I Retired Middle Class: 4 Money-Saving Mistakes I Regret the Most

We all seem to learn lessons the hard way in life and finances . This should make it no surprise that 72% of Baby Boomers, 84% of Millennials and 80% of Gen Zers and Gen Xers agree to have made financial mistakes. Do these numbers surprise you?

Making financial mistakes has a greater impact on the middle class. After all, you most likely don’t have a trust fund or a bank account with endless funds to fall back on.

Find Out: How I Went From Middle Class to Upper Middle Class

Discover More: 6 Money Moves the Wealthy Make That You Can Make Too

We recently spoke with Erin H., who lives in a suburb of Cincinnati. Erin retired a few years ago but realized that some of the decisions she made caused her path to retirement a little more difficult. In this article, we’ll cover four money-saving mistakes Erin regrets the most over her retirement journey to help you avoid making these errors yourself.

Earning passive income doesn't need to be difficult. You can start this week.

Taking Social Security Too Early

“Like most middle-class retirees, I couldn’t wait to start taking Social Security,” Erin said. “All those years working and paying Social Security and Medicare taxes are finally benefiting me. I didn’t know that taking Social Security too early reduces the monthly amount I receive.”

Trending Now: What the Upper Middle Class Make in Different US Cities

You can start receiving Social Security benefits once you reach age 62. However, the Social Security Administration doesn’t consider 62 to be full retirement age. If you were born after 1960, the full retirement age is 67 . Social Security benefits are reduced by 5/9 of one percent each month before normal retirement age. If you take benefits more than 36 months before full retirement age, benefits are further reduced by 5/12 of one percent per month.

“By taking Social Security benefits at age 62, I was reducing my monthly income,” Erin added. “By waiting a few more years and using other income to fund my retirement, I could have maximized my benefits. Benefits slowly increase each year you delay until you reach age 70.”

Prioritizing Saving for Retirement Too Late

Have you ever heard someone talk about compound interest? Although compound interest might seem foreign, saving for retirement as a middle-class individual is crucial.

“Neglecting to fully leverage compound interest by saving too late was another one of my money-saving mistakes,” Erin said. “While I knew I should have been saving for retirement early in my career, I was never explained the numbers behind the importance.”

Let’s say you put $100 in an account that earns an average of 10% interest each year. After ten years, you would have $271. Letting the initial $100 contribution grow for another ten years results in $733. What happens after 40 years? That initial $100 you put into the market is now worth $5,371 . The more time you let your money sit, the greater the earnings potential.

“If you are in the middle class, start prioritizing saving for retirement as soon as possible,” Erin added. “This could be in an employer-sponsored plan, like a 401(k), or through outside accounts, like an Individual Retirement Account (IRA). Every dollar counts.”

Missing a High Savings Rate Due to Debt

There seem to be conflicting opinions on debt. Some gurus say debt is leverage, while others argue to avoid debt at all costs. Although debt can be a great way to make major purchases, like a house or car, it can impact your retirement goals.

“I experienced this firsthand,” Erin said. “When I shifted my focus to retiring, I uncovered that my debt lowered how much I was able to save. When I was taking out the debt, it seemed immaterial. However, once I took a step back and looked at the big picture, I found that my debt was pushing back my retirement date. Did I really need to finance a new phone? How about upgrading my car or purchasing furniture on credit? Probably not. Don’t make this same money mistake.”

Overleveraging During the Great Recession

When times are good and the economy’s booming, it’s difficult to think about what comes next. After all, times have been good for so long; they won’t change, right? Wrong.

“I learned this money lesson the hard way by taking on too much risk during the Great Recession,” Erin said. “My portfolio contained too volatile positions.”

“Once the market dropped, I was left to pick up the pieces, with a significant decrease in value,” Erin added. “I should have rebalanced my portfolio according to my retirement goals. This means taking on less risk as I near retirement age. If I could go back in time, I would sell many of my volatile positions and allocate more money toward cash and stable bonds. As you age and work toward retirement, take the time to shift your portfolio allocation.”

The Bottom Line

Have you made these money mistakes before? If not, consider yourself lucky and use Erin’s mistakes as a learning lesson. Retirement doesn’t have to be impossible for the middle class. If you are unsure where to start, reach out to a qualified financial advisor.

This article originally appeared on GOBankingRates.com : I Retired Middle Class: 4 Money-Saving Mistakes I Regret the Most