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Six common retirement saving mistakes and how to avoid them

Avoiding these common mistakes can make a significant difference in your retirement saving journey.

August 2025, Make Your Plan

Key Insights
  • Retirement planning can be complex, and it’s easy to make mistakes along the way.
  • With the right information and preparation, you can steer clear of common pitfalls that can significantly impact your future financial security.
  • Avoiding these six common retirement saving mistakes can help ensure a more secure and enjoyable retirement.
View Transcript
Common Retirement Savings Mistakes and How to Avoid Them

The following is an excerpt from season 4 episode 8 of the Confident Conversations® on Retirement podcast titled Common Retirement Savings Mistakes and How to Avoid Them.

I think, for younger folks, you know, starting out or earlyin their career, underestimating how much the amount nyou're able to save, that has the greatest impact on your retirement success.

Full stop, full stop, the amount you're able to save. So, you know, our rule of thumb is to save 15% of your salary.

I know that's a lofty goal for many people.

So if your company, you know, if you can save 10% and your company is putting in 5%, then you're at the 15% mark.

So it's just to try to put something away, put it on autopilot so you don't have to think about it, you know, and we've talked about 401(k) plans, for example, having money come out of your paycheck right into the plan, you know, if you can start at 10%, start at 10%. If you can start at 15%, start at 15%.

We've also seen, if you can start at 6% or enough to get the full company match if thereis a company match.

And then a lot of companies now they have what's called an auto escalation where you can sign up for that and each year they'll increase your contribution amount by 1% point, generally, sometimes 2% points.

So that's a good way to step into increasing your um savings amount and you might not notice it.

To watch the rest of the episode, visityoutube.com/@TRowePriceGroup or listen and subscribe at troweprice.com/podcast.

202508-4783012

Recently, we asked a group of clients what their top concerns are when it comes to saving for retirement. The top three responses were not saving enough, starting too late, and not knowing the best investment strategy.1

Many people make common mistakes when saving for retirement that can significantly impact their future financial security. With proper planning and knowledge, these mistakes can be avoided. Here are some key errors people tend to make when saving for retirement and how you can course correct.

Mistake #1: Not having a plan

Saving for retirement without a clear plan can be like setting off on a journey without a map. It’s essential to understand how much you’ll need in retirement and to develop a strategy to get there.

Be sure to consider that you might live another 30 years in retirement and will need a steady income throughout. Understanding the income you’ll need in retirement from sources other than Social Security can help you estimate how much to save.

How to avoid it:

  • Determine how much you’ll need: Take time to estimate how much you’ll need in retirement, factoring in inflation and health care costs. Our analysis shows that aiming for 75% of your current income is a good starting point in terms of setting a retirement savings goal.
  • Develop a plan: Develop a savings strategy with clear goals, including periodic reviews. Your retirement plan is not a set‑it‑and‑forget‑it endeavor. Adjust your savings goals along the way based on factors like life events and changes in income or salary.
  • Ask for help: If you’re not sure your financial plan is on track, consult a financial advisor or refer to your workplace financial wellness resources.

Mistake #2: Delaying savings

One of the biggest retirement savings mistakes you can make is waiting too long to start saving. Contributing as much as you can and as early as you can has the greatest impact on your retirement savings, thanks to the power of compound growth—meaning that over time, your money earns money.

How to avoid it:

  • Save early: Start saving for your retirement as early as possible, even if it’s only with small amounts. You’re never too young to start saving as long as you have income.
  • Increase savings over time: You can then increase your savings amount over time as you are able to (see Fig. 1).

Saving early makes a difference

(Fig. 1) Starting early and steadily increasing your contributions up to the 15% target can help you reach your retirement savings goal. T. Rowe Price recommends that, generally, you should have saved about 11 times your preretirement salary by age 65.
Line graph shows how starting early and steadily increasing your contributions up to the 15% target can help you reach your retirement savings goal.

