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11 Retirement Planning Mistakes People Make in Their 20s and 30s

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Friday, January 13, 2023

According to a 2018 AARP Consumer Bankruptcy Project report, the rate of adults ages 65+ who filed for bankruptcy more than doubled since 1991.

This data reinforced a harsh reality: Most Americans are not prepared to finance 30 years of retirement.

In our 20s and 30s, we focus on the here and now.

It’s an understandable impulse. I mean, why worry about the unknown? And how do you go about preparing for something so far off?

Here’s the thing about the future–it has a habit of sneaking up on us. We may not know what the future holds, but that doesn’t mean we can’t prepare for what’s coming.

Retirement is a vital stage of life and should be a time to enjoy the fruits of all the years of hard work.

Most retirees would probably love to go back and speak some financial sense into their younger selves. They will never get that chance, but you do.

A comfortable retirement will not only depend on what you do but also on what you do not do and the mistakes you avoid.

Whether you’re a recent college grad, a budding entrepreneur, or a proud parent, being aware of these common retirement planning blunders can help you find peace of mind and avoid years of stress.

  1. Shunning a Budget

When you’re not making enough money, you might view a budget as unnecessary.

When you have an abundant income, it’s easy to let your expenditures slide.

A personal budget will help you track your spending and determine areas you need to cut back on. Try not to view it as a tool that will limit your spending.

Thankfully, plenty of free online budget trackers will help you get started.

  1. Not Maximizing Retirement Plans

If you’re already enrolled in a workplace 401 (k) plan, this is a great time to increase your contributions. According to the IRS, you can contribute a maximum of $22,500 per year in a 401(k) for 2023.

Your employer may also offer matching dollars. The match is typically a percentage of your salary. Take advantage of this free money.

Consider opening more than one retirement savings account, such as a traditional IRA, Roth IRA, and/or health savings account.

  1. Cashing-In Your Retirement Savings When Changing Jobs

It’s okay to have a few mishaps in your 20s. But when you hit your 30s, you’re approaching your peak earning years — meaning that you should protect your income and savings.

If you cash out part or all of your retirement fund before age 59½, your plan sponsor will withhold 20 percent for taxes and penalties so that you won’t receive the full amount.

  1. Overusing Credit Cards

Credit cards are convenient and can help you establish healthy credit for future purchases, but it’s important to use them wisely. Otherwise, you could fall into a debt trap and be saddled with double-digit interest.

To avoid racking up credit card debt, keep your living expenses to a minimum. Consider downgrading your house. Bring leftovers for lunch. Take public transportation. Negotiate your bills.

Work to maintain a well-funded emergency fund to avoid drawing down your retirement savings or last-minute debt.

For major purchases, plan to save for them.

  1. Not Having The “Money Conversation” With Your Partner

Putting off money conversations is a major mistake made by people in their 20s and 30s.

If you’re in a serious relationship, set aside time to discuss money with your partner.

Inquire about each other’s financial habits and future goals. If you have dissimilar views on money, working out those differences is essential to a long and happy relationship.

  1. Not Developing Additional Income Streams

Perform a thorough review of your income sources to make sure you’re on track to retire comfortably.

Instead of being over-dependent on your salary, start exploring ways to generate additional income.

Instead of spending an entire weekend Netflix and chilling, use that free time to create multiple income streams.

Pick up a side hustle: take on some freelance gigs, rent your car or house, or sell things you don’t need. The opportunities are endless!

  1. Spending Too Much on A Car

You have good credit and can afford the latest Range Rover on the market.

But just because you can afford it doesn’t mean you should get it.

Why splurge on a brand-new luxury SUV when a fuel-efficient sedan can serve you just as well?

Buy a car that serves your current needs without forgoing your mid- and long-term savings and goals.

  1. Not Diversifying Investments

Ensure your portfolio is truly diversified; if one investment underperforms or goes up in smoke, you won’t lose all of your nest egg.

Review your investment portfolio as you age. While higher risk/higher yield investments in your 20s and 30s are okay, adding conservative investments can help in your 40s and 50s.

  1. Having Inadequate Health Insurance

A 2018 Gallup survey revealed that almost half of U.S. adults were worried about not being able to cater to medical costs in the event of an accident or serious illness.

An average retired American couple may need approximately $315k saved (after tax) to cover health care expenses in retirement in 2022

While you cannot predict medical emergencies, you can budget for insurance costs.

  1. Not Living Within Your Means

The older you get, the more vulnerable you become to lifestyle creep, which is the gradual increase of you’re spending as your salary increases.

If you’re looking to make a big-ticket purchase, review your financial situation and ensure you set a reasonable budget.

  1. Hiring an Advisor Who Is Not a Fiduciary

Investment Counselors are well-versed in retirement planning.

People who work with a financial advisor feel more at ease about their finances and could end up with more money to spend in retirement.

An Investment Counselor can help you with the following:

  • Determine where to invest
  • Determine the proper order to withdraw funds
  • Avoid costly tax traps

Chances are, there are several Investment Counselors in your town, but not all of them are fiduciaries. A fiduciary is ethically bound to act in your best interest.


Retiring comfortably is easier said than done, but it isn’t impossible.

Avoiding these common retirement planning mistakes in your 20s and 30s can be the difference between reaching your retirement goals and falling short of them.         

Remember, the choices you make now could determine whether your retirement dreams come true.


Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities. 

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. 

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. 

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Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Lawrenceville, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 800-367-3000 Visit our website: www.davidlerner.com

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