and investing on the stock side versus the bonds the next mistake you can make is not getting the match this is the free money this is the money that your employer gives you in your 401k because you have contributed

Money they make a deal with you they say if you put some money in i’ll put some money in but if you don’t put any money in they’re not going to give you any money so why not do that because you’re getting a hundred percent return on your investment just by contributing to your retirement account so a lot of times employers will match up to a certain percent and if

You are not putting that percent in your employer is not matching it and you are just basically throwing away free money that could be going towards your retirement accounts and the next mistake you can make is borrowing from your 401ks now when people borrow from their 401ks they usually think they’re getting a great deal on the interest rate because these days

You can probably borrow from your 401k and only pay two or three percent on that borrowed money but what people fail to realize is that they are also taking their money out of the stock market and your money in the stock market is going to get the best return you see when you take it out you are losing time for your money to compound so on average the stock market

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Girl is about eight to ten percent annually and when you’re using your retirement account as a bank account by pulling money in and out you are taking away from your money being able to compound i mean there are people that take out 401k loans all the time and they are losing so much momentum when they do that and before they know it their money hasn’t made any

Movement the next mistake that people can make is that when they leave their employer they’re moving their retirement accounts over to a higher cost brokerage now you really want to make sure that you are shopping around and you are finding the best rate for your retirement accounts so you don’t want to just transfer it anywhere we love vanguard we talk about how

Great vanguard is and it has really low fees now we’re not getting paid by vanguard but this is just the research that we’ve done we want to keep our accounts our money and accounts that charge low fees in vanguard is one of them so i’ll give you an example of me personally when i left my employer i had a 401k retirement package so in my case i had a 401k and i

Was able to do a rollover ira into a vanguard account so if you’re not familiar with that definitely research that process and understand what account you’re rolling your money over to so that you avoid those high costs now this brings us to the next mistake that you can make with your retirement account particularly your 401k is when you leave your employer you

Have the option of rolling it over but you also have the option of cashing out your 401k you do not want to do this this is a terrible idea for many reasons but most specifically are the tax consequences because when you cash out your ira when you cash out your 401k you will be taxed heavily what it will be taxed as income but – you will also be hit with a tax

Penalty so the next mistake you can make with your retirement account is leaving your account with an employer that is unorganized so we talked about when you leave your employer you can move your money over to a different brokerage account but some people decide to leave it with their former employer which is completely fine unless your employer is an organized

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And we all know these types of employers the type of people that you call and no one answers the phone that’s probably why you’ve left them but if they are not running a very good 401k program they may be moving your money around and not even telling you what’s going on with it i mean may have the option of changing who manages the 401k and they could make those

Changes and not let you know so if you feel like the 401k that you’ve left with your employer is not going to be in safe hands then that is a reason to move it it is a it is a mistake to leave it with them and the next mistake you can make is leaving your employer too early and missing out on the vested match you see a lot of employers have this policy that they

Will match your money but if you leave too early they will take that match back so you need to be strategic if you’re planning on leaving a job maybe you stay a couple more months so that you get that match but you would hate to miss out on that by just not holding out a little longer so this mistake really needs to be assessed on a case-by-case basis because if

You’re leaving your employer to go to another job that pays the same amount or less then you really don’t want to lose that vested amount but in some cases you may be going to a job that pays a ton more money and you can recoup them out that you lost in your investment from your employer match by taking that job that makes more money so you really have to do an

Assessment when you’re thinking about leaving an employer so these are the top mistakes that we’ve identified that you can make with your retirement accounts if you’ve made some of these mistakes it’s okay you can recover and if you have not great now you have the information to be able to avoid making these mistakes and as usual if you like this video please give

It a thumbs up subscribe to our channel and join the journey you

Transcribed from video
Retirement Account Investing | What NOT to Do to Retire Early By Our Rich Journey