How 1 Small Investing Mistake Can Derail Your Roth IRA Investment

Martin Dasko

Fri, May 2, 2025, 10:02 AM 5 min read

A recent study from Northwestern Mutual revealed that the “magic number” for Americans to retire comfortably in 2025 is $1.26 million, down from $1.46 million last year. However, only 25% of Americans with retirement savings have set aside just enough for one year. If you’re interested in getting serious about retirement planning, you’ll want to ensure that you utilize all of the resources available to you.

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One of the best retirement planning tools is a Roth IRA and below, we will examine one common mistake you want to avoid so that you don’t hinder your future self.

Chad Gammon, certified financial planner (CFP) and owner of Custom Fit Financial, pointed out that contributing to a Roth IRA is a great idea, but that many contributors forget to check if it’s properly invested. “The first step is to log into your Roth account and check to see if you’re investing in the funds you wish for. This should be based on your risk tolerance and goals,” he said.

A common mistake is not actually investing your Roth IRA in anything after you’ve contributed money to it. This means that your funds aren’t growing or benefiting from compound interest. While it’s helpful to save money for retirement, you want these funds to grow so that when you’re ready to leave the workforce, you have enough money to live comfortably in your golden years.

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“Financial mistakes begin early in life and the biggest financial mistake people make is taking too little risk, not too much risk,” said Robert Johnson, Ph.D., chartered financial analyst (CFA), chartered alternative investment analyst association (CAIA) and professor of finance at Creighton University. “Unfortunately, many people allocate retirement savings to money market accounts or low-risk bonds.”

This investing mistake will cost you money because you’re missing out on the benefits of compound interest, which means that you’re leaving money on the table that could be used to fund your future lifestyle.

There are two main reasons why you should double-check your Roth IRA account once in a while.

Gammon noted that you should periodically check in on your investments to ensure they’re being managed as you intended. You should also rebalance to keep your desired asset allocation. You don’t have to be actively involved in managing your retirement nest egg frequently, but you want to be confident about the trajectory of the account.