A steady, but less than robust economy and up and down stock market performance haven't help retirement accounts in 2015. A volatile economy since 2007 had caused savings to fall for many workers, so if upcoming retirees are going to recover, they'll need more robust economic growth and a greater return on their existing holdings.
Most workers know that there is little that they can do to improve the country's economic performance. What they can do is to focus on their retirement savings strategy. With the proper focus, your retirement years can be comfortable ones, giving you the opportunity to travel, spend time with your grandchildren or take up new hobbies. However, this will not happen if you spend these years worrying about money.
Fortunately, you can boost your odds of a happy retirement by avoiding some of the most common mistakes of retirement savings.
Not saving early enough: It is easy to forget about planning for retirement when you first start working. After all, you have other expenses -- rent, maybe a mortgage, furniture, clothing -- that you need to cover. With that said, those who start saving for retirement early will end up with significantly more money in their retirement years.
Vanguard Group researchers Maria Bruno and Yan Zilbering, in their article Penny Saved, Penny Earned show how important saving early is.
According to their research, investors who saved 6 percent of their salaries in a portfolio split evenly between stocks and bonds starting at age 25 enjoyed a median portfolio balance at retirement of nearly $360,000.
That figure fell to $237,000 for investors who waited until 35 to start investing and $128,000 for those who waited until age 45.
Not maximizing the match: If you work for a company that offers a 401(k) program, you need to participate in it. These programs offer a relatively pain-free way to build your retirement savings over time. Don't make the mistake too many young workers make, though: Maximize your employer's match. If you do not, you'll miss those extra dollars when retirement arrives.
Running up debts: It is easy to run up credit card debt. However, remember, it is not easy to retire comfortably when you are burdened by debt. Begin wise spending habits -- only charge what you can afford to pay back when your next credit card statement arrives -- at a young age. They can save you a world of financial pain as retirement nears.
Borrowing money from your retirement accounts: Borrowing money from your retirement accounts is a terrible financial decision. You'll pay sometimes severe tax penalties to withdraw funds early from these accounts. Even worse, though, is the toll early withdrawals take on your future savings. If you remove money from your retirement accounts, these dollars do not get a chance to grow at a compounded rate. You'll end up with far less money at retirement age.
Putting college before retirement: It is natural that many parents want to help their children pay for their college educations. However, remember this: Your children can take advantage of student loans and grants to get through college. They then have their entire lives to pay back their college debt. If you spend your retirement dollars to help fund your children's education, though, you'll face severe financial consequences once you stop working.
Not diversifying: The best way to save money for retirement is by creating a diversified portfolio of stocks, bonds, and other savings vehicles. This way, if one savings vehicle suffers -- the stock market crashes, for instance -- your other investments will remain strong. Too many investors put all their dollars into one type of investment either incurring too much risk or not enough.
Nearing retirement age
Underestimating medical expenses: Too many people think they'll remain healthy throughout their retirement years. This often doesn't happen, and not planning for medical expenses can prove a costly mistake. The Employee Benefits Research Institute estimated the vast majority of retirees should expect to pay from $231,000 to $287,000 in medical expenses during their retirement years.
Underestimating their life spans: We are living longer today. That is good news. However, it also means that you'll want to save more money for retirement. Don't make the mistake of thinking that your retirement will be a relatively short one. If you leave work at age 66, you might have 30 years of retirement living to fund.
Retiring too early: Full Social Security benefits kick in at age 66.The longer you put off retiring, though, the higher your annual benefits will be. If you can keep working, it makes financial sense to push off retirement as long as possible.
Withdrawing too much too early: Once you retire, don't make the mistake of withdrawing too many dollars from your retirement savings too early. Financial planners advise that retirees follow the 4 percent rule: Only withdraw 4 percent of your retirement savings each year.