Small Mistakes Add Up. 4 Mistakes to Avoid When Investing for Retirement.

Key Points

• A whopping 33% of Americans claim to be unprepared for retirement.
• Compound interest is one tool you can use to catch up on retirement savings.
• Take advantage of any employer match on a portion of your retirement contributions.

A 2025 "State of Retirement Planning" study by Fidelity found that 67% of Americans feel good about their retirement prospects, down 7% from last year. I can guarantee you, at one time, I would have been among the 33% saying, "There's no way I'll be ready." However, that was before I realized that prepping for retirement involves making a "to-do" list and sticking with it.

I was born a worrier (or so my parents always claimed), but I enjoy a good to-do list. Lists give me a sense of direction and help me see when I'm falling off track. My list includes things I should do, like maxing out my 401(k), and mistakes I must avoid, like making knee-jerk reactions to sudden changes in the market.

It took me a while to realize that no one gets it exactly right. Everyone makes mistakes, even seasoned investors. The trick is to correct mistakes as you identify them, and avoid new mistakes whenever possible.

This is where it gets tricky, because some of the most common mistakes are the easiest to make. Here are four of those investment mistakes and what you can do to avoid them.

1. Putting Investments on the Back Burner

When I was young, I remember thinking I had plenty of time to plan for retirement. After all, it was next to impossible to imagine myself in my 60s. Heck, it's still hard for me to imagine being in my 60s, yet here we are. Although I have no intention of ever retiring, I know my husband does, and the years are ticking by.

Even when I got semi-serious about saving for retirement, life got in the way. First, it was the Great Recession. Our investments were decimated, and we lost a bundle on a home we'd foolishly overpaid for.

Right on the heels of the Great Recession came a brain tumor and medical costs that pretty much wiped out anything that was left. It was a discouraging time (to put it mildly), but it was also one of the most instructive times of my life.

At that point, we committed to two things: living below our means, and prioritizing our investments. At one time, we'd pay bills, spend money on things we wanted, and invest what was left over. That came to an end when it became clear that we had some serious catching up to do.

The first "bill" we pay each month is our investments. We base our household budget on the money left over. The reason is simple: If we're fortunate enough to reach retirement age, we will need every dime we've invested.

2. Thinking Your Employer Match is Too Small to Amount to Much

Besides the start-ups he's worked for, my husband's employers have always offered a 401(k) match. Sometimes it was 3% and sometimes more, but no matter how much it was, I remember wondering if matching funds really impacted our retirement account.

Imagine an employer offering to match the first 3% of a $100,000 salary. That's $3,000 per year — not terribly impressive until you factor compound interest in. If that money went into an investment vehicle with an average annual return of 7%, the company's match would provide just shy of $123,000 extra to take into retirement. That money could do all kinds of things, from paying for long-term care premiums to making home repairs.

No matter how much your employer offers to match, it's free money, and you'll be glad to have it one day.

3. Carrying Too Much Debt

Debt is a sticky thing. It makes it possible to buy things you might not otherwise be able to afford, but it can be hard to shake once you've committed to it.

Suppose you have $10,000 in credit card debt and pay an average interest rate of 26%. If you make a $250 payment each month, it will take you nearly eight years to pay off, and you'll end up paying $13,500 in interest alone (in addition to the $10,000 principal owed).

If you were to pay off that high-interest debt and put the $250 per month into an investment account earning an average annual return of 7%, it would be worth $30,780 in eight years.

Debt can derail your retirement plans unless you cut it from your life — particularly high-interest debt.

4. Forgetting to Update Important Documents

When you're busy, it's easy to allow small things, like updating essential documents, fall through the cracks. How do you feel about the money in your accounts, including savings, checking, or retirement, going to someone you don't intend it to go to when you die?

Suppose you don't regularly review financial documents to check beneficiary information. In that case, you risk leaving your hard-earned funds to an ex-spouse, a charity that's gone out of business, or another unintended recipient.

As you review your portfolio and other important documents each year, ensure the beneficiaries are who you want them to be. Whether you're driving a car, baking a cake, or investing for retirement, the little things matter.

Learn more about the stages of planning for retirement.

This article was written by Dana George from The Motley Fool and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.