We all make mistakes, and through them, we learn. But when it comes to finances, it is best not to take the trial-and-error approach. Avoiding some of the following financial mistakes might save you a great deal of money and heartache.
Cashing out a retirement account to pay off loans.
Substantial income tax penalties can hit you if you tap into retirement accounts before a certain age. For example, the amounts you withdraw before you reach 59 may be subject to an additional 10 percent tax. Even if there are no penalties, cashing out an entire account at once potentially puts you in a higher tax bracket.
Missing retirement account rollover dates.
You can move your wealth around by receiving a check from a qualified retirement account and deposit that money into another retirement account within 60 calendar days. If you miss the deadline, the IRS treats the amount as a taxable distribution. Further, your 401(k) plan provider withholds 20 percent for federal income taxes.
Failing to update beneficiaries.
Forgetting to remove a former spouse's name as the beneficiary on retirement accounts or insurance policies happens. This could result in failing to provide for your children, a new spouse or other loved ones. Check your beneficiary designations annually and when a major life transition, such as a marriage, divorce or birth, occurs.
No will, no power of attorney.
