Retirement planning isn’t a single big decision. It’s a string of smaller ones, made over decades, that either quietly compound in your favor or slowly erode what you’ve built. The trouble is that most of the costliest mistakes don’t feel like mistakes at the time. They feel like common sense, or at least like something everyone else is doing too.
The numbers tell a different story. The median retirement savings across all working-age Americans is just $87,000, a figure that masks how many workers have effectively nothing. Meanwhile, research from NCOA and the LeadingAge LTSS Center found that roughly 80% of households with older adults are financially struggling today or are at risk of falling into economic insecurity as they age. These aren’t random outcomes. They’re the result of specific, preventable errors that keep showing up generation after generation.
1. Claiming Social Security Too Early
1. Claiming Social Security Too Early (Image Credits: Unsplash)
This is one of the most financially damaging decisions a retiree can make, and it happens constantly. In 2024, 26% of new Social Security claimants started at age 62, accepting permanent cuts of up to 30%. That reduction isn’t temporary. Claiming at age 62, the earliest possible age, can result in a benefit that’s up to 30% less than what you’d receive at your full retirement age, and this reduction affects your payment for as long as you receive Social Security.
The difference in real dollars is striking. The maximum benefit for those retiring at full retirement age in 2026 is $4,152 per month, while delaying benefits until age 70 increases the maximum monthly payment to $5,181, according to SSA data. For those who can afford to wait, a report from the National Bureau of Economic Research found that more than 90% of Americans should wait until 70 to claim Social Security, and that an early claim reduces the present value of household lifetime discretionary spending by a shocking $182,370.
2. Failing to Capture the Full Employer 401(k) Match
2. Failing to Capture the Full Employer 401(k) Match (Image Credits: Pixabay)
Walking away from an employer match is essentially declining part of your compensation. Roughly 98% of companies with a 401(k) plan offer some form of matching, according to the Plan Sponsor Council of America, and the average rate ranges between 4% and 6% of pay. Yet only 54% of employees were contributing at or above their employer’s matching rate, according to a 2024 study by Vanguard, meaning nearly half of all employees are leaving free money on the table by neglecting their employer match.
The long-term cost of this oversight compounds over time in ways that are hard to fully grasp in the moment. Assuming a constant $100,000 salary and a steady 10% annual return, a 3% contribution could take nearly 38 years to reach $1 million, which many would consider the bare minimum for a comfortable retirement. Many workers also never revisit their contribution rate after initial enrollment, since workers often start with a default rate of contributions and never think about adjusting it upward, and many employers set the default automatic contribution rate at around 3%, which is too low for creating a robust nest egg by the time you retire.
3. Making Early 401(k) Withdrawals
3. Making Early 401(k) Withdrawals (Image Credits: Pexels)
More Americans than ever are dipping into retirement accounts before they should. According to Vanguard research, many Americans, particularly younger and lower-income workers, are juggling rising costs while living paycheck to paycheck, and the median 401(k) withdrawal amount was $1,900 in 2025. That might sound small, but the actual cost is far larger. Pulling just $1,900 out of your 401(k) today, the median hardship withdrawal, will cost you far more in the long run. If that money had stayed invested and earned an average annual return of 7%, it could have grown to roughly $14,000 over 30 years. Even relatively small withdrawals today translate to five-figure losses by the time you retire.
Vanguard found that Americans were dipping into their retirement savings several times, effectively using their 401(k)s as an emergency fund. Beyond the lost compounding, there’s also an immediate tax hit. The U.S. government imposes a 10% IRS penalty on any withdrawal before age 59.5, and that’s in addition to regular income taxes. The combination can erase a significant chunk of any withdrawal before the money even arrives in your bank account.
4. Forgetting Old 401(k) Accounts When Changing Jobs
4. Forgetting Old 401(k) Accounts When Changing Jobs (Image Credits: Unsplash)
Job changes are a natural part of most careers, but they carry a hidden retirement risk that few people talk about. According to a 2025 report by Capitalize, Americans have left behind or forgotten 32 million accounts and a total of $2.1 trillion in assets. These aren’t small balances, either. Accounts get orphaned, lose track in administrative systems, and stop growing in any strategically useful way.
The Vanguard data sheds further light on how job changes erode savings momentum. The Vanguard “How America Saves 2025” survey shows that while job switching often brings a higher pay rate, it can also put retirement savings at risk. Despite 64% of job switchers securing a salary increase with a median bump of 10%, the majority, 55%, actually ended up saving less. This decline often happened because employees passively accepted the new company’s default savings rate instead of proactively choosing their own. The study found that a worker starting at $60,000 who switched jobs eight times could see their nest egg shrink by up to $300,000 over their career.
5. Grossly Underestimating Healthcare Costs
5. Grossly Underestimating Healthcare Costs (Image Credits: Unsplash)
Healthcare is consistently one of the most underestimated expenses in retirement, and the numbers have grown significantly over time. Fidelity Investments’ 24th annual Retiree Health Care Cost Estimate reveals that a 65-year-old retiring in 2025 can expect to spend an average of $172,500 in health care and medical expenses throughout retirement, representing a more than 4% increased over 2024. That figure has more than doubled since Fidelity first tracked the number at $80,000 in 2002.
