Whether you’re wealthy or middle class, saving for retirement requires discipline, knowledge and, often, expert guidance. Certified financial planners (CFPs) who work with wealthy clients often see the same mistakes at every income level.
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For high-net-worth individuals, the mistakes can be costlier than you might think. Not saving enough for retirement can leave wealthy individuals with dramatic lifestyle changes later in life, just when they should start to relax and enjoy the fruits of their working years.
Matt Parenti, CFP and partner at Private Vista, shared the most common retirement account mistakes wealthy clients make.
Starting Too Late
Just like the middle class, wealthy individuals tend to procrastinate when it comes to saving.
“Retirement seems so far away,” Parenti said. He said clients often wait until their 40s or 50s to begin making retirement account contributions. This decision fails to leverage the power of compounding.
“A good retirement account balance for a wealthy individual is most commonly accumulated early on, with the help of compounding growth from investment returns,” he said.
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Using ‘Target Date Funds’
Target date funds project an individual’s retirement date and gradually rebalance the portfolio to a more conservative mix of investments as time goes on. However, Parenti explained, “These funds do not account for a wealthy individual’s actual retirement date or the amount of need from that account once they actually retire.”
He recommended reviewing the investment mix semi-annually and continuing a more aggressive strategy until retirement nears.
Early Withdrawals
Wealthy individuals may see money accumulating in their retirement accounts and decide to tap into them early. Parenti said this is a mistake.
“Not only are these plans taxed, but they also have an associated penalty of 10% before age 59.5, with some exceptions,” he said. “We recommend investors think of their retirement accounts as the funds of last resort and instead build a sufficient emergency fund of cash as well as after-tax investments to protect against having to access retirement funds.”
Not Investing in Employer-Sponsored Accounts
Wealthy workers and the middle class alike fall prey to this retirement mistake; they fail to invest in an employer-sponsored 401(k) account.
It might be that wealthy investors feel they can earn more through other investments. But, Parenti said, “Employer matching dollars are ‘free money.’ We recommend individuals always review their employee handbook and make sure that they are at the very least meeting the matching amount.”
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This article originally appeared on GOBankingRates.com: I’m a CFP: 4 Retirement Account Mistakes I See Wealthy Clients Making in 2026
