The Retirement Savings Mistake That 70% of Americans Make (And How to Fix It)

Chuvic - July 9, 2025
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The Retirement Savings Mistake That 70% of Americans Make (And How to Fix It)

It’s a startling truth: nearly 70% of Americans are behind on their retirement savings, according to recent reports from the National Retirement Risk Index. As life expectancy continues to climb, the urgency to build a secure nest egg grows more pressing each year. Many individuals underestimate how much they’ll need, risking financial insecurity in their golden years. This widespread issue isn’t limited to any one age group—it affects young professionals and those nearing retirement alike. Understanding why so many fall short is the first step toward a more secure future.

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1. Underestimating How Much You’ll Need

1. Underestimating How Much You’ll Need
A person uses a calculator to review retirement expenses, with medical bills and paperwork spread across the table. | Photo by Photo By: Kaboompics.com on Pexels

A major reason so many Americans fall behind is underestimating the true cost of retirement. It’s easy to overlook expenses like healthcare, which can quickly add up. For example, Fidelity estimates the average retired couple may need more than $300,000 just to cover medical costs. Factor in housing, food, and inflation, and the gap widens even further. Lowballing these figures leaves many ill-prepared when retirement finally arrives, making it crucial to plan with realistic numbers.

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2. Delaying Savings Until It’s Too Late

2. Delaying Savings Until It's Too Late
A classic clock and a marked calendar sit side by side, symbolizing the steady growth of compound interest over time. | Photo by Joel Zar on Pexels

Many people make the mistake of putting off retirement savings, missing out on the powerful effects of compounding interest. Starting early, even with smaller amounts, can make a dramatic difference. According to Investopedia, saving at age 25 versus 45 can mean hundreds of thousands of dollars more by retirement. Every year of delay shrinks your future nest egg, making it much harder to catch up later.

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3. Relying Solely on Social Security

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Source: “NY – Hyde Park: Franklin D. Roosevelt Presidential Library – Social Security Act” by wallyg is licensed under CC BY-NC-ND 2.0

Many Americans assume Social Security will cover all their retirement needs, but the reality is different. The average benefit is about $1,800 per month, which often falls short of covering basic expenses. Even the Social Security Administration recommends treating it as just one part of your retirement plan. Depending solely on this income stream can leave you vulnerable to unexpected costs and lifestyle compromises.

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4. Not Taking Advantage of Employer Matches

4. Not Taking Advantage of Employer Matches
Two colleagues exchange a firm handshake across a desk, celebrating a successful 401k match at the workplace. | Photo by Alena Darmel on Pexels

A surprising number of workers fail to maximize their employer 401(k) match, effectively leaving free money behind. If your employer offers a 5% match and you don’t contribute enough to receive it, you could miss out on tens of thousands of dollars over your career. CNBC reports that these missed contributions—and the compounding growth they’d earn—can significantly impact your retirement security. Maximizing this benefit is one of the simplest ways to boost your savings.

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5. Cashing Out Retirement Accounts Early

5. Cashing Out Retirement Accounts Early
A broken piggy bank spills coins onto the table, symbolizing the cost of an early withdrawal penalty. | Photo by Dovis on Pexels

Taking money out of your retirement accounts before age 59½ can trigger tax penalties and lost growth. For example, cashing out a $10,000 401(k) at age 35 could mean losing over $50,000 in potential retirement savings due to missed compounding. According to the IRS, early withdrawals not only reduce your balance but also your long-term financial security. Preserving these funds is key to a comfortable retirement.

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6. Ignoring Inflation’s Impact

6. Ignoring Inflation’s Impact
A dollar bill appears visibly shrunken beside a rising stack of groceries, symbolizing inflation and soaring prices. | Photo by Photo By: Kaboompics.com on Pexels

One commonly overlooked mistake is failing to account for inflation when planning retirement savings. Over time, rising prices can dramatically erode your purchasing power. For example, the Bureau of Labor Statistics shows that $50,000 today could be worth just $30,000 in 20 years. Not adjusting your savings goals for inflation can leave you short when it matters most. Be sure to factor in annual cost increases when estimating how much you’ll need for a secure retirement.

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7. Failing to Diversify Investments

7. Failing to Diversify Investments
A colorful pie chart illustrates a well-diversified investment portfolio, highlighting balanced allocations across multiple asset classes. | Photo by Photo By: Kaboompics.com on Pexels

Putting all your retirement savings into a single asset class—like only stocks or just cash—can be risky. Diversification helps protect your portfolio from market swings and unexpected downturns. According to the SEC, spreading investments across different asset types can reduce risk and improve long-term returns. Overconcentration leaves you vulnerable to losses if one sector performs poorly. A balanced approach helps ensure your nest egg grows steadily, regardless of market conditions.

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8. Forgetting to Rebalance Portfolios

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As markets fluctuate or you approach retirement, rebalancing your portfolio is essential to managing risk. Allowing allocations to drift can expose you to more volatility than intended. FINRA stresses the importance of regularly reviewing and adjusting your investments. Sticking with a well-balanced mix helps keep your financial plan on track and aligned with your changing goals and risk tolerance.