Assumptions: Examples beginning at age 25 assume a beginning salary of $40,000 escalated 5% a year to age 45 and then 3% a year to age 65. Examples beginning at age 30 assume a beginning salary of $50,000 escalated 5% a year to age 45 and then 3% a year to age 65. Example beginning at age 40 assumes a beginning salary of $80,000 escalated 5% a year to age 45 and then 3% a year to age 65. Annual rate of return is 7%. All savings are assumed to be tax-deferred. Multiple of ending salary saved divides final ending portfolio balance by ending salary at age 65. This example is for illustrative purposes only and is not meant to represent the performance of any specific investment option. The assumptions used may not reflect actual market conditions or your specific circumstances and do not account for plan or IRS limits. Please be sure to take all of your assets, income, and investments into consideration in assessing your retirement savings adequacy.

Mistake #3: Not saving enough

Failing to save enough for retirement is a significant mistake because it can leave you financially vulnerable in your later years. Without adequate savings, you may struggle to cover essential expenses such as health care, housing, and daily living costs, especially as inflation erodes purchasing power over time.

How to avoid it:

  • Set a savings goal: Aiming to save 15% of your income each year (including any employer contributions to a defined contribution plan, if available) is an appropriate goal for most people.
  • Review benchmarks: Savings benchmarks can serve as a helpful way to track your progress as well. For example, T. Rowe Price recommends that, generally, you should have saved about three times your salary by age 45, seven times your salary by age 55, and 11 times your preretirement salary by age 65. (See Fig. 2)
  • Use your plan’s auto features: Contribute consistently to a retirement account utilizing tools such as automatic enroll, automatic contributions, and automatic increase.
  • Reset your budget: If you’re looking to save more, consider starting with a budget reset by enacting a household discretionary spending hiatus. You can then redirect any planned or unplanned cash flow increases directly to savings.

Savings benchmarks by age—As a multiple of income

(Fig. 2) These benchmarks can help investors gauge whether their retirement savings are on track.
Bar chart shows benchmarks that can help investors gauge whether their retirement savings are on track.

Key assumptions: Household income grows at 5% until age 45 and 3% (the assumed inflation rate) thereafter. Investment returns before retirement are 7% before taxes, and savings grow tax-deferred. The person retires at age 65 and begins withdrawing 4% of assets (a rate intended to support steady inflation-adjusted spending over a 30-year retirement). Savings benchmark ranges are based on individuals or couples with current household income between $75,000 and $250,000.

Mistake #4: Missing out on employer matching contributions

If your employer offers a retirement plan with matching contributions, not taking full advantage of this benefit is akin to leaving free money on the table.

How to avoid it:

  • Match the match: Make sure to contribute at least enough to get the full match, as this can significantly boost your retirement savings. Maximizing this benefit can help to grow your retirement savings more quickly.

Mistake #5: Not diversifying investments

Asset allocation is the primary driver of a portfolio’s growth over time. Adjusting your mix of stocks, bonds, and cash to reflect your time horizon allows you to manage the trade‑off of long‑term growth with short‑term volatility.

How to avoid it:

  • Invest based on your age: Use age‑based asset allocation models to help guide your investments. In general, the longer you have until retirement, the more of your portfolio you should hold in stocks. As retirement nears, adding more bonds can help dampen market ups and downs. (see Fig. 3)
  • Adjust your mix over time: Over time, adjust your investment mix based on your time horizon and risk tolerance.
  • Consider a professionally managed portfolio: If you don’t have the time or experience to create and monitor your own retirement portfolio, consider adding a professionally managed target date fund that automatically adjusts its asset allocation over time.

Asset allocation for retirement investing

(Fig. 3) As you age and your time horizon decreases, your asset allocation should shift accordingly. Below are T. Rowe Price age-based asset allocations for retirement.
Pie charts show that as you age and your time horizon decreases, your asset allocation should shift accordingly.

