10 Retirement Investing Mistakes That Could Cost You Thousands

Enjoying a stress-free retirement depends on more than just your financial situation, but having a stable source of income once you've left the workplace is definitely a crucial component.

For many Americans, their investment portfolios, whether in the form of a tax-advantaged 401(k) or a Roth IRA, are a primary means of staying afloat in retirement. But investing is tricky, especially for non-accountant laypeople, and mistakes can have major consequences that echo through your life for years.

Fortunately, knowing what the most common investment mistakes are can help you avoid them. Keep reading to learn more about how to protect yourself and your hard-earned cash.

As you age, it makes sense to move your investments into relatively safe accounts like bonds or CDs. But if you're too conservative with your investments too early in your career, you risk losing out on getting bigger gains from stocks that compound in interest over time and could land you a much bigger nest egg.

A financial advisor or retirement planner can review your portfolio and determine if your investments have the right level of risk for your age.

As anyone who's lived through the last five years knows, the stock market is unpredictable at best. If you panic every time the stock market dips and sell off your assets, you rob yourself of the opportunity to regain your losses when the market inevitably bounces back.

It's worth looking at your portfolio at least once a year to make sure your assets are performing as expected. As you get older, you'll want to move away from risky investments like high-risk stocks to more stable investments that will protect your retirement.

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Depending on your retirement account, you might pay high management fees, excessive trading costs, and high expense ratios on mutual funds, all of which eat into your profits.

Spending 1 to 3% on fees annually might not seem like a big deal, but if that money were compounded instead, you'd end up with thousands of extra dollars after several decades. Keep a close eye on management and other fees, and consider switching things up if the fees seem excessive.

The money your employer contributes to your 401(k) doesn't count toward your annual savings limit. It's basically free money, and thanks to compounding interest, it can pay huge dividends over time.

If your employer requires you to contribute a certain amount of money before they start contributing a match, do whatever you can to rearrange your budget so you can contribute more.

Tax-advantaged traditional 401(k)s have a lot of benefits, but if you don't have some money in an alternate account like a Roth IRA, you could end up with a heavier tax burden than anticipated in retirement.

Along with diversifying your investment portfolio, make sure you're also spreading your money across different types of accounts.

Buying and selling at the "right" time might earn you a short-term reward. But most of the time, these short-term benefits pale in comparison to the long-term boosts you get from letting your investments simply sit in one place and accrue interest.

Whatever you're spending on health care right now, you're likely to spend even more in the future as you age and your health care needs get more intense.

Along with investing enough money now to ensure you can pay for health care later on, consider investing in a pre-tax health savings account (HSA).

While you must stop contributing to an HSA once you switch to Medicare, you can still withdraw the funds and use them for qualified medical expenses.

Most people are required to start withdrawing a certain amount of money from traditional IRAs once they turn 73. These required minimum distributions (RMDs) may be a long way out for you, but you should still prepare ahead of time for how these withdrawals will impact your future taxes. Crucially, they could bump you into a higher tax bracket, which means your investments need to provide enough money to live off of and cover your tax burden.

Most years, inflation doesn't rise as quickly as it did immediately after the COVID-19 pandemic. Still, costs tend to rise year over year without help from global or national crises.

Even if inflation only went up 1% per year, that would result in a 30% increase over three decades. As you're deciding how much to save, be aware that your purchasing power will be drastically different when you eventually pull funds out for retirement, so investing more now could be prudent.

Your investments are a major part of your retirement plan, but they're just one aspect of a more comprehensive plan.

Along with steering clear of the investment mistakes we listed above, make sure to carefully consider financial issues like when to apply for Social Security benefits or whether you need a side gig in retirement.

If you're having trouble thinking through your financial situation, don't be afraid to get in touch with a financial expert who can offer you specific, personalized advice.