5 Ways People Sabotage Their Own Retirement

These common mistakes can lead to hardship, or even poverty, later in life.

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There's no shortage of reasons why Americans don't have enough money saved for retirement: The stock market's volatile performance, the declining popularity of pensions, and high cost of living are all culprits. More than half of Americans report having less than $25,000 in savings and investments, according to the Employee Benefit Research Institute, a nonprofit research organization. The federal government estimates that 12 percent of women and 7 percent of men over age 65 live in poverty.

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To avoid becoming part of those depressing statistics, consider steering clear of these five common mistakes:

1. Having children. Children also provide meaning and value, of course, so we aren't actually suggesting that you avoid parenthood altogether. But it can help to consider the financial ramifications in advance, and prepare accordingly.

A survey by TD Ameritrade found that parents said having children made it more difficult to save money for retirement. Some 48 percent of female breadwinners and 39 percent of male breadwinners said they have scaled back their own retirement savings to put more money toward their children. Households with only one earner face a particularly high risk for falling behind: One in four single-income households said they are far behind on being financially ready for retirement, compared to 17 percent of dual-income households.

2. Waiting too long. Financial advisers find that people often delay saving for retirement until their debts are paid off, but that can mean sacrificing many years of compounding. Instead, advisers usually recommend opening a tax-advantaged retirement account as soon as you start working, even if you save just a small amount each pay period. Saving those small amounts—$25 per paycheck, for example—can help get a retirement account going, and employer contributions can help even more.

3. Failing to calculate a retirement number. Only 1 in 10 people make such a calculation, according to the Transamerica Center for Retirement Studies. That might explain why, on average, Americans are on track to replace 60 percent or less of their income during retirement. Financial advisers generally agree that retirees need to replace 80 percent or more.

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That means someone who brings home an $80,000 salary at the peak of his working years should save enough before retirement to generate at least $64,000 a year post-retirement. An investment, such as an annuity, that generates a 3 percent annual return would require savings of at least $2.1 million to throw off that sum annually. (Retirees can also supplement their income by continuing to work, as well as with Social Security payments and pensions.)

4. Investing too conservatively, or too aggressively. Twenty-somethings shouldn't have most of their retirement investments in bonds, or other conservative assets that barely keep up with inflation, and conversely, soon-to-be retirees should not have most of their nest egg in the stock market, which can drop unexpectedly at a moment's notice. Advisers generally recommend shifting into a more conservative portfolio as you age; a 30-year-old might have 30 percent in bonds and 70 percent in stocks while a 70-year-old would have the reverse mix.

5. Failing to anticipate a long life. With lifespans on the rise, retirees can count on living another 20 or 30 years—or longer—post-retirement age. That means they need even more savings than their parents' generation. Rising healthcare costs also eat up those funds, so erring on the side of a bigger retirement fund is essential.

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If you find all this advice confounding, consider this strategy: Just save 18 percent. That's the savings rate a medium-earner ($43,084 in 2010) would need if he or she starts saving at age 35 and plans to retire at age 68 (assuming a 4 percent return on investments), according to the Boston College's Center for Retirement Research.