10 Costly Retirement Account Mistakes (Part 1)

Money Girl covers 10 retirement account mistakes that could end up hurting your finances and how to easily avoid them.

Laura Adams, MBA
5-minute read
Episode #348

Mistake #3: Not Using Rollovers

If you leave a job where you had a workplace retirement account, such as a 401(k) or 403(b), don’t forget about your money. An easy way to consolidate one or more retirement plans is to roll them over into an IRA.

Doing a rollover involves 3 steps:

  • Open the appropriate IRA.
  • Initiate a rollover from your former employer’s plan custodian by submitting a distribution request, using a paper or online form.  
  • Choose how to allocate your money in the new IRA.

See also: What Is an IRA Rollover?


Doing a trustee-to-trustee transfer or direct rollover is best, so your money goes straight from your old plan into your new IRA and there are no tax implications. If you keep any portion of a rollover distribution longer than 60 days, you’ll owe income tax plus a hefty 10% penalty if you’re under age 59½.

Mistake #4: Thinking You Missed the Contribution Deadline

While December 31 is the deadline to contribute to some types of retirement accounts, that’s not the case with IRAs. You actually have 3½ more months, until tax filing day, to make a traditional or Roth IRA contribution for the previous year.

See also: 15 IRA Rules You Should Know


So while it’s best to make retirement contributions earlier rather than later, putting it off until after the New Year is okay—just don’t miss the April 15 deadline.

Mistake #5: Waiting to Get Started

Many times what hurts the most isn’t picking the wrong investment—it’s waiting too long to get started investing in the first place. The earlier you get into the habit of putting money aside for the future, the better.  

You can avoid the natural tendency to procrastinate and make excuses by setting up monthly automatic transfers from your bank account into your IRA. After a while you won’t even realize the money isn’t there and you’ll adjust your spending to what’s left over in the bank.

Having patience and making consistent investment contributions is an easy way to achieve a huge amount of financial success and happiness.

See also: How Much Money Do You Need to Retire?


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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.