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5 Retirement Mistakes That Could Cost You Over $650,000

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The amount you save for retirement will ultimately determine your lifestyle after leaving the workforce.

But saving for retirement is complicated and one false move can cost you dearly.

However, a 2019 Northwestern Mutual study found that U.S. adults who work with a financial advisor report “substantially greater financial security, confidence and clarity than those who go it alone.”

The value of working with a financial advisor varies by person and advisors are legally prohibited from promising returns, but research suggests average additional investment returns can range from 1.5% to 4% more each year.

SmartAsset’s new tool makes it easy to find the right financial advisor near you in just a few minutes. Our exclusive, no-cost tool matches you with up to three local fiduciary financial advisors that have passed a rigorous screening process. We confirm each is registered with the U.S. Securities and Exchange Commission (SEC) or the appropriate state regulator, possess the proper licenses and have no pending or valid regulatory disclosures within the past 10 years.

These common retirement mistakes could end up costing you over $650,000.

1. Leaving liquid assets in a regular savings account

Potential cost to savings: ~$20,000

A high-interest checking or savings account can help you earn over 2% interest on your liquid assets -- and you can still have unrestricted access to your savings. Your balance isn’t susceptible to market fluctuations and will still grow at a more substantial rate than in a typical savings account.

To put that into perspective, the national average savings account rate is 0.06%, according to the FDIC. By choosing an account that offers the highest rate, you can earn a lot more.

If you have $25,000 sitting in an account earning 0.06% interest and you make $250 monthly contributions over 15 years, you’d earn about $427 after 15 years. An account with 2.4% interest would earn you $19,672 in interest alone.

Remember, this allows you to earn compound interest on your cash, in addition to your retirement investments.

2. Not maxing out retirement account contributions

Potential cost to savings: $150,000+

One of the biggest retirement mistakes that ends up costing people the most is just not saving enough.

The Washington Post reported last year that the average company 401(k) match was up to 4.7% of employees’ salaries, while the median household income in 2016 was $59,039, according to the U.S. Census Bureau. By that math, if you’re not contributing to a 401(k), not only are you missing out on up to $18,500 per year in pre-tax, interest-earning retirement savings (the annual contribution limit), but potentially $2,774.83 in free, employer-paid retirement savings.

3. Staying in your large home

Potential cost to savings: ~$265,000

Our recent study found the national average housing costs per year in retirement are $8,819, based on data from the Bureau of Labor Statistics (BLS) and Council for Community and Economic Research. Multiply that by 30 years and you’ll spend an average $264,570.

Between a mortgage, property taxes, insurance, potential homeowners association fees, utilities and maintenance, a large home is expensive to keep up. A recent GoBankingRates study revealed that owning a home costs an average $1,204 per month in maintenance alone.

4. Not estimating healthcare expenses

Potential cost to savings: $220,000

Top economist Paul Fronstin estimates that Medicare will only cover 51% of healthcare expenses for retirees. While the average retiree has 25% lower expenses than non-retirees, healthcare expenses jump by more than 40%.

Of older adults, 80% have at least one chronic disease and 77% have two or more, according to the National Council on Aging. Studies show the average 65-year-old couple will need $220,000 to cover health care expenses in retirement.

5. Not working with a fiduciary financial advisor

Potential cost to savings: 4% in annual returns

As previously mentioned, research suggests that average additional investment returns can range from 1.5% to 4% each year.

Chances are, there are several highly qualified financial advisors in your town. However, it can seem daunting to choose one.

Our no-cost tool makes it easy to find the right financial advisor for you. Now you can get matched with up to three local fiduciary investment advisors that have been rigorously screened for regulatory disclosures and to confirm their licenses. The entire matching process takes just a few minutes.

Follow These Steps to Get Matched With the Right Advisor for You

1. Simply enter your ZIP code below.

2. After you enter your ZIP code and answer questions about your financial goals, you can compare up to three top advisors local to you and decide which to work with.

3. Enjoy a better financial future!

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