5 Biggest Retirement Planning Mistakes

Retirement Money Jar

Last Updated Oct 13, 2011 3:09 PM EDT

Boomers already faced significant retirement challenges before getting clobbered by the recent stock market volatility. The possibility of another recession and the political gridlock over the federal debt only add to the uncertainty. More than ever, you will need to make every dollar count when it comes to planning for retirement -- once you are in your 50s or 60s, there isn't much margin for error.

Here five common retirement planning mistakes and a few tips for avoiding them. Be forewared: There aren't easy answers. It will take time to navigate an effective course of action. The end result, however, will be peace of mind that you're doing everything possible in a tough environment.

Given the market decline in the past three months, you might be tempted to make retirement planning mistake #1: running for shelter and moving all your stock investments into "safe" fixed investments. Even worse, you may decide to stop contributing to your 401(k), telling yourself "What's the use if my accounts just plummet?" Those would both be bad moves. A recent study showed the highest average account balances were earned by investors who stayed the course during the 2008 - 2009 downturn -- that is, investors who maintained their equity allocation and continued contributing to their 401(k)s. Another study showed that target date funds worked well at helping investors avoid making rash moves during the downturn.

Your best investing strategy right now? As advocated by fellow CBS MoneyWatch bloggers Allan Roth and Larry Swedroe, decide on an asset allocation between stocks and bonds that's appropriate for you, ignore the scary headlines, and stick to your strategies during the tough times. Find some way to overcome your fear when the market goes down. After all, you're not just investing for the next year or two -- you're investing for the next 20 to 30 years.

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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Retirement Game-Changers: Strategies for a Healthy, Financially Secure and Fulfilling Long Life and Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck.