Many Americans are unknowingly making two major errors with their retirement savings, according to a leading investment strategist.
Marta Norton, chief investment strategist at Empower—one of the country’s largest 401(k) providers—shared her insights on the most common retirement investing mistakes she observes among clients during a recent interview with Bloomberg Radio.
Norton highlights two key missteps: first, many Americans fail to contribute enough to their 401(k) plans, often missing out on their employer’s full matching contribution. A 2015 study by Financial Engines found that U.S. workers collectively forfeit $24 billion annually in unclaimed company matches.
“People always mention that’s free money,” Norton noted. “It’s likely the most straightforward error.”
The second issue involves Americans taking a self-directed approach to retirement planning and allocating too much of their portfolio to stocks instead of diversifying into safer assets like cash and stable-value investments. While stock-heavy portfolios can generate long-term growth, they pose greater risks for older investors nearing retirement who may be less equipped to handle market volatility.
A 2023 Fidelity analysis revealed that over a quarter of baby boomers maintain “aggressive” stock allocations in their retirement accounts, exceeding recommended levels for their age group. “For individuals managing their own retirement investments, the hidden risk might be taking on too much equity exposure that doesn’t align with their specific circumstances,” Norton explained.
Recent discussions have emphasized the dangers of overconcentration in equities, especially as movements like Financial Independence, Retire Early (FIRE) face growing criticism. Within the FIRE community, withdrawing from retirement funds during a market downturn—locking in losses—is referred to as sequence of returns risk.