Saving for Retirement? Don’t Make These 5 Huge Mistakes

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Saving for retirement can feel overwhelming, but it doesn’t have to. While it’s normal to make a few missteps along the way, some mistakes can seriously derail your plans.Alert: highest cash back card we’ve seen now has 0% intro APR into 2026
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Click here to read our full review for free and apply in just 2 minutes. The good news is most of these pitfalls are easy to avoid once you know what to watch out for.Here are five in particular that it’s best to steer clear of.1. Waiting to start savingTime is your greatest ally when it comes to retirement savings. The earlier you start saving, the more time your money has to grow through the power of compound interest. Waiting even a few years to get started can mean losing out on tens of thousands of dollars in potential earnings.For example, if you start saving $200 a month at age 25 with a 7% annual return, you’ll have nearly $500,000 by age 65. Wait until age 35 to start saving the same amount? You’ll have only about $235,000.If you haven’t started saving yet, don’t panic — it’s better to start now than never. Increase your contributions as much as possible and take advantage of employer-sponsored plans, like 401(k)s, that offer matching contributions.Want to earn more than nine times the national average APY? Check out our list of the best high-yield savings accounts and start earning more today.2. Not taking advantage of employer matchingSpeaking of 401(k) matching, failing to take full advantage of this benefit is like leaving free money on the table. Many employers will match a percentage of your contributions to your retirement plan, essentially giving you an instant return on your investment.For example, if your employer offers a 50% match on contributions up to 6% of your salary, and you earn $50,000 a year, that’s an extra $1,500 added to your retirement savings annually — at no extra cost to you.If you can, it’s best to contribute at least enough to get the full employer match. If money is tight, start small and gradually increase your contributions over time. You’ll be surprised how quickly it adds up.3. Neglecting tax-advantaged accountsWhen saving for retirement, the type of account you use matters. Ignoring tax-advantaged accounts, such as 401(k)s or IRAs, can lead to paying more in taxes than necessary.”Traditional” retirement accounts let you save on taxes now by contributing pre-tax dollars, while Roth accounts offer tax-free withdrawals in retirement. Neglecting these options could cost you thousands in tax savings over the years.Learn the differences between traditional and Roth accounts to decide which is best for you. If your employer offers a 401(k), start there, especially if they match contributions. If not, open an IRA and begin contributing regularly.4. Forgetting to adjust investments as you ageWhen you’re younger, it makes sense to invest more aggressively in stocks since you have time to ride out market fluctuations. But as you get closer to retirement, failing to adjust your investments toward less risky options like bonds or stable funds could jeopardize your savings.Use a strategy that gradually shifts your portfolio to more conservative investments as you age. Many target-date retirement funds automatically do this for you, making them a great option if you want to set it and forget it.5. Cashing out earlyCashing out your retirement savings before you retire is one of the costliest mistakes you can make. Not only could you face hefty penalties for early withdrawals from a 401(k) or IRA (if you’re under age 59 1/2), but you’ll also lose out on potential growth.For example, cashing out $10,000 today might leave you with just $8,000 after taxes and penalties — and that’s before you consider the long-term growth you’re sacrificing. Over 30 years, that $10,000 could have grown to more than $76,000 with a 7% annual return.If you leave a job, roll your 401(k) over into an IRA or your new employer’s plan instead of cashing out. And if you’re in financial trouble, explore other options — like cutting expenses or taking out a personal loan — before touching your retirement savings.Bonus mistake to avoid: Not knowing how much you’ll needOne of the most common mistakes is simply not knowing how much money you’ll need in retirement. Underestimating the cost of retirement, inflation, healthcare expenses, or the fact that you may live 20 to 30 years without a paycheck can leave you financially vulnerable in your senior years.Use an online retirement calculator to estimate how much you’ll need based on your age, current savings, and expected lifestyle. Adjust your savings rate if you’re falling behind. A general rule of thumb is to aim for 15% of your income, including employer contributions.Better late than neverSaving for retirement doesn’t have to be complicated, and it’s made much easier by avoiding these costly mistakes. By making smart choices and getting started now, you’ll set yourself up for a comfortable retirement — and your future self will thank you.Ready to make the most of your retirement savings? Start reviewing your accounts today and check out our list of the best IRA accounts.Alert: highest cash back card we’ve seen now has 0% intro APR into 2026
This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes. We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
Motley Fool Money does not cover all offers on the market. Editorial content from Motley Fool Money is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.”}]] [[{“value”:”

Saving for retirement can feel overwhelming, but it doesn’t have to. While it’s normal to make a few missteps along the way, some mistakes can seriously derail your plans.

