The big retirement savings mistakes Americans are making

7 Biggest Money Mistakes to Avoid

The big retirement savings mistakes Americans are making

Mistakes – we’ve all made our fair share.

Some mistakes, however, are worse than others (we’re talking to you, gas station sushi.)

Yet one of the most painful and hard-to-correct mistakes Americans make is with their money management. That’s right – one false move with our finances, left uncorrected, can significantly damage one’s financial standing.

Make no mistake, the bigger the mistake, the more damage that’s done.

So given the immense stakes involved, why do so many U.S. adults continue to make personal financial mistakes?

According to a recent study by, 126.5 million Americans admit to making a significant money mistake in their lifetime, with 52% of men owning up to money malfeasance compared to 48% of women.

Another survey from states the problem is worse, with “a whopping 85% of Americans admit to making financial mistakes over the last decade”.

Annual incomes are also a big factor when assessing personal financial mistakes. This from the study:

“People in lower-income brackets are far more ly to admit to making a money mistake than those in the top two income ranges,” the study noted. “For example, a whopping 37.

5% of people earning up to $25,000 a year admit to making a mistake with their finances, while just 1.8% of Americans earning $300,000 or more who make these mistakes admit the same. Similarly, 44.

7% of Americans earning $25,000 to $50,000 a year admit to making a money mistake, compared with 8.2% of Americans earning $150,000 to $300,000.”

Millennials are most ly to admit to making a money mistake (33.9%), followed by boomers (30.3%) and Gen X (25.7%), the report said.

The Biggest Personal Finance Mistakes

What are the biggest and most avoidable personal financial mistakes? There’s no shortage of them, but these money management malfunctions top the charts.

1. Frivolous Spending

This is more a series of mistakes more than a single egregious one, but according to the study, “spending too much on fun” is the leading money management mistake in the U.S., with 51.1% of Americans surveyed “regretting” frivolous spending.

Wasting household dollars on fun includes pricey vacations, dining out, and shopping at retail businesses, offline and online, reports.

2. Letting Your Spouse or Partner Monopolize Household Finances

The study also noted that approximately 20% of Americans (and 24% of women) say their biggest money mistake was allowing a partner/spouse to handle all the household finances.

Going the solo route can be a big mistake as “buy-in” should be a huge factor in any couple’s money decisions. Excluding one spouse from agreeing to a big-money move is paving the way to big trouble down the road. In the same study, 32% of divorced or separated consumers say letting a spouse handle the family money was their biggest mistake.

3. Not Saving Enough for Retirement

A separate study from New York Life on American’s largest financial regrets says that not saving enough cash for a decent retirement was deemed a huge money mistake by survey respondents.

According to the survey, “not starting to save for retirement” was the biggest money mistake it recorded. Interestingly, most Americans say they knew at age 34 they were already behind on retirement saving and, on average, it would take them 11 years to fully catch up on their retirement savings, and that it would take a great effort to do so.

4. Abusing Credit Cards

The New York Life survey also cited “relying too much on credit cards” was another common lament of U.S. households.

Those that made that statement and eventually recovered said it took them eight years to do so, with tens of thousands of dollars wasted on credit card-related interest rate payments. The additional credit score hit that late credit card payers absorb is another negative impactor, according to consumers who abused their credit cards.

5. Not Having an Emergency Fund

The New York Life survey also places “not having an emergency fund” high up on its list of consumer financial regrets.

While the study gives consumers credit for admitting the mistake of ignoring an emergency fund, it also points out that that the longer you wait to build an adequate emergency fund (which usually amounts to six months of equitable annual income) the longer it takes to build one.

The study states it takes nine years to build a good emergency fund if you start at age 32 – an age when many younger Americans are struggling with expenses related to raising a family, buying their first homes, and paying down substantial student loan debt.

6. Overspending on a New Home

According to a recent report from Fidelity Investments, “spending too much on housing” is another pervasive and critical consumer financial regret.

A good rule of thumb on buying a home is to never spend more than 30% of your pre-tax annual income (this goes for individuals and spouses) on a home purchase. That number should decline, however, if you’ve already accumulated significant debt on things student loans and high credit card debt.

If you do commit to a home purchase that costs more than 30% of your pre-tax annual income, and you do have high personal debt, know that you’ll ly be struggling to make your monthly mortgage payments and paying your other debts off at the same time

That scenario not only leads to personal angst and worry over money limits every month, it can also lead to a lower credit score if you’re late paying bills, which can further send you into a deeper financial spiral.

7. Not Stashing Enough Cash for Children’s College Cost

With student loan debt soaring to $1.6 trillion in 2020, more Americans regret not saving enough money for their kid’s college funding needs. That financial regret lands high on the list of a “money mistakes” list compiled by in May 2019.

That regret is particularly high with Americans with high student loan debt, and who can’t afford to stash away as much money as they’d for future family college spending needs, as the household budget is too tight to do so.

Millennials reported having the most regret over their student loan burdens, with 17% of the demographic citing it as a regret compared to 10% of the general public,” Bankrate stated. “Their regret over student loans was more than twice that of Gen Xers (7%) and more than three times that of Boomers (4%).”

