By Wells Fargo

Retirement may seem a long way off and far removed from your day-to-day concerns. And yet, this is actually the best time to start planning and saving — that is, when you still have time to accumulate the money you’ll need.

Here are some common mistakes that throw people off course in their retirement planning. Knowing these pitfalls should help you steer clear and save more.

Mistake #1: Failing to take full advantage of retirement saving plans

If your company’s 401(k) plan offers a company match (meaning that your employer pledges to match your contribution up to a certain percent of your salary), you have an extra incentive. If you neglect to invest enough to receive the full company match, you’re leaving money on the table. If you get a raise, consider increasing your 401(k) contribution.

Mistake #2: Getting out of the market after a downturn

When the market takes a big hit, you may be tempted to pull out all the stocks in your retirement portfolio. If you do, you’ll miss the gains if the market turns around. You want to keep a good mix of asset classes in your portfolio: stocks, bonds, and cash. And once a year, you should rebalance to keep your asset allocation on track.

Mistake #3: Buying too much of your company’s stock

If your own company’s stock shares are an investment choice in your 401(k), you may want to consider keeping your allocation to no more than 10 percent. You’re not being disloyal; even the mightiest of companies — think Enron and WorldCom — can falter. With your salary already tied to your company’s fortunes, you don’t want a sizable part of your retirement savings to be similarly dependent.

Mistake #4: Borrowing from your 401(k)

Many 401(k)s allow you to borrow from your account. Unless you need the money for an emergency, try not to. Borrowing can be an expensive choice, in two ways:

• Smaller retirement savings: When you take out a loan you are losing the benefits of investment growth and that could leave you with a smaller retirement savings. How much smaller? This depends on a number of factors, including the size of the loan, the repayment period, whether you continue contributions during this period, the earnings on your account, and the loan interest rate. Also, if you stop contributing while you are paying back your loan, you won’t receive any employer matching contributions.

• Repayment requirements: If you lose your job or take another one, you’ll have to repay the money quickly, usually within 30 to 60 days. If you can’t, the IRS considers the money you’ve taken out to be a withdrawal, which means you’ll have to pay taxes — and if you’re under age 59½, you may owe a penalty as well.

Mistake #5: Underestimating the cost and length of retirement

Some crucial factors to take into account:

• Longevity: If you retire around age 65, you could spend a quarter century or more in retirement. Many advisors now urge clients to save enough to last 25 to 30 years.

• Inflation and taxes: Even with relatively mild inflation over the past 25 years, the cost of living has more than doubled. Also consider what taxes you’ll be paying on the money you withdraw from your retirement account.

• Health care: Even with Medicare, you could have expenses for supplemental insurance, some prescription drugs, and nursing home care.

• Lifestyle sticker shock: People in retirement generally need at least 80 percent of their pre-retirement income.