Biggest Retirement Planning Mistakes & How to Avoid Them in 2025
Planning for retirement can feel overwhelming—but avoiding a few key mistakes can make the difference between financial freedom and future stress. Here’s a breakdown of the most common retirement mistakes and how to avoid them in 2025 and beyond.
❌ 1. Waiting Too Long to Start Saving
Mistake: Time is your most valuable asset. The earlier you begin saving for retirement, the more compound interest works in your favor. Delaying savings means you’re missing out on years of growth.
âś… Fix it: Start now, even with small contributions. Automate your savings and increase them as your income grows. The earlier you start, the more you’ll benefit from compound growth.
- Pro Tip: Use a compound interest calculator to see how your savings can grow over time with early contributions. Start with NerdWallet’s Compound Interest Calculator.
❌ 2. Not Taking Advantage of Employer Match
Mistake: If you’re not contributing enough to get the full match in your 401(k), you’re leaving free money on the table. Many employers match a portion of your contributions, which can significantly boost your savings.
✅ Fix it: Contribute at least enough to get the full match—usually 3–6% of your salary. This is essentially free money, and you shouldn’t pass it up.
- Check Your Employer’s Plan: If you’re unsure about your employer’s match, contact your HR department or log into your 401(k) portal. Want to compare plans? Check out NerdWallet’s Guide to 401(k) Plans: Read more here.
❌ 3. Underestimating How Much You’ll Need
Mistake: Many people assume Social Security will cover most of their expenses. But with longer life expectancies and rising healthcare costs, that’s rarely enough to ensure financial security in retirement.
âś… Fix it: Use the 25x rule: Multiply your expected annual expenses by 25 to estimate your retirement savings goal. This will give you a more realistic target for how much you’ll need.
- Calculate Your Target: Use Fidelity’s Retirement Calculator to estimate how much you’ll need based on your lifestyle and goals: Try it here.
❌ 4. Relying Only on Social Security
Mistake: Social Security should be a supplement, not your entire retirement plan. It was never intended to fully replace your income.
✅ Fix it: Build multiple income sources—401(k), IRAs, investments, and passive income streams. Diversifying your income helps reduce reliance on one source.
- Expand Your Knowledge: To learn about additional retirement accounts like IRAs, read Investopedia’s Guide to IRAs: Learn more.
❌ 5. Taking Early Withdrawals from Retirement Accounts
Mistake: Withdrawing funds before age 59½ often leads to penalties and taxes, and can significantly hinder your retirement savings.
âś… Fix it: Build an emergency fund so you never have to touch your retirement savings early. This will prevent early withdrawals that can hurt your long-term financial goals.
- Need Help Saving for Emergencies? Explore Emergency Fund Savings Tips from NerdWallet: Get started.
❌ 6. Investing Too Conservatively or Too Aggressively
Mistake: Young savers may play it too safe, while older savers may take too much risk. Finding a balance is key.
âś… Fix it: Adjust your asset allocation over time. Use target-date funds or speak with a financial advisor to help tailor your investments to your age, risk tolerance, and retirement goals.
- Want to Understand Asset Allocation? Visit Vanguard’s Investment Allocation Guide: Learn more.
❌ 7. Forgetting About Inflation
Mistake: $1 million today won’t buy the same in 30 years. Ignoring inflation is a major planning error that can erode the purchasing power of your savings.
âś… Fix it: Invest in growth-oriented assets like stocks early in your career, and adjust to more stable assets as retirement approaches. This will help offset inflation and preserve your wealth.
- Track Inflation’s Impact: Use Bureau of Labor Statistics’ Inflation Calculator to see how inflation can impact your savings: Explore here.
❌ 8. Not Having a Withdrawal Plan
Mistake: Saving is only part of the equation. Once you retire, you need a strategy for how to withdraw money from your accounts without running out.
âś… Fix it: Learn about the 4% rule, tax-efficient withdrawals, and required minimum distributions (RMDs). A withdrawal strategy is crucial to ensure your savings last.
- Maximize Your Withdrawals: Explore Fidelity’s Withdrawal Strategy Guide for tax-efficient withdrawals: Read here.
âś… Final Thoughts
Avoiding these retirement mistakes doesn’t require perfection—just awareness and action. The best time to start planning was yesterday. The second-best time is right now.
- Start early, even with small contributions.
- Stay consistent, and automate your savings where possible.
- Make adjustments along the way as your life circumstances and financial goals evolve.
By following these steps, your future self will thank you for the financial freedom and security you’ll achieve in retirement.
For more detailed retirement strategies, check out NerdWallet’s Retirement Planning Guide or speak with a financial advisor to tailor a plan to your specific needs: Explore NerdWallet’s Retirement Planning Tools.