Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Young Retirement Investors Can't Keep Making This Huge Mistake

A recent look from Fidelity Investments revealed that last year's jumps in the Dow Jones Industrials  (DJINDICES: ^DJI  ) and the S&P 500 (SNPINDEX: ^GSPC  ) have helped retirement investors enjoy big gains in their 401(k) accounts. But it also showed that young investors are making a huge mistake that could cost them in the long run.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at the survey and its findings that 41% of those ages 20 to 39 who left their jobs in 2013 cashed out of their 401(k) plans, with an average balance of $16,000. Dan notes that it's tempting to take that money and use it for immediate needs, but the negative impact on your finances can be huge. Not only could you pay taxes and penalties of around $5,000 on a withdrawal of that size, but Fidelity also found that you'll miss out on an estimated $471 in monthly retirement income. Dan concludes that young investors have to have the discipline to roll over old 401(k) balances to new retirement accounts or to leave them alone to avoid this huge mistake.

Think young
It's no secret that young investors don't always make the right decisions with their money, but your best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.

Read/Post Comments (2) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 16, 2014, at 5:11 PM, wesam wrote:

    It is a great suggestion: buy share in solid investment and keep them for long time. BUT, greedy market players left nothing for those young people. There are plenty of solid companies there and we know them but the valuation is nothing short of a disaster.

    Some correction in this crazy market is needed

  • Report this Comment On February 17, 2014, at 5:48 PM, Venom991 wrote:

    I'm interested to see if Fidelity followed up with these people to find out what it is exactly they spent their money on. I for one am looking to cash out, pay off my student loans where i'm getting charged 10% interest and then reinvest the monthly payments into stocks. There is no guarantee that the government won't find someway to take money out of your 401K plan nor do you know what the income tax rate will be 40 years from now when you can take out the money without paying a penalty. I'd rather take the money out now and pay the 31% (5,000/16,000) now than possibly have to pay 50%-70% 40 years from now.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2841595, ~/Articles/ArticleHandler.aspx, 8/28/2015 1:10:39 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

Today's Market

updated Moments ago Sponsored by:
DOW 16,620.69 -34.08 -0.20%
S&P 500 1,984.83 -2.83 -0.14%
NASD 4,821.34 8.63 0.18%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 12:55 PM
^DJI $16621.99 Down -32.78 -0.20%
^GSPC $1984.07 Down -3.59 -0.18%
S&P 500 INDEX CAPS Rating: No stars