Alert: highest cash back card we’ve seen now has 0% intro APR into 2026

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

The good news is most of these pitfalls are easy to avoid once you know what to watch out for.

Here are five in particular that it’s best to steer clear of.

1. Waiting to start saving

Time is your greatest ally when it comes to retirement savings. The earlier you start saving, the more time your money has to grow through the power of compound interest. Waiting even a few years to get started can mean losing out on tens of thousands of dollars in potential earnings.

For example, if you start saving $200 a month at age 25 with a 7% annual return, you’ll have nearly $500,000 by age 65. Wait until age 35 to start saving the same amount? You’ll have only about $235,000.

If you haven’t started saving yet, don’t panic — it’s better to start now than never. Increase your contributions as much as possible and take advantage of employer-sponsored plans, like 401(k)s, that offer matching contributions.

Want to earn more than nine times the national average APY? Check out our list of the best high-yield savings accounts and start earning more today.

2. Not taking advantage of employer matching

Speaking of 401(k) matching, failing to take full advantage of this benefit is like leaving free money on the table. Many employers will match a percentage of your contributions to your retirement plan, essentially giving you an instant return on your investment.

For example, if your employer offers a 50% match on contributions up to 6% of your salary, and you earn $50,000 a year, that’s an extra $1,500 added to your retirement savings annually — at no extra cost to you.

If you can, it’s best to contribute at least enough to get the full employer match. If money is tight, start small and gradually increase your contributions over time. You’ll be surprised how quickly it adds up.

3. Neglecting tax-advantaged accounts

When saving for retirement, the type of account you use matters. Ignoring tax-advantaged accounts, such as 401(k)s or IRAs, can lead to paying more in taxes than necessary.

“Traditional” retirement accounts let you save on taxes now by contributing pre-tax dollars, while Roth accounts offer tax-free withdrawals in retirement. Neglecting these options could cost you thousands in tax savings over the years.

Learn the differences between traditional and Roth accounts to decide which is best for you. If your employer offers a 401(k), start there, especially if they match contributions. If not, open an IRA and begin contributing regularly.

4. Forgetting to adjust investments as you age

When you’re younger, it makes sense to invest more aggressively in stocks since you have time to ride out market fluctuations. But as you get closer to retirement, failing to adjust your investments toward less risky options like bonds or stable funds could jeopardize your savings.

Use a strategy that gradually shifts your portfolio to more conservative investments as you age. Many target-date retirement funds automatically do this for you, making them a great option if you want to set it and forget it.

5. Cashing out early

Cashing out your retirement savings before you retire is one of the costliest mistakes you can make. Not only could you face hefty penalties for early withdrawals from a 401(k) or IRA (if you’re under age 59 1/2), but you’ll also lose out on potential growth.

For example, cashing out $10,000 today might leave you with just $8,000 after taxes and penalties — and that’s before you consider the long-term growth you’re sacrificing. Over 30 years, that $10,000 could have grown to more than $76,000 with a 7% annual return.

If you leave a job, roll your 401(k) over into an IRA or your new employer’s plan instead of cashing out. And if you’re in financial trouble, explore other options — like cutting expenses or taking out a personal loan — before touching your retirement savings.

Bonus mistake to avoid: Not knowing how much you’ll need

One of the most common mistakes is simply not knowing how much money you’ll need in retirement. Underestimating the cost of retirement, inflation, healthcare expenses, or the fact that you may live 20 to 30 years without a paycheck can leave you financially vulnerable in your senior years.

Use an online retirement calculator to estimate how much you’ll need based on your age, current savings, and expected lifestyle. Adjust your savings rate if you’re falling behind. A general rule of thumb is to aim for 15% of your income, including employer contributions.

Better late than never

Saving for retirement doesn’t have to be complicated, and it’s made much easier by avoiding these costly mistakes. By making smart choices and getting started now, you’ll set yourself up for a comfortable retirement — and your future self will thank you.

Ready to make the most of your retirement savings? Start reviewing your accounts today and check out our list of the best IRA accounts.

Alert: highest cash back card we’ve seen now has 0% intro APR into 2026

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
Motley Fool Money does not cover all offers on the market. Editorial content from Motley Fool Money is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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