10 Retirement Planning Mistakes That Could Cost You Hundreds of Thousands

Introduction: Mistakes Are Expensive

A single retirement planning mistake can cost you tens of thousands—or even hundreds of thousands—of dollars. The good news? Most mistakes are avoidable once you know what to watch for.

Here are the 10 most costly retirement planning mistakes and how to avoid them.

Mistake #1: Starting Too Late

The cost: $500,000+ in lost compound growth

This is the single most expensive mistake. Every year you delay costs exponentially more to catch up.

The math: - $500/month starting at age 25 → $1,312,406 at 65 - $500/month starting at age 35 → $609,985 at 65 - $500/month starting at age 45 → $260,464 at 65

Starting 10 years earlier means $702,421 more at retirement.

The fix: Start today, even if it's just $50/month. Time matters more than amount.

Mistake #2: Not Getting the Full Employer Match

The cost: $100,000+ over your career

The employer match is literally free money. If your employer matches 50% up to 6% of salary and you only contribute 3%, you're leaving half the match on the table.

Example: - Salary: $75,000 - Full match available: $2,250/year (50% of 6%) - Only getting: $1,125/year (50% of 3%) - Leaving on the table: $1,125/year

Over 30 years at 7% growth, that's $106,000 lost.

The fix: Always contribute at least enough to get the full employer match. It's a 50-100% instant return.

Mistake #3: Cashing Out When Changing Jobs

The cost: 30-40% of your balance + lost growth

When you leave a job, it's tempting to cash out your 401(k). Don't.

What you lose: - 20% withheld for taxes immediately - 10% early withdrawal penalty (if under 59½) - State taxes (3-13% depending on state) - Decades of compound growth

Example: $50,000 cash-out at age 35 - Immediate loss to taxes/penalties: ~$18,000 - Lost growth by age 65 (7%): ~$330,000 - Total cost: ~$348,000

The fix: Roll the balance into your new employer's 401(k) or an IRA. Direct rollover = no taxes.

Mistake #4: Paying High Fees

The cost: $100,000-$500,000+ over your lifetime

A 1% difference in fees seems small. It's not.

Example: $500,000 portfolio over 25 years at 7% return

That 1.4% fee difference costs you $780,000.

The fix: - Choose low-cost index funds (0.03-0.20%) - Check 401(k) plan fees annually - Avoid actively managed funds unless they significantly outperform (they rarely do)

Mistake #5: Being Too Conservative (or Aggressive) for Your Age

The cost: $200,000+ in missed growth or devastating losses

Too conservative when young: 100% bonds at age 25 means missing decades of stock market growth.

Example: $500/month for 40 years - At 4% (bond-like): $590,000 - At 7% (stock-like): $1,312,000 - Difference: $722,000

Too aggressive near retirement: 100% stocks at age 60 with a 2008-style crash (-50%) right before retirement is devastating.

The fix: Use age-appropriate asset allocation: - Age 20-40: 80-100% stocks - Age 40-55: 60-80% stocks - Age 55-65: 50-70% stocks - Age 65+: 40-60% stocks

Or use a target-date fund that adjusts automatically.

Mistake #6: Ignoring Tax Diversification

The cost: Tens of thousands in unnecessary taxes

Having all retirement savings in Traditional (pre-tax) accounts means every dollar withdrawn is taxed.

The problem: - $2 million in Traditional accounts - $80,000/year withdrawal = $80,000 taxable income - Potentially pushes you into higher tax brackets - Increases Social Security taxation - Increases Medicare premiums (IRMAA)

The fix: Maintain balances across account types: - Traditional (pre-tax): Tax deduction now - Roth (after-tax): Tax-free withdrawals later - Taxable brokerage: Flexibility and lower capital gains rates

This lets you manage your tax bracket year by year in retirement.

Mistake #7: Underestimating Healthcare Costs

The cost: $200,000-$400,000+ for a couple

Many people assume Medicare covers everything. It doesn't.

