Experts warn that traditional markers like account balance can be misleading; emphasising income needs, consistent contributions, and realistic expense assumptions are key to ensuring a secure retirement.
Many people assume they are on track for retirement because they contribute to a 401(k), watch their balance rise or reach an occasional savings target. But retirement specialists say those checkpoints can be misleading if they are not tied to the income a portfolio will actually provide.
One common mistake is treating account size as the main measure of success. Christopher Stroup, a certified financial planner and owner of Silicon Beach Financial, told MoneyLion that a large 401(k) can look reassuring even when savings are uneven, spending keeps climbing or much of a person’s wealth is locked in assets that are not easy to use, such as a business or company stock. Will Allen, a chartered retirement planning counsellor and founder of Sentara Capital, said savers should begin with the monthly income they will need in retirement, subtract Social Security and any pension, then focus on closing the gap with savings and investments. Andrew Gosselin, a certified public accountant and senior contributor at Save My Cent, suggested using a withdrawal rate of roughly 3.5% to 4% as a planning guide.
Another warning sign is letting income rise without lifting the savings rate. Money experts quoted by MoneyLion said broad targets, such as building savings equal to three times salary by age 40 and six times salary by 50, can be useful benchmarks, but they are not a substitute for steady contributions. For many higher earners, Stroup said setting aside 15% to 25% of gross income for long-term savings is a stronger indicator of retirement progress than salary alone.
A third problem is underestimating what retirement will really cost. Both healthcare and inflation can erode purchasing power over decades. Stroup said Medicare does not cover everything and retirees still face premiums, out-of-pocket costs, dental, vision and possible long-term care expenses. Allen advised workers to make the most of health savings accounts while they are still employed. Gosselin said building retirement income assumptions 10% to 20% higher, or creating a separate healthcare reserve, can help. Stroup also warned that even 3% inflation can meaningfully raise future expenses if projections are built only on today’s prices.
Savers can also be tripped up by taxes and overly optimistic assumptions. Allen said many retirement accounts are tax-deferred, which means withdrawals from traditional 401(k)s and IRAs are generally taxed as ordinary income and should be modelled into retirement budgets. Stroup cautioned against assuming concentrated stock positions will solve everything, saying wealth on paper is not the same as diversified, spendable income. Gosselin added that some people expect selling a home to solve a retirement shortfall, but that plan often does not produce enough cash on its own.
The most important red flag may be having a savings gap without a catch-up plan. Stroup said the first move is usually to raise the savings rate rather than chase higher returns or trim investments too quickly. From there, workers can aim to maximise retirement accounts, use catch-up contributions, cut lifestyle inflation and build a more tax-efficient investment mix. Allen said the main late-stage levers are simple: save more, work longer or spend less. He also noted that delaying retirement or postponing Social Security can improve the odds of success by shortening the number of years a portfolio must support withdrawals and by increasing monthly benefits. As The Motley Fool and other retirement guides have similarly argued, the best plans are the ones that are specific, reviewed regularly and adjusted as life changes.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
