Budgeting & Saving

3 Ways You’re Hurting Your Retirement Savings

Americans continue to have trouble stashing enough cash for retirement, and in many cases, they only have themselves to blame.

For starters, one in three Americans has less than $5,000 in savings, according to Northwestern Mutual's 2018 Planning & Progress Study. Additionally, one in three Baby Boomers, the generation closest to retirement age, have between $0-$25,000 in savings, Northwestern Mutual reports.

A big part of the no-or-low retirement savings issue is that U.S. adults just aren't saving enough money away for retirement. But an equally big component is the errors Americans regularly make when they address their retirement savings needs.

Or, in many cases—not address their retirement savings.

"Many people are simply overwhelmed when it comes to their finances," says Tony Drake, founder of Drake & Associates, a wealth management firm in Waukesha, Wi. "They use the ostrich method of financial planning: you stick your head in the ground and say you'll deal with it later."

What are other major retirement planning errors that Americans are making? These three money mistakes are at the top of the list.

1. Not Matching

The number one retirement investing mistake is not getting the full employer match, says David Rae, an investment advisor with Financial Planner LA, in Los Angeles. "The average worker leaves over $1,300 per year on the table in lost employer matching," he says. "This is free money. If you did this over your entire working career you are losing over $40,000 per year in lost retirement income."

2. No Automated Savings

Too many Americans don't have automated savings accounts set up. "If you fund a retirement account sporadically, you might not accumulate what you need to retire," notes Alexander Lowry, a finance professor at Gordon College, in Wenham, Mass. "Making savings an automated process coming directly from your payroll, or checking account, will force you to have the discipline to save."

3. Being Too Conservative with Investments

A common investment mistake older Americans make is that they're far too conservative with their investment portfolios, says Eric Meermann, a financial planner at Palisades Hudson Financial Group in Stamford, Conn. "Many seniors think because they're retired, they should be almost totally invested in bank CDs and cash-like investments," he states. "The flaw with this strategy is inflation, which erodes the purchasing power of the dollar. It's best to take on some investment risk (in the form of stocks), to provide growth to protect against outliving your assets."

These aren't the only retirement savings mistakes Americans are making, but they're three of the most damaging ones.

Check with your money manager or employer retirement planning specialist to ensure you're on the right track, savings-wise, and that you're avoiding the above mistakes.