4 Retirement Savings Mistakes That Could Cost You Over $50,000

Saving for retirement can be simple. Follow a few basic principles, and your wealth can grow exponentially. But there are some pitfalls that could cost you tens of thousands of dollars.

Here are four retirement mistakes that could slash your nest egg by $50,000 or more -- and how to steer clear of each one.

1. Ignoring tax-advantaged accounts

Tax-advantaged retirement accounts, like 401(k)s and individual retirement accounts (IRAs), offer huge tax breaks. Investments held in these accounts are free from capital gains and dividend tax -- which are 15% each for the average American.

Let's say you invest $6,000 a year for 30 years, earning 7% annually. You'll have $567,000.

• In a 401(k) or IRA, you'd owe $0 in capital gains taxes.
• In a regular brokerage account, you'd owe $58,000 in capital gains taxes if you sold your investments, assuming a 15% tax rate.

Note that you only pay capital gains tax when you sell your investments. So that tax would likely be paid over the course of many years as you sold investments for income. Still, you'd probably owe thousands of dollars per year.

Luckily, almost anyone can open an IRA -- and it usually takes just a few minutes. Click here to learn more about IRAs and open an account through one of the top brokers today.

2. Investing too conservatively

Only the very wealthy can afford to stash all their money in a savings account. The rest of us need to invest; otherwise our savings won't grow fast enough to support us in retirement.

Say you're nervous about the stock market, so you put your retirement savings in a "safe" place -- like bonds or even a savings account -- earning 3%. Compare that to someone who invests in a mix of stocks and bonds earning 7% annually.

• $6,000/year for 30 years at 3%: $285,000
• $6,000/year for 30 years at 7%: $567,000

That's a difference of $282,000.

If you're years from retirement, most of your money should be in stocks. You have time to ride out the market's ups and downs, and your returns will likely be much higher than the APY of any savings account. Stock market index funds and target-date funds make great "starter" investments.

If you need help building your retirement portfolio, then consider getting some professional advice. A short questionnaire from our partner, SmartAsset, helps match you with up to three fiduciary financial advisors, each legally bound to work in your best interest.

3. Waiting too long to start investing

If you put off retirement saving for even a few years, it can cost you a huge amount of money down the road.

Let's again say you invest $6,000 per year and earn 7% annually. Here's how much you'd end up with if you saved for…

• 25 years: $379,000
• 30 years: $567,000

Starting just five years later would cost you $188,000.

So start saving now, even if it's just a small amount. Time is the biggest factor in building wealth through investing.

4. Tapping your retirement savings early

Say you withdraw $10,000 from your 401(k) in your 30s. Not only will you pay taxes and a 10% early-withdrawal penalty, but you'll also miss out on future growth.

• Taxes + 10% penalty, assuming 22% tax bracket: $3,200
• Lost growth on remaining $6,800, assuming 7% return over 30 years: $52,000

Total cost of early withdrawal: $55,200

Only tap your retirement accounts as a last resort. Ideally, you have three to six months' worth of expenses in a savings account so you'll never need to make an early retirement savings withdrawal.

The good news is that even your savings can earn a decent return. There are high-yield savings accounts paying APYs as high as 4.40%. Click here to see a list of the top high-yield savings accounts and start earning more interest now.

Start now and stay the course

Every one of these mistakes is avoidable. You don't need to make perfect choices -- you just need to make smart ones early and often. Take advantage of tax savings, stay invested, and don't let short-term fear mess with your future.