5 Stupid Things Even the Smartest People Do With Their Retirement Plans

Most people spend more time planning their annual vacation than they do planning for the 30 years of unemployment we call retirement.

The results are predictable. We rely on gut feelings instead of math. We let inertia make our decisions. We fall for comfortable lies instead of facing uncomfortable truths.

The path to a secure retirement is not complicated, but it is full of pitfalls. If you stumble on them early, the compounding effect works against you, turning small mistakes into big mistakes later in life.

These are five of the dumbest mistakes experts see when saving for retirement.

1. Refusing free money

This is one of the most damaging mistakes you can make, but millions make it every year.

If your employer provides a 401(k) match, that’s not a “benefit.” That is part of your salary. If they match 50% of your contributions up to 6% of your income, and you don’t contribute that 6%, you voluntarily get a free, guaranteed return of 50% of your money.

There is no investment in the world that guarantees a 50% return on the first day, without risk.

Let’s say you earn $60,000 a year. A 3% rate is $1,800 in free cash every year. Over 30 years of work, assuming a 7 percent return, that free money alone would grow to about $170,000.

2. Betting that taxes will be lower in the future

Traditional 401(k)s and individual retirement accounts (IRAs) feel good today because you get a tax break right now. You invest pre-tax, and it grows tax-deferred.

But there’s a catch: You have to pay taxes on withdrawals in retirement. You’re betting that your tax bracket will be lower then than it is now.

Given the national debt and historic tax rates, that’s a risky bet.

In 2026, the Roth IRA contribution limit is $7,500 for people under age 50 and $8,600 for those age 50 or older. You pay taxes on that money today, but it grows tax-free forever, and withdrawals in retirement are 100% tax-free.

Having a mix of taxable and tax-free income in retirement gives you more control over your taxes.

3. Fear of making money

When the stock market gets strong, the instinct is to run to safety—cash, savings accounts or CDs.

While having an emergency fund is important, hoarding your savings over the long term is a little financially suicidal. The cause of inflation.

Even if the inflation rate recedes to around 2% to 3%, the purchasing power of the dollar continues to erode. As we remind our readers who are curious about the stock market, you have to risk to get a return.

If your “safe” money is earning 1% in a savings account while inflation is 3%, you are losing 2% of your wealth every year.

To build a nest egg that can sustain you for decades, you should invest in assets that have historically outpaced inflation, such as stocks and real estate. Being too careful is one of the most dangerous things you can do.

4. Withdrawing money when changing jobs

The average person changes jobs every four to five years. When you leave, you get a letter asking what you want to do with your 401 (your old k).

Too many people see a $15,000 or $20,000 balance and think, “I can use that for a down payment/car/vacation.” They took out the money.

This is a mistake. First, the IRS hits you with a 10% early withdrawal penalty if you’re under age 59.5. Then, the rest of the money is taxed as ordinary income in your highest tax bracket.

Depending on where you live, you can lose 30% to 40% of your money immediately in taxes and penalties.

Even worse, you rob that money of its future growth potential. Roll it over directly to an IRA or your new employer’s plan. Don’t touch it.

5. Ignoring health care costs

Many people think that Medicare will take care of all their health care expenses in retirement. It won’t.

Medicare is not free. There are premiums (for Part B and Part D), deductibles and copays. Also, traditional Medicare does not cover general dental, vision or hearing care.

According to the latest estimates from Fidelity, a 65-year-old retired in 2025 could spend $172,500 on health care in retirement — and it did. not include long-term care such as a nursing home.

If your retirement number doesn’t account for these big expenses, your plan is based on a dream. Consider opening a health savings account if you qualify, which offers a triple tax benefit to save for these future medical expenses.