Investment strategist flags two common retirement savings mistakes

Marta Norton, chief investment strategist at Empower, one of the largest 401(k) providers in the U.S., has identified two significant mistakes many Americans make when saving for retirement. Speaking to Bloomberg Radio, Norton highlighted that individuals often fail to contribute enough to their 401(k) plans, thereby missing out on their employer's full matching contribution, which she described as "free money."

A 2015 study by Financial Engines estimated that Americans collectively leave $24 billion in unclaimed 401(k) company matches each year.

The second major error Norton pointed out is an excessive allocation to stocks in retirement portfolios, particularly for individuals closer to retirement age. She suggested that a do-it-yourself approach often leads to portfolios being too heavily weighted in equities, increasing vulnerability to market downturns. A 2023 Fidelity report found that more than a quarter of baby boomers held an "aggressive" stock allocation, exceeding recommended levels for their age group. This concern about over-investing in stocks has gained traction, especially with discussions around the Financial Independence, Retire Early (FIRE) movement and the associated "sequence of returns risk" – the danger of withdrawing savings during a market decline.