5 Ways Youre Saving for Retirement Wrong

5 Ways Youre Saving for Retirement Wrong How much are yousaving for retirementeach year?If you havent departureed saving yet, youre leid alone. According toNorthwestern Mutuals 2018 Planning Progress Study, about 1 in 5 Americans have bedrngnishing saved for retirement.And the average American has $84,821 saved for retirement, which is far less than the $1 million to $1.5 million thats recommended.These numbers paint a bleak picture, suggesting many Americans will bedrngnis have the means to support themselves later in life.So how can you stay ahead of the curve and support yourself after youve stopped working? First, make koranvers youre not making any of these retirement savings mistakes.1. Not having a retirement planThey say that failing to plan is planning to fail. Although this might not always be the case, it certainly rings true when it comes to saving for retirement. Without a plan in place, its impossible to know whether youre on the right track.The major mistake people ma ke is not having a written retirement plan in place at an early age, said Drew Parker, creator ofThe Complete Retirement Planner. You should actually start developing a comprehensive retirement plan as soon as you start working.Part of this plan should be toset a retirement savings goal. Since everyones lifestyle is different, your target figure should be customized to your unique needs.Carter Henderson, founder and chief investment officer atHenderson Capital Group, recommended using the replacement ratio, or what proportion of your current (or predicted) income youll need during retirement.To be considered financially secure, meaning youre not living on a tight budget nor are you spending money on lavish vacations, experts recommend replacing 70% of your former income, said Henderson. If you think youll cut back in retirement, plan to replace 60%, but if you want to live just like you are living and take some lavish trips, you should save enough to replace 80% to 100% of your form er income.Once you know your goal, you canuse an investment calculatorto work backward and figure out how much you must save each year to reach that number.2. Waiting to save until youre debt-freeIf youve got debt (student loans, anyone?), you might put saving for retirement on the back burner until youve paid it off. But waiting to save would be a mistake, particularly if you have low-interest debt.Not starting to invest regularly as a 20-something is a financial mistake that carries long-term consequences, said retired professor Timothy Wiedman, who taught a course on retirement planning. Unfortunately, many young folks divert their disposable income in other directions, believing that they can catch up later after their incomes rise. But that strategy is almost always a big mistake.Thats not to say you should ignore your debt, but ratherfind a balance between debt repayment and savingfor retirement. After all, the earlier you start saving, the bigger your nest egg will grow over time.The single most determining factor for success in savings for retirement is length of time in the game, said Matthew Novak, a certified financial planner (CFP) atIntegral Wealth Planning. The power of compounding interest over 30 years is more important than any single investment pick.Compound interest is a powerful force over time, so take advantage of it by starting early. Even if you can only set aside a small amount now, you can always increase your contributions over time.3. Stashing cash in a bank account instead of investingWhen we talk about saving for retirement, were typically not referring tosaving money in a bank account. Even high-yield savings accounts only get around a 1.00% annual return, which wont amount to much over the long run.Instead, you should put your money into aretirement savings account, which typically includes a mix of stocks and bonds.Out of default, many people put their money into a savings account when they are saving for retirement, said McCal l Robison, who writes about retirement planning forBest Company. Although its good to start saving, putting your money in a savings account isnt doing you any good in regards to increasing the amount of that money. Instead, you should look into other options that will still give you opportunities to earn interest on your retirement fund.If your employer offers a 401(k) or 403(b), go with that. If not, look for a low-fee individual retirement account (IRA), such as one offered byBetterment. Self-employed people and small-business owners might also use a simplified employee pension individual retirement account (SEP IRA).You also dont have to limit yourself to one account, especially if you plan to save more than yearly contribution limits allow.4. Failing to take advantage of tax benefitsBesides giving you a solid return on investment, retirement savings accounts also offer tax benefits.Traditional IRAs, for instance, let you contribute pretax dollars to your account. You can contrib ute more upfront while lowering your taxable income, but you will pay taxes when you withdraw the money.Roth IRAs, on the other hand, involve post-tax dollars, but your future withdrawals arent taxable. Roth IRAs can be an especially good choice for young people as theyre likely not in high tax brackets yet.The Roth 401(k) makes sense for them because theyll likely never be in a lower tax bracket again, said Levi Sanchez, CFP and co-founder ofMillennial Wealth. Over time, they can switch to the traditional 401(k) as their compensation and tax bracket increases.If youre just getting started, learn thedifferences between traditional and Roth accountsso you can make the best choice for your future.5. Not maxing out an employer matchIn addition to offering a 401(k), some employers will also match a percentage of your contributions. For instance, lets say you make $50,000 a year and your employer offers a 3% match.That means your employer will deposit $1,500 in your 401(k) every year as long as you also contribute that much or more. This employer match means you immediately get a 100% return on 3% of your salary.Make sure to max out the contributions that your employer is willing to match, said Robison. Not matching your companys contribution is like throwing that offered money into the trash.If your employer offers this benefit, try to take full advantage of it. After all, its free money that will go straight into your retirement savings.Start saving today for a financially secure tomorrowSaving for retirement is hard for a lot of reasons. Between paying rent and paying off loans, you might not have much left over to save.Plus, its hard to limit spending today so you have more money in the future. But even if you cant set aside 10% or more of your paycheck, every little bit will help.Remember, the earlier you start, the larger your money will grow over time. By starting small today, you canset yourself up for a financially secure future.Editorial NoteThis content is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the authors alone, and may not have been reviewed, approved or otherwise endorsed by the financial institution.This article originally appeared on Student Loan Hero.