Asset allocation models:
Within stocks: 60% U.S. large-cap, 25% developed international, 10% U.S. small-cap, and 5% emerging markets.
Within bonds: 45% U.S. investment grade, 10%–30% U.S. Treasury, 10% nontraditional bond, 0%–10% high yield, 10% international, and 0%–10% emerging markets.
Within cash: 100% money market securities, certificates of deposit, bank accounts, and short-term bonds.
These allocations are age-based only and do not take risk tolerance into account. Our asset allocation models are designed to meet the needs of a hypothetical investor with an assumed retirement age of 65 and a withdrawal horizon of 30 years. The model asset allocations are based on analysis that seeks to balance long-term return potential with anticipated short-term volatility. The model reflects our view of appropriate levels of trade-off between potential return and short-term volatility for investors of certain ages or time frames. The longer the time frame for investing, the higher the allocation is to stocks (and the higher the volatility) versus bonds or cash. While the asset allocation models have been designed with reasonable assumptions and methods, the tool provides models based on the needs of hypothetical investors only and has certain limitations: The models do not take into account individual circumstances or preferences, and the model displayed for your investment goal and/or age may not align with your accumulation time frame, withdrawal horizon, or view of the appropriate levels of trade-off between potential return and short-term volatility. Investing consistent with a model allocation does not protect against losses or guarantee future results. Please be sure to take other assets, income, and investments into consideration in reviewing results that do not incorporate that information. Other T. Rowe Price educational tools or advice services use different assumptions and methods and may yield different outcomes.

Mistake #6: Cashing out retirement accounts early

Withdrawing funds from your retirement accounts before you retire can be tempting, especially during financial hardships. However, early withdrawals typically come with significant penalties and taxes, which can severely deplete your savings.

How to avoid it:

  • Avoid early withdrawals: Leave your retirement accounts untouched unless it’s absolutely necessary.
  • Explore other funding sources: Maintaining an emergency fund can help keep your financial and savings goals on track during hardships and help you avoid tapping in to retirement savings. For starters, try to save $1,000 immediately for emergencies. Then, gradually build up to an amount that can cover three to six months of expenses if you are in a two‑income household.
  • Keep your retirement money tax‑deferred: When you change jobs, consider all of your options for your old 401(k) plan, including rolling your account in to your new employer’s plan or an IRA instead of cashing out, which could subject you to a 10% early withdrawal tax penalty if you do so before age 59½.2
“Remember, the key to successful retirement planning is making informed decisions and staying disciplined in your savings and investment strategies.”

Avoiding these common mistakes can make a significant difference in your retirement savings journey. By starting early, having a clear plan, taking full advantage of employer benefits, diversifying investments, and seeking professional advice, you can build a more secure and comfortable retirement. Remember, the key to successful retirement planning is making informed decisions and staying disciplined in your savings and investment strategies.

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By  Roger Young, CFP®

1 Investor Voice Research Survey of 161 investors, ages 30–79, asked one of two questions: For those of you who are currently working and planning for retirement, what is the biggest mistake you’re worried about making as you save for or head into retirement? And for those of you who have already retired, looking back, what’s the one thing you wish you had done differently when preparing for or entering retirement?

2 Certain exceptions apply.

Important Information

This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action.

The views contained herein are those of the authors as of August 2025 and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.

This information is not intended to reflect a current or past recommendation concerning investments, investment strategies, or account types; advice of any kind; or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Please consider your own circumstances before making an investment decision.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy. Actual future outcomes may differ materially from any estimates or forward-looking statements provided.

Past performance is not a guarantee or a reliable indicator of future results. All investments are subject to market risk, including the possible loss of principal. All charts and tables are shown for illustrative purposes only.

T. Rowe Price Investment Services, Inc., distributor. T. Rowe Price Associates, Inc., investment adviser. T. Rowe Price Investment Services, Inc., and T. Rowe Price Associates, Inc., are affiliated companies.

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