Are you making these 5 retirement mistakes?

Saving for retirement isn't just a matter of sticking money into a 401(k) and hoping for the best. It's also about making smart choices from the start. Here are five major mistakes to avoid along the way.

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1. Not starting early enough

The sooner you start saving for retirement, the more opportunity your money has to grow, yet many Americans fail to maximize the power of compounding. According to TransAmerica's 16th Annual Retirement Survey, only 67% of 20-somethings and 76% of 30-somethings are already saving for retirement, which means one-quarter to one-third of Americans are missing out one to two decades of growth.

Here's how that might shake out. Let's say you start saving $200 a month for retirement at age 40 and want to retire 25 years later. If your investments generate an average annual 8% return (which is possible with a stock-focused strategy), by the time you reach 65, you'll have $175,000. But if you start saving that amount 10 years earlier, you'll have $413,000 -- more than double. And if you begin saving at 22, you'll have close to $800,000. When you fail to start saving early, you're not just losing out on the principal amount you should've put in all those years; you're missing the chance to turn that money into an even larger sum.

2. Leaving employer matching dollars on the table

If you don't put enough into your 401(k) to get your full employer match, you're essentially saying no to free money -- and you wouldn't be alone. According to a 2015 report by Financial Engines, American workers are foregoing a cumulative $24 billion each year by not contributing enough to their 401(k) plans to fully maximize employer matching dollars. In 2014, the average employee passed up an estimated employer match of $1,336.

Missing out on $1,336 for just three years could be a serious long-term setback because it doesn't just mean losing out on $4,000 in extra income; it also means losing out on whatever growth that $4,000 could've otherwise generated. Over 25 years, you could turn $4,000 into $27,000 if your investments average an annual 8% return. Passing up any amount of free money means doing your retirement savings a major disservice.

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3. Not saving your raises

Do you typically get a raise year to year? If so, you should be putting that money into savings. Chances are, by the time that increase kicks in, you've already learned to live on whatever pre-raise amount you're making. If you set up your raise to go directly into your retirement account, you won't miss the extra money, but you'll be helping your nest egg grow.

Even if you can't save your entire raise, make sure to allocate some of it to retirement to stay on pace with your current savings rate. Let's say you're making $50,000 a year and are saving $5,000, or 10%, of your earnings for retirement. If you get a 3% bump, or $1,500 increase, be sure to up your retirement account contribution by another $150 to stay on track proportionately.

4. Playing it safe with investments

Sticking to conservative investments might help you sleep better at night, but it could derail your long-term savings efforts. Riskier investments like stocks have historically outperformed safer investments like bonds, so if you're decades away from retirement, you should focus your investments on stocks to bring in higher returns.

Imagine you contribute $200 a month to a retirement plan but limit yourself to conservative investments that give you an average annual 4% return. Over the course of 35 years, you'll have close to $177,000. However, if you invest heavily in stocks and generate an average annual return of 8%, after 35 years, you'll have over $413,000. Remember, you can -- and should -- shift more of your investments into bonds as retirement nears, but playing it safe from the start could really stunt your savings growth.

5. Underestimating your healthcare costs

For years, Fidelity has been estimating retiree healthcare costs, and the most recent assessment claims that a 65-year-old couple retiring today should expect to spend $245,000 on healthcare throughout retirement, not including long-term care expenditures. As if that figure weren't shocking enough, new data from HealthView Services reveals that the average healthy 65-year-old couple retiring this year is expected to spend $377,000 in lifetime healthcare costs (not including long-term care) when you factor in necessities like vision and dental expenses. While it's good to be optimistic about your health, don't fall into the trap of miscalculating your healthcare costs in retirement. Chances are, they'll wind up being higher than you think.

Avoiding major retirement mistakes can put you in a much better financial position down the line. The more strategic you are up front, the better your chances of securing the comfortable, worry-free retirement you've always dreamed of.

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