Stashing all your savings in tax-deferred accounts
Traditional 401(k)s or individual retirement accounts (IRAs) incentivize you to save in two ways: Since contributions are tax-deductible, they lower your taxable income in the years you make them, and the money you invest grows tax-deferred. However, relying solely on such accounts can lead to big tax bills when you begin making withdrawals in retirement, cautions Jean Keener, principal of Keener Financial Planning in Keller, Texas.
“People will max out these plans — and it does save a lot of money in your working years — but if you do that exclusively, sometimes that ends up being a mistake,” she says, citing the IRS’s rules for required minimum distributions, or RMDs. These are mandatory withdrawals from tax-deferred retirement accounts that, for people born in 1960 or later, start at age 75. That money is taxed at regular income rates.
Diversification can help reduce the tax sting. If you’re still working, consider contributing some after-tax dollars to a Roth 401(k). According to the Plan Sponsor Council of America, more than 95 percent of 401(k) plans also offer a Roth option. Since taxes have already been paid on Roth 401(k) contributions, you can make tax-free withdrawals in retirement. You can reap the same tax gains by opening a personal Roth IRA and making regular after-tax contributions.
Not taking advantage of catch-up contributions
A 2025 survey from investment company Schroders found that only 16 percent of Gen Xers think they have enough money to retire. One way to shore up your savings is to take advantage of “catch-up” retirement account contributions, says Matteo Hoch, founder and financial adviser at Bird Spring Financial in Las Vegas.
In 2026, most workers age 50 and older can make an additional $8,000 in 401(k) contributions on top of the standard contribution limit of $24,500. (People who earned more than $150,000 in 2025 are required to make those catch-up contributions into a Roth account.) For both traditional and Roth IRAs, retirement savers age 50 and older can contribute an extra $1,100 as a catch-up contribution on top of the $7,500 IRA cap.
Investing too conservatively
In the years before you retire, putting too much of your money into low-risk investments such as certificates of deposit (CDs) or money-market accounts could hurt your ability to build a long-lasting nest egg.
