Smart IRA Planning: Common Retirement Mistakes to Avoid

Individual Retirement Accounts (IRAs) are one of the most effective strategies for building long-term financial security. Setting one up is simple, part of the reason a record-high 44 percent of US households had an IRA in 2024, according to the Investment Company Institute. Jennifer Peric, Community President at WaterStone Bank, sees the power this investment tool can have for retirement planning: “IRAs offer tax advantages and put you in control of planning,” she says.

Completing the paperwork may be straightforward, but once you’ve started contributing to the account, you want to make the most of the benefits. Peric says, “Even with the painless process, many people need a little extra guidance to make sure they’re getting the most out of their account.” Here, Peric outlines some of the most common IRA missteps, and how to fix them.

1. Missing contribution deadlines.
IRA contributions for a given tax year must be made by the following year’s tax filing deadline, on or around April 15. “When you miss a deadline, you’re really missing out on a full year of potential growth,” Peric explains. Missing the deadline also affects your ability to take advantage of tax deductions for Traditional IRAs or contribution limits for Roth IRAs, so planning ahead is key.

2. Contributing too much or too little.
The IRS sets annual contribution limits and exceeding them can trigger penalties. On the other hand, under-contributing can reduce your long-term savings potential. Peric advises, “Make it a habit to revisit your contribution strategy every year.” If you’re over 50, reviewing your contributions regularly also ensures you’re making the most of catch-up contributions.

3. Forgetting about required minimum distributions (RMDs).
Starting at age 73 (as of 2025), Traditional IRAs and Simplified Employee Pension (SEP) IRAs, which are employer-funded versions of a Traditional IRA, require annual withdrawals. Missing them can be costly. Peric suggests working with a tax professional to time RMDs in advance. Tax professionals can help you strategize to ensure withdrawals are timed to minimize your tax liability while still meeting the IRS requirements.

4. Withdrawing funds too early.
Taking money out before age 59½ generally leads to taxes and penalties. “Your IRA should be a long-term commitment,” Peric says. “Avoid tapping into it unless it’s truly a last resort.” Early withdrawals can also reduce the benefits of compounding, which is a critical factor in long-term retirement growth.

5. Neglecting to update beneficiaries.
Life changes quickly: your beneficiary designations should keep up. Updating beneficiaries ensures that your savings go to the people you intend. Peric recommends reviewing beneficiaries after major life events like marriage, divorce, or the birth of a child to prevent confusion and potential legal complications later.

6. Forgetting about retirement accounts from previous jobs.
“Old 401(k)s don’t disappear, but people lose track of them more often than you’d think,” Peric says. Consolidating eligible accounts into an IRA can streamline your planning, potentially reduce fees, and make it easier to manage your overall retirement strategy. It also ensures that all your retirement savings are working efficiently toward your goals.

Smart decisions and regular check-ins can help your IRA work its hardest for your future. To review your IRA options or open an account, visit your nearest WaterStone Bank branch or connect with a banker today.