7 Bad Decisions You Could Make in Your 30s and 40s to Derail Your Retirement

NEW YORK (TheStreet) -- Decisions you make today will have an outsized influence on your retirement down the road. 

You can never start planning your retirement too early in your life. The earlier you invest, the better. However, beyond building your nest egg, there are plenty of ways that you can destroy your retirement plans in your 30s and 40s.

In many ways, it is the fault of a broken financial system, which makes it too easy to get credit and defer loans and debt. Society has encouraged a reality that expects and demands expensive milestones, frequent turnovers of pricey items, and perceived necessities that aren't so necessary. It has become too easy to adopt a shortsighted view of personal finances, and make mistakes that could be fatal for your financial future. 

Don't let that be you. Here are some decisions you could make in your 30s and 40s that will destroy your retirement. 

1. Waiting too long to start investing in your retirement, and not scaling your investments with your income

Many people in their 20s and 30s feel as if retirement is too far in the future to have to worry about it now. These people are the ones who end up missing out on investing early in their 401ks when offered. By your 40s, you should be building your nest egg, scaling your savings with your income and making sure you're 100% out of bad debt. Generally, 10% of your salary should be invested into building your retirement savings. If your company matches your 401k contributions, then take advantage of that; if your company doesn't offer a retirement plan, then you can always set up an IRA and automatically deduct 10% of your earnings to your retirement fund.

2. Big life decisions that you make "just because": spending way too much on a wedding, replacing a car every few years, and buying a bigger house

There are a lot of assumed milestones and expectations for one's adult life that come at a huge cost. These range from actual life milestones, like weddings (which, on average, cost $26,444), to the expectation that some things get outdated, like cars. These are huge expenses but can easily be driven down with careful planning -- weddings, for example, needn't cost more than $5000 with careful budgeting; cars can still be kept in good condition for up to ten years, saving the owner tens of thousands of dollars.

Houses are also a significant, and financially crippling, expense. People who are ready to purchase their first homes should plan for a long-term future. Though there is an expectation of moving into a larger house to accommodate a growing family, it also comes with a bigger mortgage, more property taxes, and steeper maintenance costs.

3. Cashing out early

An IRA, 401k, RRSP, or TFSA account should be reserved for retirement. However, many people feel the temptation to cash out early in order to pay for a down payment for their first house, to buy a car, or to start their own business. However, cashing out early could leave you paying penalties, and lose potential gain on your hard saved money.

It could also, more dangerously, start you on a path to treating your 401 k like a piggy bank. Instead of turning to your 401k, consider deferring the purchase of your first house until you can totally afford it, and bootstrap and look for investors for your start-up.

4. Taking money out of your retirement fund for your child's education

Taking money out of your retirement fund to cover your child's education is simply not a good idea. On top of all the drawbacks of cashing out your 401k for life's milestones, this one is exceptionally expensive, and one that could be easily curbed by helping your child improve her school performance. By helping your child improve their grades to be able to one day compete for academic scholarships, you can hope to lower the cost of tuition without putting your retirement fund in danger.

In the long run, if you end up weakening your nest egg, you run the risk of having to rely on your child in old age, which is a burden they might have been able to avoid if they simply worked harder, and took on some debt and covered tuition themselves.

5. Not being financially prepared for divorce

A mismanaged divorce or legal separation could really put a dent in your savings. On top of hefty legal fees, the assets of a joint IRA will be divided between both parties (or, in some cases, all given to one). You could face early withdrawal penalties, unexpected taxes, or other fees and taxes. Obviously, if you're going to get a divorce, the issue of money will not deter you from completing that divorce, but know it is an expensive procedure that will impede on your nest egg.

6. Filing for bankruptcy

Filing for bankruptcy if you are saddled with significant debt might seem like a tempting choice -- handing over your assets to a trustee to wipe your debts free is a route that many people take, particularly after traumatic life events, like a divorce, or after a failed business. It's sometimes the only option, if debts are due to be paid. However, bankruptcy also leaves a black mark in your credit history for at least three years and often longer -- it creates the greatest negative effect on your credit score -- making it difficult to apply for services and credit later, and in certain cases, finding future employment. However, some people who opt for bankruptcy aren't fully aware of all their options, and end up jeopardizing their future. In all cases, anyone who is considering filing for bankruptcy should thoroughly go over their options with a debt advisor, and curb as much as their debt as possible.

7. Not getting properly insured

As much as people don't like talking about finances, people really don't like talking about insurance. Nobody wants to think about an abstract future in which they might someday need to rely on life insurance, disability, homeowner's and long-term care insurance. However, the price of insurance is a drop in the bucket of what not getting insured might cost you and/or your partner in the long run. When it comes to unsavory discussions, this is one you should have.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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