7 Retirement Mistakes That Cost the Average American $340,000

The average American retires with about $255,000 saved. Financial advisors say they need $1.5 million.

That gap doesn’t happen because people don’t earn enough. It happens because of a handful of expensive mistakes that compound over decades.

Here are seven of the costliest—and how to sidestep each one.

1. Waiting Until 30 to Start Investing

Cost: $400,000+

Every year you delay investing in your 20s costs you more than a year of investing in your 50s. Compound interest is exponential, not linear.

Someone who invests $400/month from age 22 to 65 at 7% returns ends up with $1,143,362.

The same person starting at 30 ends up with $657,947.

That eight-year delay cost $485,415—more than the total amount contributed over a lifetime.

Your twenties are your most valuable investing years, not your least. Check our Compound Interest Calculator to see exactly what your early start (or late start) means for your final number.

2. Not Getting the Full 401(k) Match

Cost: $150,000+

About 25% of employees don’t contribute enough to get their employer’s full 401(k) match. This is literally refusing free money.

If your employer matches 50% up to 6% of your salary, and you earn $60,000, that’s $1,800 per year in free money—$3,600 if they match dollar-for-dollar.

Over 35 years at 7% returns, that unmatched employer contribution grows to $178,000 you left on the table.

The fix is simple: contribute at least enough to get the full match before doing anything else with your money.

3. Cashing Out 401(k)s When Changing Jobs

Cost: $100,000+

About 40% of workers cash out their retirement accounts when leaving a job. It feels like a windfall. It’s actually a disaster.

Cash out a $30,000 401(k) at age 30 and you’ll:

• Pay income tax (let’s say 22%): $6,600
• Pay the 10% early withdrawal penalty: $3,000
• Receive: $20,400

But that $30,000 left invested until 65 at 7% becomes $320,226.

You traded $320,000 in future wealth for $20,000 today. Roll it to an IRA instead. It takes one phone call.

4. Keeping Too Much in Cash

Cost: $200,000+

Some people “save for retirement” by putting money in savings accounts. With inflation running 3%, a 0.5% savings rate means you’re losing 2.5% annually in purchasing power.

$500/month into savings for 35 years at 0.5%: $235,000

$500/month into a stock index fund for 35 years at 7%: $866,000

The “safe” choice costs $631,000 in retirement wealth.

If retirement is decades away, your money should be working in the market, not hiding in a bank.

5. Paying High Investment Fees

Cost: $200,000+

The difference between a 0.04% expense ratio index fund and a 1% actively managed fund seems tiny. It’s not.

On a $500/month investment over 35 years:

• 0.04% fees: $858,000
• 1.00% fees: $697,000

You pay $161,000 for the privilege of a fund that probably underperforms the index anyway. (Most actively managed funds do.)

Check your 401(k) fund options. If there’s a low-cost S&P 500 or total market index fund, use it.

6. Not Knowing Your Actual Retirement Number

Cost: Variable (but it’s probably stress and poverty)

Most people have no idea how much they need to retire. They pick a round number—“a million dollars sounds good”—without any calculation behind it.

The standard rule: you need 25x your annual expenses. Spending $60,000/year? You need $1.5 million. Spending $40,000/year? You need $1 million.

More importantly, you need to know your Coast FIRE number—the amount where compound growth does the rest of the work.

Use our Retirement Calculator to figure out your actual target, then use our Coast FIRE Calculator to see when you can stop worrying.

7. Underestimating Healthcare Costs

Cost: $50,000+

Fidelity estimates the average 65-year-old couple will spend $315,000 on healthcare throughout retirement. Yet most retirement projections ignore this entirely.

Medicare doesn’t cover everything. Long-term care costs $100,000+ per year. One serious illness can reshape your entire financial picture.

Build healthcare into your retirement number or risk outliving your money when you need it most.

The Compound Effect of Multiple Mistakes

These mistakes don’t just add up—they multiply.

Someone who starts late, doesn’t get their match, keeps money in cash, pays high fees, and has no real plan isn’t making five separate mistakes. They’re making one compounding mistake that snowballs for decades.

Conversely, fixing any one of these creates benefits that compound too.

A Simple Plan to Avoid Them All

In your 20s:

1. Contribute enough to get your full 401(k) match (day one)
2. Open a Roth IRA and contribute what you can
3. Invest in low-cost index funds—nothing fancy

In your 30s:

1. Max out tax-advantaged accounts ($23,000 401k + $7,000 IRA in 2026)
2. Calculate your actual retirement number
3. Find your Coast FIRE age—it’s closer than you think

At every job change:

1. Roll old 401(k)s to an IRA—never cash out
2. Review new 401(k) fund options for low-cost indexes
3. Update your retirement projections

Ongoing:

1. Increase contributions with every raise
2. Rebalance annually (or use target-date funds)
3. Ignore market noise—keep investing regardless

Your Next Step

Open our Retirement Calculator in a new tab right now. Input your actual numbers. See where you stand.

If the gap between where you are and where you need to be feels overwhelming, remember: the mistakes that created the gap were made one day at a time over decades.

Fixing them works the same way. One good decision today, repeated consistently, closes the gap faster than you’d expect.

Start with whichever mistake resonates most. The math doesn’t care which one you fix first—it just rewards you for starting.