A strong economy and rising markets can help retirement account balances grow over time, but downturns and periods of volatility can quickly slow that progress. Since no one can control the economy or predict the stock market with certainty, the best approach is to focus on what you can control: your savings habits, investment strategy, and long-term retirement plan.
With the right focus, your retirement years can be comfortable and fulfilling, giving you the freedom to travel, spend time with family, or take up new hobbies. That becomes much harder, however, if you enter retirement worried about money.
Fortunately, you can improve your retirement outlook by avoiding some of the most common retirement savings mistakes.
New Workers
Not saving early enough
It is easy to delay retirement planning when you first start working. After all, you have other expenses like rent, housing costs, furniture, and everyday bills. However, the earlier you start saving, the more time your money has to grow through compounding.
Research has consistently shown that even modest contributions made early can lead to significantly larger balances later, while waiting just 10 or 20 years can make retirement saving much more difficult.
Not maximizing the match
If your employer offers a 401(k) plan with matching contributions, take advantage of it. Employer-matching contributions are among the most valuable benefits many workers receive. Failing to contribute enough to earn the full match is essentially leaving money on the table.
Running up debt
Credit card debt can grow quickly and become difficult to manage. Carrying high-interest debt makes it harder to save for retirement and can delay financial progress for years. Building smart spending habits early, such as only charging what you can pay off, can make retirement saving much easier over time.
Middle-Age Workers
Borrowing from retirement accounts
Withdrawing or borrowing money from retirement accounts can be costly. Depending on your account type and age, you may be subject to taxes and penalties. Even when penalties do not apply, early withdrawals reduce the amount of money invested for your future. That lost growth can have a major impact over time.
Putting college before retirement
Many parents want to help pay for their children’s education, but it is important to keep retirement savings a priority. Students may have access to loans, scholarships, grants, and work opportunities. Retirement, however, is not something you can easily borrow money for. If you sacrifice retirement savings too heavily, you may create financial stress later in life.
Not diversifying
A diversified portfolio is one of the best ways to manage risk while building long-term growth. Diversification helps reduce the impact of market downturns by spreading your money across different types of investments. Too many people invest too heavily in one area, which can increase risk or limit long-term growth.
Nearing Retirement Age
Underestimating medical expenses
Healthcare is often one of the largest expenses in retirement. Even with Medicare, retirees may still face premiums, deductibles, prescription costs, and out-of-pocket costs. Planning ahead for healthcare spending can help you avoid financial strain later.
Underestimating how long retirement may last
People are living longer, which means retirement can last decades. If you retire in your mid-60s, you may need your savings to last 20 to 30 years or more. Planning for a longer retirement helps reduce the risk of running short later in life.
Retiring too early
Retiring earlier can reduce the time you need to save and increase the number of years your savings must support you. It can also reduce your Social Security benefit if you claim too early. Working longer, when possible, can strengthen your overall retirement plan.
Retirement
Withdrawing too much too early
Once you retire, the way you withdraw money matters. Taking too much too soon can increase the risk of running out of savings later. Many financial planners suggest using a structured withdrawal strategy, such as limiting withdrawals to a small percentage of your savings each year, to help your money last throughout retirement.
Retirement planning does not require perfect timing or perfect market conditions. It requires consistency, smart choices, and avoiding the common mistakes that can quietly derail long-term progress.