Some people fail at retirement savings because they don't create a plan. Others, however, fail because their plan simply isn't up to par. There are numerous things that can derail people's savings efforts, which helps explain why the retirement savings picture in the U.S. is so grim today. Research from Voya Financial indicates that one-third of those in retirement report having a lower standard of living than they did in their working years and that nearly four in 10 estimate they will likely run out of savings. "These findings are telling and underscore the need to save -- and starting early," says James Nichols, head of retirement income advice and strategy at Voya Financial. "Even if it is a small amount, 30 years of routine savings and compounded growth can add up to a significant amount." But while the straightest path to a financially secure retirement -- save early and save often -- is easy to understand, it's also easy for savers to fall victim to some common stumbling blocks. Here are four common reasons why retirement-savings strategies fall short.
1. Overestimating future returns
Even with a financial adviser guiding you, it can be hard to know how much to save. There are so many unknowns, including how the market will perform in the years till your retirement. Even relatively small variations in returns can add up over the course of decades. For example, a saver who stashes $5,000 per year in tax-deferred accounts for 30 years will end up with more than $418,000 in 2014 dollars, assuming a 6 percent rate of return. But if that rate of return drops to 4 percent, the portfolio will be worth about $289,000 -- in other words, less than 70 percent of the value of the higher-performing portfolio. Chris Miles, a former financial adviser and stock coach, and now founder of the website Moneyripples.com, says that smart retirement savers don't overestimate their future earnings, and that if they find that their investments are underperforming, they go in search of better options.