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9. Overestimating Pension Reliability

9. Overestimating Pension Reliability
A worried retiree sits at a kitchen table, studying a pension statement and retirement check, uncertainty in their eyes. | Photo by Ron Lach on Pexels

Many Americans mistakenly count on pensions to fund their retirement, yet traditional pensions are becoming rare. Only about 15% of private-sector workers have access to a pension today, according to the U.S. Bureau of Labor Statistics. Additionally, some pension plans are underfunded, putting future payouts at risk. Relying solely on a pension can leave you unprepared if your plan changes or falls short.

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10. Not Planning for Healthcare Costs

10. Not Planning for Healthcare Costs
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Healthcare expenses often catch retirees off guard, especially as costs continue to rise. Many assume Medicare will cover all medical needs, but it doesn’t pay for everything—especially long-term care or certain prescription drugs. AARP highlights that out-of-pocket healthcare costs can quickly add up, straining limited retirement budgets. Building these expenses into your retirement plan is crucial to avoid financial surprises and ensure you can afford the care you may need.

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11. Assuming You Can Work Indefinitely

11. Assuming You Can Work Indefinitely
An older man in business attire sits alone at his desk, reflecting on job loss as retirement approaches. | Photo by Mikhail Nilov on Pexels

Many people plan to work well past traditional retirement age, but unexpected circumstances can disrupt those intentions. Health issues or shifts in the job market often force earlier retirements than expected. A Gallup poll found that most retirees left work sooner than planned. Counting on continued employment is risky; having a solid savings plan ensures you’re prepared if working longer isn’t an option.

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12. Not Creating a Withdrawal Strategy

12. Not Creating a Withdrawal Strategy
A financial advisor discusses a retirement withdrawal plan with a couple, reviewing charts and income strategies together at a desk. | Photo by Kampus Production on Pexels

Having a solid plan for withdrawing money in retirement is just as important as saving it. Without a strategy, you risk spending too quickly and outliving your assets. The popular 4% rule suggests withdrawing 4% of your portfolio annually, but it’s not foolproof and may not suit everyone. Careful planning and regular review help ensure your savings last, adapting to market conditions and your changing needs over time.

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13. Overlooking Required Minimum Distributions (RMDs)

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Source: Photo by Estée Janssens on Unsplash

After age 73, retirees must start taking Required Minimum Distributions (RMDs) from most retirement accounts. Missing these mandatory withdrawals can result in steep IRS penalties—up to 25% of the amount you should have withdrawn. IRS guidelines make it clear that staying organized is essential. Factoring RMDs into your retirement plan helps you avoid unnecessary costs and keeps your withdrawal strategy on track.

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14. Not Adjusting Savings with Life Changes

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Source: Photo by Mihály Köles on Unsplash

Life events like salary increases, marriage, or unexpected expenses should prompt a review of your retirement contributions. Failing to adjust your savings rate during these milestones can slow your financial progress. NerdWallet recommends increasing your retirement contributions whenever your income rises or your budget changes. Regularly revisiting your plan ensures you stay on track and take full advantage of opportunities to grow your nest egg.

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15. Ignoring Roth Accounts’ Tax Benefits

15. Ignoring Roth Accounts’ Tax Benefits
A tidy workspace features a laptop, calculator, and a Roth IRA booklet, highlighting the tax benefits of smart retirement planning. | Photo by RDNE Stock project on Pexels

Many savers overlook the powerful advantages of Roth IRAs and Roth 401(k)s. These accounts allow for tax-free withdrawals in retirement, providing flexibility and potential tax savings later in life. Despite these benefits, Roth accounts remain underutilized by many Americans. The IRS highlights their value, especially for those who expect to be in a higher tax bracket during retirement. Incorporating Roth options into your savings strategy can help maximize your retirement income and offer peace of mind.

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16. Failing to Automate Savings

16. Failing to Automate Savings
A computer screen displays an automated direct deposit notification, while a growing stack of coins symbolizes increasing savings. | Photo by Photo By: Kaboompics.com on Pexels

One of the easiest ways to boost retirement savings is to automate contributions through payroll deductions or regular bank transfers. Automation eliminates the risk of forgetting or skipping deposits, ensuring steady progress toward your goals. Forbes notes that people who automate their savings are more consistent and less tempted to spend. Setting it and forgetting it puts your retirement plan on autopilot and builds wealth over time.

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17. Not Seeking Professional Financial Advice

17. Not Seeking Professional Financial Advice
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Trying to navigate retirement planning alone can lead to missed opportunities or costly mistakes. Working with a fiduciary financial advisor ensures you get guidance that’s tailored to your unique situation, especially if you have complex needs or assets. The CFP Board recommends consulting a certified planner for expert advice on investment choices, tax strategies, and withdrawal plans. Professional advice can make a significant difference in achieving your retirement goals and avoiding common pitfalls.

