To retire with an annual expense of $40,000 a year, you need to save a million dollars, so how can you make sure you’re on the right track? “The key is starting as early as possible and trying to maximize your contributions,” says Louis J. Barrientos, co-founder and CEO of FC360, Inc. in Roseville, who recommends saving five to seven percent of your salary, as well as one percent more every time you get a raise. “The older an individual gets the more conscious they are about the balance in their retirement account and whether it’s enough to sustain into the golden years,” says Paul Lee, CPA principal of PSG Certified Public Accountants in Roseville, who encourages clients to be consistent in saving. If you need to contribute more, the IRS allows catch-up contributions of $6,000 once you turn 50. To make sure your retirement years are the best they can be, avoid these seven golden mistakes.

Mistake 1 / Waiting Too Long to Get Started

It’s never too soon to start saving. “Because retirement for many is over 30-40 years away, we see a lot of individuals thinking they’re too young to start so they delay signing up for an employer plan,” says Barrientos, which could mean missing out on matching contributions and having to catch up later. 

Mistake 2 / Cashing Out Early 

Don’t treat your retirement like a piggy bank, notes Barrientos. He says using your retirement money for non-retirement expenses before age 59-and-a-half means you’ll be “subject to taxes and penalties, which average around 30-50 percent of their total.” Worse yet? “They will have to start all over again in saving for retirement, and they will have lost time that will cost them more in additional contributions if they want to catch up.”

Mistake 3 / Thinking Retirement Saving is a Short-Term Plan

“You have to commit to a long-term savings plan and not worry about the short-term fluctuations,” says Barrientos. While your retirement savings may go up and down, every dollar counts. Start early and make regular investments, even if contributions are as low as three percent of your income.

Mistake 4 / Not Taking Advantage of Employee Retirement Matching

“That’s free retirement money in the bank, assuming you stay with your employer long enough to be fully vested,” says Lee. “You want to make contributions at least up to your company match.”

Mistake 5 / Not Being Aware of Alternative Retirement Plans

Even without employer retirement plans, you still have savings options. “You can contribute into traditional or Roth IRAs and you have the ability to do so by April 15, 2016, to make it eligible to be applied for the 2015 tax year,” says Lee.

Mistake 6 / Withdrawing Contributions When Changing Jobs

Withdrawing money now “will result in the full amount being taxed along with additional penalties from IRS and your resident state,” says Lee, who recommends leaving your money in the same plan, if allowed, or rolling it over into another IRA for more investing options and flexibility.

Mistake 7 / Gambling with Your Retirement

Your retirement account should be in a diversified portfolio, says Barrientos. “Many individuals who manage their own investments think they can use their retirement funds and ‘play the market,’” he says, noting bad investment decisions could impact the success of your retirement plan.

By Kristen Castillo // Nest photo © Simon Booth/fotolia.com.