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You "Cubicle Copied" Your Retirement Plan? Yikes! Why That's a Big Mistake

It's so easy, so tempting to lean over and say to your office buddy, "What box did you check on the retirement forms?" But is it the best idea? Not at...

This story originally appeared on MarketBeat

Have you ever leaned toward your coworker's desk and said, "Psssst. Hey, how much do you save for retirement and what're you invested in?" contributor/ - MarketBeat

When you're working with people who have the same retirement options as you, it's natural to feel curious about what everyone else is doing. Seems innocent, right? You have no idea what to invest in, so you lean on your older, much wiser neighbor because you have the same retirement plan.

In fact, some investment companies have tools that tell investors how their retirement savings compare to those of their peers. Companies create these types of "peer review" options to motivate investors to increase their savings. However, research has shown that it can have the opposite effect. Knowing about coworkers' retirement savings habits has even made some employees less likely to save for their own retirement.

Even if you're not going to bounce in that direction (you're dead-set on saving for retirement) becoming an office copycat can be a big mistake. Let's learn why and what you can do about it.

Reason 1: Your timeline may not look the same as someone else's.

One of the most important parts of determining your investment strategy involves knowing your time horizon. In other words, when will you retire? If you plan to retire at 60, outlining an investment strategy that meets that benchmark timeline can help you actually do what you said you'd do and retire at 60!

You might miss the mark if you don't think in terms of years in the market and the return on your investment. If you have lots of time on your side, you may also be able to endure more volatility in the market and therefore, chase higher returns.

So how can you pick the right investments for your timeline if you copy someone else's investment strategy? After all, if you're 22 and the cube buddy that you look up to is 33, he may have a totally different asset allocation than what is appropriate for you. He might have a nod to bonds in his portfolio, whereas you might be better off investing in all stocks (though this depends on your personal situation).

Reason 2: You don't have the same personal situation.

Your personal situation could look vastly different from the cubicle buddy you're tempted to copy. For example, let's say your next-door neighbor in the office has a special needs son and simply can't invest much beyond the company match.

Your cubemate might have to balance his retirement goals with the money he needs to live off of. He might be in a situation where he's tremendously stretched financially and actually needs to keep more in his emergency fund because his son has regular hospital visits, medical equipment and other needs not covered by insurance. He has to invest more conservatively than he wants to but has no choice.

So, in your fact-finding mission, you find out that he invests 3% to get the company match. However, there's no reason for you not to go whole hog and invest 20% of your income into your retirement account because you get an incredible amount from your Grandma every year on your birthday. (In fact, it's more than you need to live off of for more than six months throughout the year.)

Don't shortchange your portfolio by investing too little, especially when you have the potential to ramp up your savings.

Reason 3: You might ruin your risk appetite.

Your cubicle neighbor might be terrified of losing money in the markets. Now, it's definitely important to understand that before you invest, you could lose some or all of your money.

However, the reward for taking on risk is the potential for a greater investment return. Carefully investing in asset categories with greater risk, like stocks, can pave the way for you meeting all of your financial goals.

If you're investing for the long haul, higher-return assets such as stocks can help you beat inflation and help you avoid outpacing and eroding your returns over time. Historically, the S&P 500 has delivered average annual returns of about 10% over time. There's no question about it: It's hard to get that level of return consistently through any other investment opportunity.

If you don't include enough risk in your portfolio, your investments may not earn a large enough return to meet your investment horizon timeline.

What to Do Instead of Copying from Your Neighbor

Instead of using a copyeditor in the next cubicle over as your financial advisor, take these tips into consideration when developing your own investment portfolio.

Meet with a Company Financial Advisor

Most investment plans offer you the opportunity to meet with a financial advisor. Meeting with the representative for your company will give you a better handle on investing, and in particular, can help you iron out your investing horizon, account for the details in your personal situation and fit your risk profile. Investment advisors can give you valuable insights, answer my questions and explain how you should structure your investments.

Think Carefully About Your Goals

Independent of a financial advisor, think about what you want to achieve. You might have goals beyond just "having $1 million when you retire."

Maybe you want to buy a home someday or save for college for your kids. You want to carefully consider your needs on the front end, rather than later. Even if you're a long way away from putting together a plan for a down payment, you may want to have that in the back of your mind before getting started saving.

Whatever You Do, Don't Copy Your Cubemate

Not only should you not copy your cubemate, don't copy your boss, either. Even if you highly respect your boss' marketing savvy, he or she might not know squat about investing. It's easy (especially as an impressionable young person) to listen to someone you respect, but consider the source. If your boss isn't a certified financial advisor, skip the details and head straight to a professional's office for the best information possible.

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