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18. Overlooking Spousal Benefits

18. Overlooking Spousal Benefits
A smiling couple sits together at a kitchen table, reviewing documents and discussing their spousal benefits and joint planning. | Photo by Vodafone x Rankin everyone.connected on Pexels

Coordinating retirement planning with your spouse can significantly boost your combined benefits. By optimizing Social Security claiming strategies and synchronizing savings plans, couples can maximize their retirement income. The Social Security Administration encourages reviewing spousal options, which may provide higher payouts or survivor benefits. Overlooking these opportunities can lead to missed income and reduced financial security for both partners.

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19. Paying High Investment Fees

19. Paying High Investment Fees
A side-by-side chart compares investment fees and expense ratios, highlighting the differences in costs for various funds. | Photo by Breakingpic on Pexels

Investment fees, such as management costs and expense ratios, can quietly eat away at your retirement savings. Even a seemingly small 1% annual fee can add up to six figures in lost returns over several decades. FINRA warns that minimizing investment costs is crucial for long-term growth. Regularly reviewing your portfolio’s fees and considering lower-cost alternatives can help you keep more of your hard-earned money for retirement.

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20. Not Catching Up After Age 50

20. Not Catching Up After Age 50
A smiling woman in her 50s reviews her finances at a desk, exploring catch-up contributions to boost retirement savings. | Photo by Kampus Production on Pexels

If you’re behind on retirement savings, catch-up contributions can help bridge the gap. Once you turn 50, the IRS allows you to contribute extra to your IRAs and 401(k)s each year. IRS guidelines make it clear that taking advantage of these higher limits can significantly boost your savings in the critical years before retirement. Don’t miss this valuable opportunity to strengthen your financial future.

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21. Underestimating Longevity Risk

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Source: Photo by Guillermo Latorre on Unsplash

Many retirees fail to consider the possibility of living much longer than expected, which increases the risk of outliving their savings. With average life expectancy rising—currently over 76 years in the U.S., according to the CDC—it’s crucial to plan for a longer retirement. Building a financial cushion and considering products like annuities can help ensure your money lasts as long as you do.

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22. Not Having an Emergency Fund

22. Not Having an Emergency Fund
A clear glass jar labeled “Emergency Fund” overflows with coins and bills, ready to cover life’s unexpected expenses. | Photo by Photo By: Kaboompics.com on Pexels

Without a dedicated emergency fund, unexpected costs—like medical bills or home repairs—can force you to dip into retirement savings. This not only interrupts compounding growth but also increases the risk of running short later. The Consumer Financial Protection Bureau emphasizes the importance of maintaining a separate emergency fund. A well-stocked safety net protects your retirement accounts so they can continue to grow undisturbed.

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23. Failing to Account for Taxes in Retirement

23. Failing to Account for Taxes in Retirement
A stack of tax forms sits beside a calculator and retirement documents, highlighting the importance of careful tax planning. | Photo by Nataliya Vaitkevich on Pexels

Taxes don’t disappear when you retire. Required withdrawals from traditional IRAs and 401(k)s, as well as a portion of your Social Security benefits, may be taxable. If you don’t plan for these taxes, your actual retirement income could be lower than expected. IRS guidelines highlight the importance of factoring taxes into your retirement budget to avoid unpleasant surprises.

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24. Overlooking Estate Planning

24. Overlooking Estate Planning
A neatly arranged will document rests beside a pen and reading glasses, symbolizing thoughtful estate planning and inheritance decisions. | Photo by Tima Miroshnichenko on Pexels

Estate planning is about more than just having a will—it’s essential for protecting your savings and ensuring your wishes are honored. Naming beneficiaries, setting up trusts, and considering tax-efficient strategies can help your heirs avoid unnecessary costs and delays. AARP recommends reviewing your estate plan regularly. Ignoring this step can result in unintended consequences and added stress for your loved ones.

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25. Not Reviewing and Updating Plans Regularly

25. Not Reviewing and Updating Plans Regularly
A hand checks off items on a printed annual review checklist, surrounded by financial planning documents and a calculator. | Photo by RDNE Stock project on Pexels

A successful retirement strategy isn’t “set it and forget it.” Annual reviews are essential to keep your plans aligned with changing goals, tax laws, and market conditions. Vanguard recommends revisiting your retirement plan every year. Regular checkups help you spot gaps or needed adjustments, ensuring your savings and strategies remain on track for a secure future.

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How to Start Fixing Your Retirement Plan Today

How to Start Fixing Your Retirement Plan Today
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The good news is, it’s never too late to improve your retirement outlook. Begin by reviewing your savings habits, increasing contributions where possible, and ensuring you’re taking full advantage of employer matches and catch-up provisions. Diversify your investments and rebalance your portfolio regularly to manage risk. Don’t hesitate to consult a fiduciary advisor for personalized guidance. A proactive approach—including routine checkups and adjustments—will help you course-correct and build a more secure, comfortable retirement.

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Disclaimer

Disclaimer
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This article is for informational purposes only and does not constitute personalized financial advice. Everyone’s situation is unique—please consult a qualified financial advisor before making major retirement decisions. Take charge of your future by seeking expert guidance tailored to your needs.

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