“Considering education costs have more than tripled since the 1980s, millennials are ly to have much larger student loan balances than those who are older than them, perhaps leading them to higher levels of regret,” Bankrate reports.

The Takeaway on Major Money Mistakes

While financial regrets seem to be multiplying in many consumer financial demographics, the good news is that there are proven ways to avoid making big money mistakes.

For instance, a sharper focus on spending less and saving more (especially for tax-advantaged opportunities in retirement plans and 529 college savings plans) can eliminate major financial regrets on their own.

In that regard, avoiding major money mistakes simply means learning to live below your means, and do so on a long-term basis.

Master that financial habit and you’ll ly find you’ll be stacking personal financial success stories and accumulating fewer financial regrets as you go through life.


7 Retirement Mistakes to Avoid

The big retirement savings mistakes Americans are making

Saving for retirement is confusing. It’s no surprise we make mistakes along the way. Luckily, there are strategies to get back on track.

Here are the most common retirement mistakes as shared by financial planners — and how to avoid them.

1. Failing to create a plan

A retirement plan is one of the best ways to spot potential hurdles to long-term goals, says Nancy Skeans, CEO of Schneider Downs Wealth Management Advisors in Pittsburgh.

Creating a financial plan for retirement means estimating future expenses and expected income.

Be sure to write it down. “A plan is not in your head — it’s on paper,” Skeans says.

2. Forgetting about taxes

If you’ve been saving for a while, you might get excited when you peek at your balance. Don’t forget that a chunk of that money — assuming it’s in a 401(k), traditional IRA or similar tax-deferred account — will go to taxes.

You can’t avoid taxes, but you can diversify with after-tax accounts. For example, with a Roth IRA, you put money in after you’ve paid taxes. Then, your money, including investment earnings, comes out tax-free in retirement.

Another idea is to save money in a taxable investment account. You may owe taxes annually on capital gains or dividends, but those rates often are lower than regular income tax rates.

Owning a Roth or taxable account in addition to tax-deferred accounts helps you manage your taxes in retirement. If distributions from a 401(k) or traditional IRA will push you into a higher tax bracket, you can use money from a Roth to keep your tax rate lower.

“We always want our clients to have the most flexibility that they can,” Skeans says.

3. Overpaying on fees

There are many retirement-account fees to watch for, including mutual fund front-end loads and expense ratios, trading commissions, and account maintenance fees. All of these eat into investment returns over time.

At a minimum, look for low or free trading commissions and invest in exchange-traded funds or index mutual funds.

“These are very low cost,” says Lindsay Martinez, founder of Xennial Planning in Oceanside, California. “You don’t have to pay a load for a mutual fund if you don’t want to.”

4. Tapping savings before retirement

Emergencies happen, there’s no doubt. But people sometimes pull money retirement accounts when it’s not absolutely necessary.

Doing so triggers taxes and a potential 10% penalty. Depending on your tax bracket, “you could wipe out close to half of what you’re withdrawing with taxes and penalties,” Martinez says.

Ideally, bank some savings separately for emergencies, and save up for your financial goals.

5. Taking on too much, or not enough, investment risk

It can be hard to get investment allocations just right. A good rule of thumb: If you have at least five years to let your money sit, harness the stock market’s long-term growth to build your balance. You have time to ride out market volatility — your investments may lose value in a downturn, but they’ll grow as the market recovers.

“You can take on a little bit more risk,” says Shaun Melby, founder of Melby Wealth Management in Nashville, Tennessee.

The opposite is true for people who’ll need their money in less than five years. Investing too aggressively in stocks could be a problem because you may have to sell investments that have lost value.

One easy way to get your asset allocation right is to invest with a robo-advisor.

Robo-advisors use computer algorithms to build and manage an investment portfolio for you, which can make sure you're taking on the right amount of risk at the right time.

6. Failing to save enough

Sometimes, not saving enough isn’t a mistake so much as a lack of resources. But no matter how the problem arose, there are ways to address it.

If you’re older and retirement is coming up fast, working longer may be your best option.

That doesn’t necessarily mean more years at a job you hate, says Ashley Coake, founder of Cultivate Financial Planning in Radford, Virginia. A lower-paying, part-time job could be enough to tide you over until you fully retire.

Keep in mind, though, that working longer isn’t always possible. Life, in the form of a health scare or job loss, can foil this plan.

Another strategy that works at any age? Trim spending. “Cutting back on expenses is a tough thing to do but that’s a great way to make a huge impact” on retirement savings, Coake says.

7. Working longer than needed

People in their 60s or 70s often come to Coake, saying they’re tired of working and wondering when they can retire.

“Honestly, this happens a lot,” Coake says. “And I have to say, ‘You could have retired three years ago.’”

It’s not that surprising, Coake says. Figuring out how various investment and retirement accounts will create income, and how those accounts interact with Social Security, is complicated.

“It’s just a really hard picture to put together in your head,” Coake says.

That’s where a written retirement plan comes in handy. The outside perspective of a financial advisor can also be handy, especially if your financial life is becoming more complicated over time.


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