10 Critical Retirement-Saving Mistakes

Avoid errors like retiring with too much debt and withdrawing Social Security payments prematurely.

Retired couple.
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Americans are worried about retirement, but many are making classic mistakes that can easily be avoided with the right planning.

Nearly a third of baby boomers ages 55 to 65 are worried that they won't be able to cover basic living expenses in retirement, according to a recent survey by Allianz Life. More than 40 percent of those surveyed said they don't know when retirement planning should begin.

[See 12 Money Mistakes Almost Everyone Makes.]

To address these and other concerns, U.S. News spoke to financial advisers and retirement experts, who highlighted 10 critical mistakes to avoid when saving for retirement:

1. Not saving early enough. Start saving for retirement as early as you can. "So many people put it off," says personal-finance expert Liz Weston, author of The Ten Commandments of Money: Survive and Thrive in the New Economy. "They think they need to pay off their credit card debt first or they need to save for a house. But the reality of retirement savings is that it's really tough to make up for lost time." If you haven't gotten started by the time you're 35, it can be nearly impossible to catch up, Weston says.

2. Retiring with excessive debt. Given the current state of the economy, more people are entering retirement with mortgages and credit card debt. A 2011 study by the University of Michigan Law School found that older Americans carry 50 percent more credit card debt than younger debtors. And according to a recent study by AARP, people 75 and older who live on a fixed income are increasingly taking on mortgage debt. "There are some people who are comfortable with having a mortgage in retirement. If you're really wealthy, that might not be a big deal for you," Weston says. "But I think most people are better off being mortgage-free and debt-free in retirement, just for the reason that you won't have to draw the money to pay your mortgage from your retirement funds."

3. Relying too heavily on Social Security. John Clawson, a certified financial planner and financial adviser with Waddell & Reed in Winchester, Va., says a number of clients unrealistically expect Social Security benefits to provide their full retirement. "You can't just have one source of income—you have to have several sources for retirement. Relying on Social Security alone doesn't work," he says. This is especially true, given that the average monthly Social Security benefit for a retired worker was about $1,230 at the beginning of 2012.

Many people also dip into Social Security too early, Weston says. By collecting Social Security benefits when you're first eligible at age 62, before the full retirement age (somewhere between 65 and 67, depending on when you were born), you'll lock yourself into a lower benefit for the rest of your life, Weston says.

For every year you wait to collect Social Security (until age 70, after which there's no benefit to waiting), you'll earn a roughly 8 percent increase in your benefits. "I don't know any place else in the market right now where you're going to get that 8 percent," says Andrea Blackwelder, a financial planner and president of Wisdom Wealth Strategies in Denver.

[See One Family's Journey Out of $26,000 Debt.]

4. Lack of diversification in your portfolio. You can afford to take more risks with your money in your twenties than when you're 60 and preparing for retirement, says Joseph Hearn, author of The Bell Lap: The 8 Biggest Mistakes to Avoid as You Approach Retirement. "You don't want to have your investments all in one place," Hearn says. As such, diversifying your portfolio as you approach retirement will help reduce your risk. "It doesn't mean that your portfolio will have no, or even low, risk—it just means that your risk will be spread across different investments," Hearn explains in his book. For starters, he advises clients not to invest more than 10 percent of their savings in any one stock or investment. By not putting all your eggs in one basket, you'll decrease the chance that one investment will tank your portfolio.