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Top 5 Financial Retirement Mistakes to Avoid
Personal Finance
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According to a Northwestern Mutual study, one in three Americans has less than $5,000 in retirement savings. Another 21% of Americans have no retirement savings at all. While most people know that not saving at all is one of the biggest money mistakes in retirement and personal financial planning, there are plenty of other errors you can make, as well. Unfortunately, making mistakes in your retirement planning can cost you thousands of dollars over time. Consider some of the top financial mistakes that the average American makes when planning for retirement. Once you understand the potential error, you can evaluate your finances to determine whether you need to make some changes to avoid these common pitfalls. 1. Failing to Take Full Advantage of Employee Match Contributions to 401(k) One report indicated that Americans are leaving a total of roughly $24 billion in unclaimed 401(k) matches on the table every year. On average, that means that a single person is losing out on an extra $1,336 each year, which is often an extra 2.4% of their annual income. If your employer offers a 401(k) match, it is absolutely in your best interest to take full advantage of that match. Over time, that money can add up to be thousands of dollars in your account, and, with the power of compound interest, that can significantly increase the amount of funds in your account when you retire. 2. Forgetting to Consider Taxes Depending on how you have set up your retirement accounts, there is a good chance that at least some of the income you will receive in retirement is taxable. Some seniors forget that they will need to account for paying Uncle Sam a portion of their retirement funds. For some, that portion can be a significant drain on their tax savings. Keep in mind that most draws from your IRA and 401(k) are subject to income taxes. Many Social Security benefits will be, as well. It may be a good idea to consider Roth plans, which contribute post-tax dollars today so that you do not have to pay taxes on distributions later. 3. Starting Social Security Benefits Too Early Everyone falls into a different age bracket that dictates when they will qualify to take their full amount of Social Security benefits. For example, if you were born between 1943 and 1954, your full Social Security benefits will start at age 66. That number increases if you were born after 1954. For those who were born in 1960 or after, for instance, their full retirement age is 67, rather than 66. You can actually start taking benefits when you reach age 62. The catch is that if your start receiving benefits at age 62, you will not get the top amount that you could obtain, and you are stuck with whatever rate you get when you start if you do not wait to take full benefits. If you begin taking benefits at age 62, for example, the total amount of benefits you receive is reduced by 25%. If you delay taking Social Security as a retiree past your full retirement age, you might also be eligible for delayed credit. This increases the amount of money you can get if you delay, up to age 70. Delaying to age 70 can increase your benefits by nearly 25% in some cases. 4. Cashing Out Your Retirement Accounts When you leave a job, your 401(k) or other retirement savings account should go with you. However, that does not mean that you should cash it out and use the funds. Instead, rolling over the money will keep your retirement savings intact so you can keep taking advantage of compound interest. Rolling over the account also helps you avoid paying extra taxes and penalties. If you cash out too early, you may end up paying a good chunk of the funds to Uncle Sam. You might end up wasting up to 10% of the funds in penalty fees as well. 5. Failing to Have an Emergency Backup Plan Even if you have enough funds for all of your expenses in retirement, you need to also plan for an extra cushion to account for emergency situations. Even if you do not have a chronic health problem now, for example, you may end up being injured or becoming ill, and that can seriously derail the amount of funds you need to keep up with obligations in retirement. Work with our office to discuss how you can build in an extra cushion that will help you deal with the unexpected more effectively.
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Tax and Financial Insights
by NR CPAs & Business Advisors
2026 IRS Mileage Rates: Key Updates and Insights
The IRS has rolled out the inflation-adjusted mileage rates for 2026, offering taxpayers an efficient way to claim deductions for vehicle-related expenses incurred for business, charity, medical, or moving purposes. These adjustments reflect the continued economic shifts impacting car operation costs.
Effective January 1, 2026, the new standard mileage rates are established as follows:
- Business Travel: Increased to 72.5 cents per mile, inclusive of a 35-cent-per-mile depreciation allocation. This marks a rise from the 70 cents per mile rate set for 2025
- Medical/Moving Purposes: Reduced slightly to 20.5 cents per mile, down from 21 cents in the previous year, reflecting the variable cost considerations.
- Charitable Contributions: Consistent at 14 cents per mile, a fixed rate unchanged for over a quarter-century.
As is typical, the business mileage rate considers the integral fixed and variable costs of automobile operation. Meanwhile, the medical and moving rates remain contingent on variable expenses as determined by the IRS study.
It is critical to note that the One Big Beautiful Bill Act (OBBBA) held firm on disallowing moving expense deductions except for specific cases within the Armed Forces and intelligence community, marking a substantial shift since 2017.
When engaging in charitable work, taxpayers might opt for a direct expense deduction over the per-mile method, covering gas and oil costs. However, comprehensive upkeep and insurance costs are non-deductible expenses.
Business Vehicle Use Considerations: Taxpayers can alternatively compute vehicle expenses using actual costs, which might benefit from shifting depreciation rules, particularly through bonuses and first-year advantages. Keep in mind, however, reverting from actual cost calculations to standard rates in subsequent years is restricted, particularly per vehicle protocol and when exceeding four vehicles in concurrent use.
Additionally, parking, tolls, and property taxes attributable to business can be deducted independently of the general rate, an often-overlooked advantage by many business owners.
Tax Strategies for Employers and Employees: Reimbursements based on the standard mileage framework, providing the right documentation is in place, remain tax-free for employees. Meanwhile, the elimination and continued prohibition of unreimbursed employee deductions continue, with particular exceptions offered to qualified personnel across specific occupations.
Opportunities for Self-employed Individuals: Entrepreneurs remain eligible for deductions on business-related vehicle use via Schedule C, with potential to account for business-use interest on auto loans.
Heavy SUVs and Deduction Advantages: Heavier vehicles exceeding 6,000 pounds but under 14,000 pounds open opportunities for substantial tax deductions through Section 179 and bonus depreciation avenues. The lifecycle of such a vehicle bears implications on recapturing initially claimed deductions, urging cautious tax planning.
For professional guidance on optimizing your vehicle-related tax deductions and understanding their implications on tax strategies, contact our office in Coral Gables, Florida, where expert advice and strategic insights are just a call away.
Educator's Deduction Reform: Key Changes Under OBBBA
The One Big Beautiful Bill Act (OBBBA) introduces significant enhancements for educators' tax deductions starting in 2026, offering both strategic opportunities and planning considerations for educators who qualify. With the reinstated itemized deduction for qualified unreimbursed expenses, educators have a broader spectrum of financial relief. This is complemented by the retention of the $350 above-the-line deduction, allowing educators to maximize their tax benefits by selectively allocating expenses between these avenues.
Understanding the nuances of these changes is crucial for educators and financial advisors alike. The dual-option deduction strategy can potentially enhance tax efficiency, thereby aligning with broader financial planning goals.
At NR CPAs & Business Advisors, based in Coral Gables, Florida, our expertise in tax preparation and planning provides invaluable support to educators navigating these changes. Our comprehensive approach, combined with personalized advice from our experienced team, ensures compliance and optimization in line with the latest tax legislations.
Given these updates, it is imperative to engage with seasoned professionals to fully leverage your deduction strategies. Contact us today to streamline your tax planning under OBBBA's new guidelines and maximize your deductions for upcoming tax years.
