5 Ways You Could Be Sabotaging Your Retirement

Failing to maximize your earnings now could hurt you in retirement.

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Retirement isn't impossible for most of us, but we often get so wrapped up in navigating our busy schedule that we unknowingly sabotage our own retirement. Look into these five specific areas of your plan to see if you are doing harm to your goal of a comfortable retirement.

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Not negotiating better pay during the hiring process. In this economy, it's easy to be grateful for even having a job. But you are definitely short changing yourself if you don't negotiate for higher pay once an employer presents a job offer. A higher starting salary sets you up for bigger paychecks down the line because most raises are calculated as a percentage of your current pay. The worst an employer can say is no. And unless you are very rude in your negotiations, it’s highly unlikely that an employer will take their original offer back because you asked if there is any room for improvement.

Working less than 35 years. You could be drastically cutting your Social Security checks without even knowing it if you decide to retire early. Your Social Security checks will be based on your 35 highest annual salaries. If you work less than 35 years, you get a zero averaged in for each year that you didn’t work. And it’s usually a good idea to work even more than 35 years to cancel out unfortunate years that you didn't work much due to layoffs or your lower salary at the beginning of your career.

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Letting lifestyle inflation creep in. It's easy to spend a little more each time your income increases. Spending more money improves your quality of life, allows you to celebrate your achievements, and also helps to keep you motivated. Although money isn't just for hoarding, it’s important to also save for the future as your paychecks grow.

Withdrawing more money when investments perform well. If your retirement plan includes owning volatile investments like stocks, you should know that the performance of those investments can vary widely from year to year. Let's say you had $500,000 invested in 2009 and started your 4 percent withdrawal at $20,000 a year. When 2011 rolled around, you probably had more than $500,000 of liquid assets available even though you withdrew money for two years. Seeing that you now have more money, some people might start to inflate their withdrawals and take 4 percent of the new total. If your account balance grew to $700,000, a 4 percent withdrawal is $28,000 instead of $20,000. But what if the stock portion of your portfolio later loses 20 percent? Those who stay with their original $20,000 withdrawal probably won't run out of money because the down years were already accounted for. People who take out more money in years when their investments perform well increase their risk of running out of money because that level of investment growth is unlikely to continue forever.

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Thinking there is always tomorrow. If you consistently put off saving until future years you will not have enough saved to retire well. For most people, retiring comfortably takes years of diligent savings. The earlier you start saving, the more time your money has to accumulate interest and growth.

David Ning runs MoneyNing, a personal finance site aimed at helping others change their habits for a better financial future. He suggests that everyone to sign up for an online savings account to get more out of our hard earned money.