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Financial advisors see the same retirement mistakes over and over again. Some will cost you up to a few thousand dollars. Others cost you six figures or more.
Lance Morgan, founder of college funding secretsand Aaron Young, private wealth advisor and CEO Blueprint Financial Group of Northwestern MutualI have seen clients make costly decisions that haunt them for decades. Here’s what they most often see.
1. Waiting too long to start saving
It seems too early to worry about retirement in your 20s and 30s, but that delay costs real money.
“Timing is what allows compound growth to work, not just the size of the contribution,” Young said. “A person who waits even 10 years to start investing often has to contribute significantly more each month to reach the same retirement goal.”
That delay alone could cost you six points in your growth. The money you invested at the age of 25 will take 40 years to grow. The money you invest at the age of 35 has a tenure of only 30 years. A difference of 10 years turns into a big difference by the time you retire.
2. Relying too much on your 401(k)
Most people treat their 401(k) as if it is their entire retirement plan. Morgan thinks this is a mistake.
“If you understand the history of 401(k) plans and IRAs, they were created simply to ‘supplement’ pensions in retirement,” Morgan said.
The problem isn’t that 401(k) plans are bad investments. This is because they limit your options in retirement. The standard advice is to live on 4% of your balance each year, which means your income is significantly less than the income generated from other investments.
“The money inside a 401(k) or IRA can earn a very good rate of return, but it could cost you more than $100,000 in retirement because of cash flow,” Morgan said. “For example, cash flow for living in retirement is much lower than for other investments like real estate.”
3. Ignoring tax diversification
Putting everything into tax-deferred accounts seems smart now, but it sets you up for tax trouble later.
“Without tax diversification across taxable, tax-deferred and tax-free accounts, retirees may face higher taxes than expected on withdrawals,” Young said.
Morgan agreed. “If all your retirement is in qualified plans like 401(k) plans and IRAs, that means they haven’t been taxed yet,” he said. “If taxes increase in the future, you could pay more than an extra $100,000 in taxes during retirement.”
The solution is to divide your savings between traditional retirement accounts, Roth accounts, and taxable investment accounts. This gives you flexibility in managing your tax bill when you start withdrawing the money.
4. Underestimating how long retirement will last
Planning for 15 years of retirement seems reasonable until you turn 80 and realize you may live another decade.
“Many people plan for a 15-year retirement when realistically, they may need income for 25 to 30 years,” Young said. “Underestimating longevity can lead to undersaving and overspending early in retirement.”
More than half of American adults believe they will live longer than their retirement savings, according to Northwestern Mutual’s 2025 Planning and Progress Study. This fear is not unfounded if you are planning for a very short period of time.
5. Focusing on rate of return rather than cash flow
Morgan spent years as a traditional financial advisor before thinking about this.
“When I started my career as a financial advisor, I was trained about all the products and the rates of return available on each investment,” Morgan said. “Over the years, and as I’ve worked with some of the nation’s wealthiest clients, I’ve learned the importance of cash flow more than rate of return.”
An investment that grows 8% per year but doesn’t pay you anything unless you sell it is not as useful in retirement as an investment that gives you steady income every month, even if the growth rate is lower.
6. Holding too much cash for too long
Sitting on a pile of cash seems safe, but inflation eats away at it every year.
“Holding excess cash may seem like a safe option, but over time, inflation reduces purchasing power,” Young said. “When retirement funds remain conservative for too long, the portfolio may not grow sufficiently to meet future income needs.”
You need some cash for emergencies, but keeping your entire retirement in a savings account guarantees that you won’t lose your money to inflation.
7. Claiming Social Security too early
You can start taking Social Security at age 62, but that doesn’t mean you should.
“Taking benefits at an earlier eligibility age can permanently reduce monthly payments,” Young said. “The difference between initial and optimized claims strategies could add up to more than $100,000 at retirement.”
For every year you delay claiming benefits between ages 62 and 70, your monthly payment increases. For many people, it’s worth the wait.
8. Paying too much tax during your working years
High earners are hit hardest by taxes, and most are not taking advantage of the deductions available to business owners and real estate investors.
“As a high-earning W-2 employee, you’re paying more than your fair share in taxes,” Morgan said. “However, most families can take advantage of the many tax benefits such as bonus depreciation when owning businesses and real estate and save a lot of money in taxes that can be used for greater retirement savings.”
9. Not saving consistently
Starting and stopping your retirement contributions takes away your pace.
“Even short contribution intervals can lead to significant long-term shortfalls because you lose valuable compounding time,” Young said.
Set up automatic contributions so the money comes out before you even see it. Consistency matters more than the size of the contribution.
10. Ignoring health care and long-term care costs
Health care is one of the biggest expenses in retirement and most people underestimate it.
“Premiums, out-of-pocket expenses and potential long-term care needs can have a significant impact on savings,” Young said. “Planning for these costs ahead of time helps prevent large, unplanned withdrawals later.”
Medicare doesn’t cover everything. Long term care is expensive. Budget for both otherwise you’ll burn through your savings faster than you planned.
11. Not having access to your money
Morgan sees it all the time. People lock everything away into retirement accounts and home equity, then wonder why they can’t take advantage of opportunities.
“Most people across the country are putting most of their money into their retirement accounts and increasing their home equity,” Morgan said. “It’s hard to get access to money without fines or eligibility from the bank.”
You need liquid cash that you can get without penalty or loan application. “Having access to your money can be the easiest way to avoid a $100,000 mistake or missed opportunity,” Morgan said.
12. Not working with a professional
Both experts agreed on this. Mistakes that cost you six figures can be prevented if you get help early.
“Taking a proactive planning approach with a financial advisor can help reduce costly mistakes and strengthen long-term retirement preparation,” Young said.