Jean Chatzky's Stark Warning: Don't Make This 401(k) Mistake in Retirement

U.S. employees generally recognize that securing their retirement requires dedication, careful planning, and a solid grasp of how to save and invest funds for later life.

Jean Chatzky, who previously served as the financial editor for the NBC Today Show and founded HerMoney, shares some introspective reflections on strategies she might have used differently to approach her tasks. She also connects these insights with advice on how individuals can work toward securing a comfortable retirement for themselves.

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Individuals are usually guided with certain fundamental strategies to start their financial retirement planning. In this regard, the U.S. Department of Labor provides recommendations. reports Only approximately fifty percent of American workers have determined the overall sum they think they need to save for their retirement.

A common strategy for retirement planning involves maximizing contributions—and beginning as soon as feasible—to workplace savings programs like 401(k) accounts, particularly when these plans come with company match options.

Utilizing tax-advantaged accounts like Individual Retirement Accounts (IRAs) is strongly advised. Specifically, Roth IRAs and Roth 401(k)s stand out since these enable employees to postpone paying taxes until after retirement.

Related: Tony Robbins cautions American employees about 401(k)s, IRAs, and potential future taxation

An essential method to maintain discipline when saving is to ensure automatic contributions to retirement accounts for consistent savings.

It’s advisable to consistently monitor and tweak your savings and investment strategies in response to shifts in your financial circumstances and objectives. In essence, when someone is experiencing good financial health, they should increase their contributions towards retirement. Conversely, during tough times, it's best to reduce these efforts to address immediate monetary requirements.

Considering all of these factors and others mentioned during an exclusive talk with The Street, Chatzky shared what counsel she would impart to her younger self if given the chance to travel back in time.

Jean Chatzky, who previously served as the financial editor for NBC's Today Show, explores topics related to retirement, Generation X, and 401(k) plans.

When asked by GudangMovies21host Conway Gittens what top piece of advice she believes everyone should follow, Chatzky emphasized that individuals must assume personal accountability for their retirement savings.

Chatzky stated that "More so than any preceding generation, retirement depends entirely on you." He further explained that Gen X is the initial cohort without significant pension benefits, making personal savings the crucial financial resource. Therefore, he advised maximizing every opportunity to set aside funds for retirement.

More on retirement strategies:

• Tony Robbins cautions Americans about a Social Security error to steer clear of.
• Dave Ramsey isn't shy about his thoughts on Medicare for those who have retired.
• Suze Orman provides straightforward guidance on Social Security for those who have retired.

Chatzky described her initial grasp of retirement savings and 401(k) plans. She also spoke candidly about the importance of starting to plan at an earlier stage in life.

As soon as possible should be the investment advice we typically offer ourselves," she stated. "I received a 401(k) when these plans first appeared. However, I did not comprehend it. At that point, I wasn’t deeply involved with personal finances and truly failed to grasp the nature of this particular account.

She discussed an error she thinks she committed during her early professional years.

When I quit my initial job, I withdrew the funds from my [401(k)] and used them for shopping; I was thrilled at the time," she explained. "I required some new attire for my subsequent position, yet it turned out to be a significant error. Had I kept that money invested, allowing it to grow, it would currently be equivalent to a substantial sum.

Chatzky mentioned that she only became an engaged investor when she started focusing intensively on personal finance, which occurred during her thirties.

Related: Dave Ramsey cautions Americans about a significant error to steer clear of with Medicare

Jean Chatzky clarifies a surprisingly prevalent retirement misconception.

Chatzky tackled a common misconception she noticed people holding onto regarding retirement savings.

"I believe the most significant misconception about retirement is that individuals have clarity on what they desire for this phase of life," she stated. "In my extensive experience within the realm of retirement planning, I've observed that as people approach retirement age, they often remain uncertain regarding both the timing and location of their retirement. Additionally, they frequently lack an understanding of the financial requirements associated with retiring," she explained.

"And that’s why, with about 10 years left until retirement, I believe it's crucial to conduct a pre-retirement review to ensure everything is aligned properly," she advised.

The financial editor shared some additional insights she believes individuals should grasp about strategizing and accumulating funds for their retirement years.

When you reach retirement, our discussion should shift towards strategies for making your savings endure," Chatzky stated. "This phase requires substantial education and various tools for most individuals.

However, for the moment, try to save as much as possible for an extended period and ensure that this money is invested.

Related: Seasoned fund manager sounds alarm on potential S&P 500 downturn by 2025