What makes this even more alarming is how few people are preparing for it. Recent Fidelity research shows one in five Americans say they have never considered healthcare needs during retirement, a figure that rises to one in four among Gen X. Across all generations, 17% have taken no action at all when it comes to planning for health expenses in retirement. Meanwhile, while 37% of Americans plan to rely on Medicare to cover health costs in retirement, Fidelity’s estimate is evidence of how fast out-of-pocket expenses can add up, since things like Medicare premiums, over-the-counter medications, dental and vision care, and long-term care are costs retirees will still have to cover themselves.
6. Carrying Debt Into Retirement
6. Carrying Debt Into Retirement (Image Credits: Pexels)
Debt doesn’t stop being expensive just because you’ve stopped working. Heading into 2024, about two in three retirees were in some form of non-mortgage debt, and the average retiree owed $15,393 in non-mortgage debt, with credit card debt playing a significant role. Carrying high-interest balances on a fixed income means a meaningful portion of each month’s money goes straight to interest rather than living expenses or savings.
According to Ramsey’s State of Personal Finance report, more than a third of Americans, 37%, have more credit card debt than retirement savings, representing over 90 million U.S. adults. The math is deeply unfavorable for anyone trying to build wealth while carrying these balances. Every dollar of interest paid is a dollar that cannot compound in a retirement account. Retiring with significant outstanding debt effectively forces a retiree to draw down savings faster than any reasonable projection would suggest.
7. Relying Too Heavily on Social Security Alone
7. Relying Too Heavily on Social Security Alone (Image Credits: Pexels)
Social Security was never designed to be a complete retirement income, yet millions of Americans still treat it that way. About half of retirees have less than $145,000 saved, and 12% rely solely on Social Security for income. The monthly benefit simply isn’t enough to cover most retirees’ actual expenses. For January 2026, the average retired worker benefit is $2,071 per month, according to the Social Security Administration.
BLS consumer expenditure data shows average annual expenditures of $61,432 for households age 65 and older in 2024, or about $5,119 per month. That gap between what Social Security provides and what retirement actually costs is real and persistent. A 2024 Census Bureau report found that 42% of older Americans rely on their benefits for half or more of their income, and 14% depend on Social Security for 90% or more of their income. That level of dependence creates serious vulnerability, especially given the program’s long-term funding challenges.
8. Starting to Save Too Late
8. Starting to Save Too Late (Image Credits: Unsplash)
The timing of when you start saving matters more than almost any other factor, and the cost of delay is almost always larger than people realize. A 20-year-old needs to invest just $330 a month into an asset class that delivers a steady 7% annual return to reach $1.26 million by the time they turn 65. Wait until 50, and the math changes drastically. If a 50-year-old hasn’t started saving for retirement, they’d need to invest $3,958 a month at a steady 7% return to reach the same $1.26 million by retirement.
The gap between what Americans believe they need and what they’ve actually saved remains wide. According to the 2025 Planning and Progress Study by Northwestern Mutual, Americans’ target number for a comfortable retirement remains $1.26 million, but that’s a sharp contrast to the average retirement savings that most adults have, about $192,500, for people between the ages of 55 and 74. Given that 11,000 Americans will turn 65 every day through 2027, only half of boomers and Gen Xers believe they’ll be financially ready for retirement when the time comes.
9. Ignoring Tax Strategy on Retirement Accounts
9. Ignoring Tax Strategy on Retirement Accounts (Image Credits: Pexels)
Many savers focus on how much they contribute to retirement accounts without thinking carefully about which type of account they’re using. The difference in tax treatment between a traditional 401(k) and a Roth 401(k) can translate into tens of thousands of dollars over a retirement. With a traditional 401(k), contributions are made pre-tax, which feels like a win today, but every withdrawal in retirement is taxed as ordinary income. Contributions to a Roth 401(k) are made after taxes, so withdrawals in retirement are tax-free, while the biggest mistake is getting a tax write-off now for contributions to a retirement account and paying for it significantly later on.
The 401(k) contribution limit for 2026 is $24,500, with an IRA limit of $7,500. Most Americans use a fraction of that capacity. Those who do contribute often don’t think about the tax mix between their accounts. Diversifying between pre-tax and after-tax retirement savings gives retirees more flexibility to manage their taxable income in retirement, which can also reduce Medicare premium surcharges and minimize taxes on Social Security benefits.
10. Underestimating How Long Retirement Will Last
10. Underestimating How Long Retirement Will Last (Image Credits: Unsplash)
People systematically underestimate how many years they’ll spend in retirement, and that miscalculation shapes every other planning decision. On average, workers expect to retire at age 66 and believe their savings will last 22 years in retirement. However, this may not be sufficient given increasing life expectancy. A couple retiring today at 65 has a meaningful probability that at least one spouse will live into their 90s.
About 40% of retirees worry they’ll outlive their retirement savings, and 19% say they already have. The fear is well-founded. Longer lives and lower savings are fueling a retirement security crisis for millions of Americans, worsened by inflation, rising health care costs, and the fact that someone turning age 65 today has almost a 70% chance of needing some type of long-term care services. Planning for a 25 to 30 year retirement rather than 20 requires meaningfully different withdrawal strategies, investment allocations, and spending discipline throughout those later years.
The mistakes above aren’t unusual or exotic. Most of them are things ordinary people do every year without fully recognizing the cost. What makes them so persistent is that the damage tends to accumulate quietly, only becoming visible years or even decades later when it’s far harder to correct. Awareness is the first step. A honest look at where your own plan stands, while there’s still time to adjust, is worth far more than any single financial product or one-time contribution.