The 10 Biggest Retirement Savings Mistakes

Retirement is a big scary word, one that many people aren’t prepared for, financially.

You know, retirement really isn’t that far off. I mean, sure, it could be 30 years away, but that time passes so fast that you should be thinking about saving for retirement in your first job out of college. In fact, I’d argue that you should start saving for retirement as soon as you start working! That way, you don’t “miss” the extra money that gets put toward retirement goals. You’re already saving, so you get used to spending what you have left in your paycheck.

Preparation is half the battle here, so if you can avoid all ten of these biggest retirement savings mistakes, you’ll be on the path to eating caviar (not cat food) in your sunset years.

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  • 1. Not Starting Soon Enough 2 of 11

    The best time to start to save for retirement is as soon as you start working. The second best time is now, as you're reading this. The magic of compound interest favors the young. The longer you have to save, the more money you'll get when you're done working. It sounds simple, doesn't it? But it's not. It can be really difficult to get motivated to start saving. Either retirement feels like a long way off, or it feels like it's too late to get started. It's not, I swear.


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  • 2. Not Taking Full Advantage of Employer-Sponsored Retirement Accounts 3 of 11

    Does your company offer a retirement plan? Use it. Does it match, even a little? If it matches up to x%, and you're not contributing x%, listen carefully: YOU ARE WALKING AWAY FROM MONEY. Let me ask you this: if you saw a $100 bill on the ground, would you pick it up, or just keep walking? It's the same principle, seriously. Only it's a lot more than $100.


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  • 3. Not Maxing Out your IRA 4 of 11

    You have an IRA, right? Either traditional or Roth? Max it out, year after year. The contribution limit is $5500. You're doing yourself a huge favor.


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  • 4. Putting Your Money in a Target-Date Retirement Fund 5 of 11

    You know those target date retirement funds? The ones that say, hey, I want to retire in 2040. Make all my decisions for me! Those aren't great. They are expensive, and they offer really (SUPER) low returns. Instead, use a company like Jemstep that will teach you where you should allocate your retirement.


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  • 5. Taking Too Few Risks 6 of 11

    Investing in "safe" things will give you a lower return than inflation, and you only have to listen to one retired person tell you the price of eggs when they were a child to understand that you need to beat inflation in your investing.


    That means taking more risks. Now, I'm not talking about investing in a friend-of-a-friend's business (ahem! I did that) or heading to Vegas to put it all on red, but taking a slightly more aggressive approach to investing makes a lot of sense, and can pay off. One or two percent higher return may not sound like much, but 2% times 30 years equals a LOT more money for your retirement!


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  • 6. Counting on Social Security 7 of 11

    You might hear politicians suggest that Social Security might run out before you get a chance to retire. That's probably not going to happen. That said, it's not enough. It's not going to be enough. Knowing that, really truly understanding, will help motivate you to save even more.


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  • 7. Failing to Consider Alternative Forms of Passive Income 8 of 11
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    Sometimes, savings and Social Security alone won't be quite enough to pay your bills. So if you can, it pays to consider alternatives. Can you afford a rental property? What about investing in something that pays dividends?


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  • 8. Draining Retirement Accounts Early 9 of 11

    Let the power of compound interest work for you, friend! Do not take loans from your 401(K), do not use your IRA to put a down payment on your house, do not borrow from your future self! Seriously, taking money out of retirement accounts while we're working is something we think we can pay back later, but often we don't. So just don't touch it in the first place. There are penalties and taxes, so save up for your house in another account.


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  • 9. Failing to Pay Off Your House Before Retirement 10 of 11

    Here's the thing. If you pay off your house before you retire, you will be in MUCH better shape for retirement. Think about it. You'll have $500-1000 extra dollars every month! Minimizing fixed expenses goes a long way toward a happy, healthy retirement.


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  • 10. Inflating Your Lifestyle 11 of 11

    According to all the retirement calculators, retired people need about two thirds less money than working people. Make sure this is true for you. Sure, take that vacation you always wanted to take when you were working but could never get enough time off to take, but be careful not to let your daily expenses nickel and dime you into having to pick up another source of income in your sunset years.


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