Financial Advice That Can Do Serious Damage

BOSTON ( TheStreet) -- Even the most well-intentioned personal finance advice and most standard, accepted bit of conventional wisdom on money matters can be bad in the wrong situation.

Of course everyone's situation is unique and what works for some is unwise for others, and vice versa. But there's advice so common it's hard to keep that common-sense truth in mind.

Following the conventional wisdom on investing isn't always certain to fill your piggy bank.

Here are four usually savvy strategies that in the wrong situation can backfire and cause more damage in the long run:

Put as much as you can into your 401(k) or IRA.
The mantra of many retirement experts falls into two camps: "save" and "save more." Deferrals of 10% and 15% of pay are often touted as ideal.

While planning for the future, it's naive to not at least consider your current reality. If all you can legitimately kick in is 2%, so be it. At least you are doing something and setting the stage for when times are better.

Another scenario where pumped-up contributions may not make sense for everyone is when it comes to creating an emergency fund. Experts advise that having an emergency fund of at least three to 12 months of salary is important, to help in the case of disasters such as unemployment, an unexpected illness or the always poorly timed car breakdown.

On paper, your money will do better in a 401(k), especially if it can leverage an employer match, or an IRA because there will be -- in all likelihood -- a far better return on your money than the typical savings account. But if you have little or no emergency savings, that money can be costly to extract when needed -- a 10% penalty on top of additional state and federal income taxes. You also lose the future value of compounded returns.

Boost your deferral rate as high as you can.
Even if you have an above-average salary, is a bigger deferral rate necessarily better?

Choosing how much to contribute isn't always so simple.

"If you contribute too little to your 401(k), you may not get the full employer match," says Robert J. DiQuollo, president of Brinton Eaton, a New Jersey financial planning firm. "On the other hand, if you contribute too much, too fast, you can shortchange yourself."

DiQuollo uses the example of an executive making $20,000 a month who contributes 20% to a 401(k), with a 5% company match. He or she will reach the IRS' annual contribution limit of $16,500 in May and can't contribute for the rest of the year.

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