I’ve Been a Retirement Planner for 17 Years—Here Are the 18 Biggest Mistakes Most People Make

Not having a retirement account because your company doesn't offer it

If your job doesn't offer benefits—one in three Americans are gig workers without benefits—you can still open retirement accounts and put money into them. And you absolutely should. Even if you work a job where you live paycheck to paycheck, try to put aside a small amount of money toward retirement.

What to do instead: It's true that you can only open a traditional 401(k) through your employer, but if you're a gig worker and/or self-employed, you can open a solo 401(k) plan through your banking institution. A more flexible option is a traditional, Roth or simplified employee pension (SEP) individual retirement account (IRA). If you're a lower-wage worker, it's worth it to find an employer that offers retirement benefits; Starbucks and Target both do.

Not understanding how retirement taxes work

Tax laws about retirement are confusing and constantly changing, but the one certainty is this: Your retirement money will get taxed. The government will get its cut one way or the other. This includes Social Security! Far too many people think that because Social Security is a tax, it means the money is already taxed. It's not. People will have to pay taxes on up to 85% of their Social Security benefits, though it's important to know that not every state taxes Social Security. Not understanding that may lead you to believe you have more money saved than you really do.

What to do instead: Be aware that taxes will be a big factor down the road. However, how much you contribute to Social Security now, how much Social Security money you can expect when you retire, how much money you'll owe when you start receiving the payments and when the tax bill is due varies based on a mind-boggling number of factors. The Social Security Administration website has a retirement calculator that you can use to estimate your future benefits.

Picking a plan that doesn't match your personal risk tolerance

Retirement accounts rely on investing funds in the stock market. Investing is inherently risky, and people have different levels of risk tolerance, based on their personalities, life situations, planned career trajectory, family situation, assets and other factors. For instance, someone with a large family and little savings will want to invest their retirement funds in a low-risk account, whereas someone who has plenty to live on and no dependents can afford to make higher-risk (but perhaps higher-reward) investments.

Age is a huge factor. It's not uncommon for younger people to have a higher percentage of their retirement in higher-risk investments and then gradually switch that over to lower-risk accounts as they get closer to retirement age. Yet way too many people read about a flashy retirement account online and invest beyond their risk tolerance. Not only is this stressful, but in the worst-case scenario, it can wipe out all your savings.

What to do instead: Get off the internet investing boards, turn off the financial news and talk to a CFP who can help you assess what risk you can tolerate and which plan best matches that.

Thinking that $1 million in retirement money means you're a millionaire

A very common retirement mistake people make? Seeing a large sum of money in their retirement account, thinking that makes them a millionaire and then spending like it. First, $1 million spread over an entire retirement really isn't that much money, and you won't be living a millionaire lifestyle. Second, you can't really access all that money now because the financial fees and tax penalties can be massive—sometimes over 50%—when you withdraw it early. I tell people it's best to mostly put it out of your mind so you don't get tempted to withdraw it early and spend it all.

What to do instead: Have realistic expectations of the lifestyle you can afford in retirement. Come up with a frugal monthly and yearly budget to make sure you don't run out of money early.