Errors to avoid in retirement planning

When the markets turn bumpy, it can be unsettling to look at your 401(k), IRA or other retirement accounts. But don't let fear drive you to make these four common mistakes.

Slip-up No. 1: Checking the market hourly and your portfolio balance daily.

"Sure, it's important to stay on top of your retirement investments," said Scott Halliwell, a certified financial planner with USAA. "But there's no need to be hypervigilant."

With retirement investments, your focus should be on long-term performance, not day-to-day changes.

Slip-up No. 2: Adopting a hide-your-money-under-the-mattress approach.

This means you move out of stocks entirely and put all your retirement savings into "safe" investments, which come with less risk but offer historically lower returns. It may be tempting to do this if you've seen your account lose money — and even more so during exceptional market swings when your account balance appears unstable. But over time, stock funds typically have provided a bigger return than conservative investments, despite the ups and downs of the market.

"If you're in your 20s or 30s, you probably should have some money invested in stocks," said JJ Montanaro, a certified financial planner with USAA. "Because over the long haul, stocks may do better for you.

"It's all about finding a mix of investments that gives you a better chance of achieving your financial goals. Keep in mind that no one can outguess the market.

If you find keeping track of your portfolio too stressful or time-consuming, Montanaro suggested target-date retirement funds as a way to stay in the game with less effort. These funds allocate your money among stocks, bonds and other investments according to how long you have until your targeted retirement date. The allocation automatically grows more conservative as that date approaches.

Slip-up No. 3: Stopping your 401(k) contributions.

This is a bad move because if your employer matches any part of your contribution, you're turning down money. You should contribute at least enough to get the maximum match from your employer.

"If someone offered you a 50 percent return on your money, you'd take it, wouldn't you?" Halliwell asked. "Well, many employers' matching programs do just that on a portion of the money you put into the plan. Rarely is it ever a good idea to pass up that opportunity."

Only suspend payments into your 401(k) if you've cut your budget to the nub and still don't have enough cash to meet your financial obligations.

Slip-up No. 4: Pulling money out of your retirement funds.

Even if your adjustable mortgage payments are going up, a family illness has strained your finances, or you've been laid off, it's never advisable to raid retirement funds for quick cash. That kind of withdrawal could come with an immediate tax hit and a 10 percent penalty, as well as jeopardize your income when you retire.

"If you have other options — even a loan from a family member — I'd go that route before tapping your 401(k) savings," Montanaro said.