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3 risks you’re probably taking with your retirement accounts

SPONSORED — Whether you’re 25 or 65, chances are, you’ve given your retirement some thought. According to Forbes, about 45 percent of American households aged 25 to 64 had balances in retirement accounts (not as many as should, but that’s another topic altogether). If you’re saving for retirement, you might be surprised at the risks you’re actually taking.

You’re counting on long-term investments

When you’re young, retirement seems a world away, so naturally, taking a long-term mindset on your investments makes sense. After all, markets go up and down, but generally go up in the long run, right? Not exactly, says Ken Peterson of Online Trading Academy.

“Many investors believe if they buy and hold, their retirement accounts will weather the bear markets and profit from the bull markets leaving them in a position to retire in luxury 40 years from when they open their accounts,” he said. “Oh, if only that were true. In fact, if you look at the statistics, only one out three Americans achieves this goal.”

The fact of the matter is, long-term investing doesn’t eliminate risk.

“If you began your retirement account in 1980, contributing the average amount per year, the 40 percent market correction of 2000 cost your account $60,000 and pushed back your retirement five years,” said Peterson. “The 25 percent correction in 1987 only cost you $3,000, pushing back your retirement only 10 months. But a 25 percent correction today would cost your account $220,000 and push back your retirement nearly a decade.”

You let ‘life’ get in the way

Saving early is the key to a financially stable retirement, right? Well, yes, but unfortunately, many Americans are taking risks they didn’t intent to take simply because life got in the way. If you’re fresh out college starting a new job, you might responsibly contribute regularly to your retirement savings. But then you pay for a wedding, make a down payment on a home, buy a luxury car, send your kids to private school, pay for braces and soccer camps and, well, the list could go on and on. Pretty soon you’ve put your savings on the backburner or, worse, drained your accounts for this very rainy period in your life.

“Only one out of every four Americans between the ages of 18 and 34 has a retirement account with more than $5,000 in it,” Peterson said. “Experts tell us if we want to be on track for retirement, by 30 we should have one year’s salary already saved. How many 30 year-olds do you know today that have $40,000 to $90,000 put away?”

You let the wrong people manage your money

If it’s the 1980s and you’ve got Peter Lynch handling your retirement accounts, you’re probably sitting pretty. But what happens when your fund manager inevitably changes? According to Peterson, the average person invests in four funds, and the average fund manager tenure is nine years. That means, over a career, your money is at the mercy of 27 different fund managers.

According to Peterson, your funds could see worse than a poor manager.

“Jack Bogle, founder of Vanguard, said that what the industry won’t tell you is 43 percent of the funds that were in existence in 2007 are no longer around,” he said. “The average investor experiences 10 fund failures during the course of their retirement savings careers.”

Saving for retirement requires commitment, insight, perseverance an understanding of the markets and your specific situation.

“This is way, way too important to put in the hands of someone else who, usually, you never meet,” Peterson advised. “At Online Trading Academy, our students learn to take control of their own accounts. By navigating the markets with a shorter, more manageable outlook, they can outperform most market index and especially most fund managers.”

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