8 Ways to Mess Up
Your Retirement Plan

• 

  Getty Images (RF)

  Here's What Not to Do

  
  Investing mistakes may top the list of how people ruin their retirement plan, but there are plenty of other ways to goof up too.
  
  Click through our photo gallery as Bankrate shares 8 common mistakes that you should avoid at all costs, when it comes to saving and investing for your golden years.
  
  First Up: Mistake No. 1

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• Lady at desk

  Managing Your Investments
  In Isolation

  
  Many people look at their 401(k) or 403(b) plan, IRAs or other retirement plans as separate entities instead of integrating them as one total portfolio. By not seeing the forest for the trees, they don't correctly position their assets in their plans.
  
  · More on This Mistake
  
  
  Next: Mistake No. 2

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• taxable vs. tax deferred

  Getting Taxable vs.
  Tax-Deferred Wrong

  Generally, investments that produce high, fully taxable dividends should go into your retirement plans. Inside a tax-deferred plan, dividends from investments such as taxable bond funds and REITs won't cause any tax damage. Conversely, investments that are designed to produce long-term capital gains, such as growth stocks, are generally best held outside of your retirement plan. They're tax-advantaged to begin with and don't need additional tax sheltering.
  · More on This Mistake
  Next: Mistake No. 3

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• wasting money

  Not Taking Advantage of Employer Matching

  
  Most employers that offer a retirement plan will match your contribution up to a certain limit. For instance, your employer may match the first 3% of salary you contribute. If you contribute less than 3%, you're literally throwing away free money.
  
  · More on This Mistake
  
  
  Next: Mistake No. 4

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• a pick pocket

  Ignoring High Fees

  
  In some 401(k) plans, participants pay as much as 2 percent to 2.5 percent in expenses. These fees may be well hidden, but they still impair your return. Over many years, that difference, compounded and increasing as your assets grow, can cost you many tens of thousands of dollars. Do the research to see if your plan is fee heavy. If so, move your money to a rollover IRA, if allowed, as soon as possible.
  
  · More on This Mistake
  
  Next: Mistake No. 5

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• Forms

  Getty Images

  Not Filing Form 8606 With Nondeductible IRAs

  
  If you make contributions to a traditional, nondeductible IRA, make sure you file this form with your tax return to establish the necessary verification trail that you'll need when you make withdrawals from that IRA. Otherwise, you may have to pay taxes on withdrawals that should rightly be tax-free since you didn't get a tax deduction when you made your contribution.
  · More on This Mistake
  
  Next: Mistake No. 6

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• stack of bills with symbol meaning no

  Fox

  Believing You Can't Touch Principal in Retirement

  
  Suppose you plan to withdraw 5% a year from your plan once you're retired. Many people think that the 5% withdrawal can only come from interest and dividends, and therefore load up their plan with bonds, forgoing growth investments. They don't achieve an appropriate allocation. As part of your annual withdrawals, you can also sell individual holdings and use the proceeds.
  · More on This Mistake
  
  Next: Mistake No. 7

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• 401(k) Invest Wisely

  Assumptions About Net Unrealized Appreciation

  This tax break lets you remove company stock from your 401(k) plan. You pay ordinary income tax only on the cost (basis) of the shares when they first went into your 401(k), which may be much lower than the current market value. When you sell the stock, any additional appreciation is taxed at the long-term capital-gains tax rate. It sounds appealing, but it's usually not a good idea. It's often better to simply roll the stock over into a traditional IRA and then sell it.
  · More on This Mistake
  Next: Mistake No. 8

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• Divorce decree

  Failing to Update Beneficiaries on Your Forms

  You designate beneficiaries when you open your plan. If you don't review your beneficiaries periodically, you might be leaving your assets to someone who is already deceased or no longer a part of your life. For instance, if you're divorced, you probably don't want to leave your money to your ex-spouse. But the plan administrator must distribute the funds to the listed beneficiaries. The beneficiary designation holds no matter what your will calls.
  · More on This Mistake
  Next: Retirement Hot Spots

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• 

   

  More on AOL:
  Retirement Hot Spots
  
  Thinking about changing your address during your golden years? A move is a big decision that should be based on many factors, including what the cost of living will be. Bankrate has rounded up key stats on 62 popular retirement spots, we highlight 30 of them here.
  
  Click through our gallery to check out the prospective communities. Compare the price of goods and services there, everything from the cost of a dozen eggs to median home prices.
  How Much Does It Cost in ...

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