Make sure you stay on track with one of life’s most significant savings goals by avoiding these common mistakes.

Americans are saving for retirement but in many cases they’re not saving enough. On average, individuals have $141,542 saved for retirement, however, the median 401(k) balance is only $35,345, according to a Vanguard report. Clearly, many people will face shortfalls when they reach retirement age. Let’s take a look at some of the retirement saving mistakes you should avoid.  

Not saving at all

Many people don’t save because every dollar they earn is already allocated to living expenses and debt. However, participating in an employer-based retirement uses pre-tax dollars. Setting aside a small percentage could have very little or no effect on take-home pay.

If you’re not saving because your think you can’t afford it, talk to your employer to see how contributing to a retirement plan could affect your paycheck.

The next time you get a raise, consider putting all or part of it aside for retirement savings.

Missing out on employer matching funds

Depending on your employer’s plan, your retirement savings may be matched dollar-for dollar or 50 cents for each dollar saved, up to a designated percentage of your salary. Oftentimes, up to 6% of employee salaries are matched by employers, but contact your employer to clarify their specific policy. Not taking advantage of employer matching funds means leaving money on the table.

If you are one of the many who has access to an employer matching plan for retirement savings but aren’t participating, ask yourself, “Would I like a 6% pay raise?” If the answer is “yes,” start saving today.

Overlooking HSAs

Health savings accounts (HSAs) have multiple benefits. First, they allow you to pay for qualified health expenses with pre-tax dollars. Second, funds may be able to be invested as part of your long-term retirement plan. Overlooking HSAs can leave people struggling to pay medical bills in retirement.

Keeping your portfolio static

When setting up a retirement investment portfolio, assets are typically allocated between equities and fixed income investments. However, your needs change over time. Often the closer folks get to retirement the more they shift toward safer income vehicles such as bonds. Leaving your portfolio static could leave you without income when you need it most.

Many advisors recommend reviewing and rebalancing your mix annually. Factors like your lifestyle, financial obligations, life expectancy and inflation can affect how you balance your portfolio.

Tapping savings early

It may be tempting to withdraw retirement funds before the age of 59½, but doing so may result in a hefty penalty.

If you have debt and think that tapping your retirement savings will solve your problem, think again. First, check out this blog, “Pay down debt or save for retirement?” Second, if your debt is excessive and you’re considering bankruptcy, know this: retirement savings are exempt in bankruptcy. Creditors can’t touch money in your 401(k) or IRA.

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