Not Starting Early Enough
Every year you delay investing costs you exponentially. Starting at 25 vs 35 with $500/month means the difference between $1.7M and $650K by age 65 (assuming 8% returns). That 10-year delay costs you over $1 million. The best time to start was yesterday. The second best time is today. Even $100/month makes a massive difference over 30+ years.
Ignoring the 401(k) Match
If your employer offers a 401(k) match and you’re not contributing enough to get the full match, you’re leaving free money on the table. A typical 50% match on 6% of salary means $3,000+ per year in free money for someone earning $100K. Over a 30-year career with investment growth, that free money alone could be worth over $300,000.
Keeping Too Much in Cash
Having an emergency fund is smart. Having $200K sitting in a savings account earning 0.5% is not. After inflation (averaging 3.5%), your cash loses purchasing power every year. Keep 3-6 months expenses in cash, and invest the rest. A balanced portfolio has historically returned 7-10% annually — turning idle cash into a wealth-building machine.
Not Considering Healthcare Costs
The average retired couple will spend $315,000 on healthcare in retirement — and that doesn’t include long-term care. Medicare doesn’t cover everything, and premiums, deductibles, and prescription costs add up fast. Consider an HSA (triple tax advantage), supplemental insurance, and long-term care insurance before you retire.
Taking Social Security Too Early
You can claim Social Security at 62, but each year you delay (up to 70) increases your benefit by about 8%. Claiming at 62 vs 70 could mean the difference between $1,800 and $3,200 per month — for life. If you’re healthy and can afford to wait, delaying is one of the best ‘investments’ you’ll ever make.
Underestimating How Long You’ll Live
A 65-year-old couple has a 50% chance that one of them will live to 92. Planning for retirement to 80 could leave you broke for over a decade. Use conservative estimates: plan for at least 30 years of retirement. Running out of money at 85 with no ability to work is a nightmare you can prevent with proper planning.
Not Diversifying Beyond Stocks
Having 100% of your retirement in stocks is fine at 30. At 55? It’s reckless. A major market crash right before retirement can devastate your portfolio. Follow the rule of thumb: subtract your age from 110 to get your stock allocation percentage. The rest should be in bonds, real estate, and other stable assets.
Forgetting About Taxes in Retirement
Many retirees are shocked by their tax bill. 401(k) and traditional IRA withdrawals are taxed as ordinary income. Social Security can be taxed up to 85%. Consider Roth conversions before retirement to create tax-free income later. A mix of pre-tax and Roth accounts gives you flexibility to manage your tax bracket in retirement.