• I’m a financial planner, and I often hear retirement planning mistakes from my clients.
  • Sometimes, people will tell me it’s too soon to start saving, or that their employer’s 401(k) match won’t make a difference.
  • Or, they’ll say they can withdraw cash from their savings, and that they need to save for their kids’ college over retirement.
  • Read more stories from Personal Finance Insider.

Retirement is meant to be an enjoyable experience where you slow down and enjoy your golden years. However, it is quite common for people to sabotage their golden years by not creating a plan.

From starting to save too late in life to withdrawing money too early, there are plenty of ways you can sabotage your retirement plan. To avoid some common retirement planning mistakes, you must create a plan and goal. Below, I’ve compiled a list of six common retirement planning mistakes I often hear from my clients, and how to avoid them.

1. ‘It’s too early to start planning and saving for retirement’

There is a false notion that you should wait until you reach the peak of your career before starting to plan for retirement, but there’s no better time than now to start. The earlier you begin, the more time your money will have to grow in the market. The more time you have, the less money you will have to save upfront, as compound interest will do most of the work. 

Another benefit to starting early is that you can be very aggressive with your investment selections. With multiple decades in the market, you will be able to withstand multiple dips and downturns in the market. 

2. ‘My employer’s match won’t make a significant difference’

An employer’s match to your retirement plan is essentially free money. This is a guaranteed return on your investment. It doesn’t matter if they match 3% or 6%. Remember that you will be able to benefit from the


compound interest

on your employer’s match. Enroll to have your contributions automatically deducted from your payroll. Trust me: You won’t miss this money. 

3. ‘I really need some cash — I’ll just withdraw it from my retirement savings’

It is essential to build an emergency fund that can cover three to 12 months of your expenses. This fund is meant to cover you in situations that are unpredictable, like if your car breaks down or you lose your job. With this fund established, you won’t have the need to dip into your retirement account.

Retirement savings are built to be used only in retirement. If you decide to access and use these funds earlier, you could potentially trigger taxes and penalties. If possible, avoid withdrawing funds from your retirement account until you reach age 59 ½.

There are some exceptions, so make sure you check the rules of your plan. Avoid robbing your future retirement to fulfill current needs.

4. ‘I don’t need to increase my contributions if my income increases’ 

It is very important to revisit your budget frequently to see if there are any opportunities to save more money. As your income increases, consider setting up automatic increases with your retirement plan. Many plans allow you to set up automatic annual percent increases. This would ensure that your savings rate is constantly growing. Always remember to invest in yourself first. 

5. ‘I want to save towards my child’s college education before maximizing my retirement savings’

I get it: Our children mean the world to us. We want the best for them and to set them up for success. In many cases, this means going to college.

However, it is important to put your retirement first before trying to fund your child’s college education. Remember that your children have many funding options for college such as loans, scholarships, grants, or a job. Your options are much more limited when it comes to funding your retirement. Make sure you are prioritizing your needs first.

6. ‘My investments have been doing very well over the years, so I don’t want to change them’

When you are young, you can invest in riskier assets because you have decades before you would retire. However, as you get closer to retirement, you should reduce some of the risk in your portfolio as you have less time. For example, as a financial planner, I recommend clients hold five to seven years of their retirement income in fixed income. Therefore, if the market is down, clients do not have to pull from the equities in their portfolio. 

Make sure that you adjust your asset allocation to a less risky portfolio as you approach retirement. The goal is to limit your downside, while achieve some gains. Diversification is the key. 

When it comes to planning and saving for retirement, the earlier you start the better. You should prioritize yourself. Consider talking with a financial planner to create a retirement plan centered around your goals, time horizon, and risk tolerance. 





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