What Medicare doesn't fully cover: - Premiums (Part B, Part D, Medigap) - Dental, vision, hearing - Long-term care - Prescriptions (after coverage gap)

Fidelity estimate: $315,000 for a 65-year-old couple (not including long-term care)

The fix: - Max out HSA while working ($8,550/year for family in 2026) - Budget $7,000-$12,000/year per person for healthcare in retirement - Consider long-term care insurance or self-insurance plan

Use our [HSA Calculator](/hsa-calculator) to plan healthcare savings.

Mistake #8: Taking Social Security Too Early

The cost: $100,000+ in lifetime benefits

Each year you delay Social Security past 62 increases your benefit by 6-8%.

Example: $2,000/month at full retirement age (67) - Claiming at 62: $1,400/month (30% reduction) - Claiming at 70: $2,480/month (24% increase)

Lifetime difference (if you live to 85): - Claiming at 62: $386,400 total - Claiming at 70: $446,400 total - Difference: $60,000+ even starting 8 years later

And if you live longer, the gap widens significantly.

The fix: Unless you have health issues or need the income immediately, consider delaying to at least full retirement age—or 70 if possible.

Mistake #9: Not Having a Withdrawal Strategy

The cost: Running out of money or paying excessive taxes

"Just withdraw what I need" isn't a strategy. Poor withdrawal planning can: - Deplete your portfolio too quickly - Trigger unnecessary taxes - Reduce Social Security benefits - Increase Medicare premiums

The fix: Develop a tax-efficient withdrawal strategy: 1. Withdraw from taxable accounts first (while letting tax-advantaged grow) 2. Fill up low tax brackets with Traditional account withdrawals 3. Take additional needs from Roth (tax-free) 4. Plan withdrawals around Social Security timing 5. Consider Roth conversions in low-income years

See our [Withdrawal Strategies Guide](/learn/withdrawal-strategies).

Mistake #10: Neglecting Estate Planning

The cost: Family conflict, unnecessary taxes, assets going to wrong people

Without proper estate planning: - Retirement accounts may go to unintended beneficiaries - Heirs could face unnecessary taxes - Assets may be tied up in probate - Family disputes can arise

The fix: - Review beneficiary designations annually - These override your will - Create/update your will - Basic document everyone needs - Consider a trust - For larger estates or complex situations - Plan for incapacity - Healthcare proxy, power of attorney - Communicate with heirs - Prevent surprises and conflicts

Bonus Mistake: Lifestyle Inflation

The cost: Years of additional work

Every raise that goes entirely to lifestyle is a raise that doesn't accelerate retirement.

Example: $10,000 raise - Option A: Increase lifestyle by $10,000/year - Need additional $250,000 saved for retirement (Rule of 25) - Option B: Save 50% of raise ($5,000/year) - Adds ~$395,000 to retirement over 30 years - Only need additional $125,000 for higher lifestyle

The fix: Follow the "save half" rule—save at least 50% of every raise.

The Cumulative Cost

These mistakes compound. Someone who: - Starts late (-$500,000) - Misses employer match (-$100,000) - Pays high fees (-$300,000) - Takes Social Security early (-$100,000)

Could easily be $1 million+ poorer in retirement.

Your Action Plan

1. **Start now** - Open a retirement account today if you don't have one
2. **Get the full match** - Increase 401(k) contribution to max employer match
3. **Check your fees** - Review fund expense ratios
4. **Diversify tax treatment** - Consider adding Roth contributions
5. **Plan healthcare** - Open/fund an HSA if eligible
6. **Delay Social Security** - Run the numbers before claiming
7. **Create a withdrawal strategy** - Before you retire
8. **Review estate documents** - Beneficiaries, will, healthcare proxy

The Bottom Line

The best time to fix these mistakes was years ago. The second best time is now.

Use our [Retirement Calculator](/) to see where you stand and what adjustments could improve your outlook. Even small changes made today can be worth tens of thousands at retirement.

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This content is for educational purposes only and does not constitute financial or legal advice. Consider consulting professionals for personalized guidance.