In a surprising turn, given the usual grim reports about how little most Americans have saved for retirement, there’s been a spate of good news lately about 401(k) investors. Plan participation, contributions and account balances were all at or near record highs in 2023, according to a study in June from Vanguard. And new research from BlackRock shows that, buoyed by a surging stock market, nearly 70% of workplace savers now feel they’re on track for retirement — a 12-point jump from last year.

So, have we finally solved what experts routinely refer to as the country’s looming retirement crisis — at least, for the roughly half of Americans with access to an employer-sponsored savings plan?

Hardly.

That lofty 401(k) balance? Yes, the median shot up an impressive 29% in 2023, but the typical account was still worth just more than $35,000 by year end, Vanguard reports. Other signs of stress: A record number of savers withdrew money early, and the percentage taking out loans rose too. All told, despite the surface optimism about retirement savings, 6 in 10 investors told BlackRock they still worry they’ll outlive their money.

“The rising tide for retirement savers has not lifted all boats,” said Christine Benz, director of personal finance and retirement planning at Morningstar.

How to be among those who stay afloat? Avoid the common mistakes that can undermine savings efforts. Here is a look at what experts say are the three costliest stumbles — and how to get back on course.

Saving too little, too late

The increasingly widespread adoption of automatic enrollment in 401(k) plans is the main reason more Americans than ever are saving in these accounts. Participation in 401(k)s at companies that automatically enroll their employees hit 94% last year, compared with just 67% at places where sign-up is voluntary, Vanguard reports.

That’s the good news — but also the bad news, because people tend to stick with the contribution rate they’re assigned, and that default level is typically too low to fund a comfortable retirement. In 7 of 10 plans, the initial default contribution rate is below 6% of pretax income. Financial advisers typically recommend putting aside 10% to 15%.

To help employees close the gap, companies have been steadily increasing that initial default setting, and most also automatically raise participants’ annual contributions, commonly by 1 percentage point a year until the rate hits 10%. Those annual increases only help, though, if you stay with the company long enough to reap the benefits. Since the average job tenure these days is 4.1 years, many people start from scratch in their 401(k) every few years, sticking with an initial savings rate below 6%.

“Defaults are a really good policy idea but we’re fumbling the football on the 1-yard line,” said David Blanchett, head of retirement research for PGIM DC Solutions.

Tweaks to plan design could help. Blanchett favors adopting different default rates for retirement savers of different ages — lower contributions for younger employees; higher ones for older employees. Or, says Amber Brestowski, head of advice and client experience for Vanguard’s institutional investor group, plans could be set up to carry over a new employee’s contribution level from a previous job so they’re not beginning all over again.

For now, though, it’s up to employees to save at the highest rate they can afford. Only 15% of 401(k) savers raise contributions voluntarily but Benz recommends doing so, especially if you have just gotten your annual raise. And if you work for a company with voluntary 401(k) sign-up and you’re among the third of employees who haven’t enrolled yet, don’t delay. Not starting to save sooner for retirement is the most common financial regret.

Not maximizing contributions

The vast majority of 401(k) plans match a portion of their employees’ contributions, most commonly kicking in 50 cents for every dollar saved, up to 6% of income. But nearly half of eligible employees don’t save enough to get the full match, or they’re not in the plan at all.

“It’s a reasonable mistake to fall into, if your budget is tight and you feel like you can’t spare more from your paycheck,” said Benz. “But where else are you going to get a guaranteed 100% return on your money?”

Missing out on the full match is especially costly for younger savers, because of the growth power of compounding investment gains over time.

A 30-year-old earning $75,000 a year who contributes 3% to a 401(k) with a standard match, for example, would have $815,000 in the account by age 65, assuming average annual returns of 8%. If that employee stretches to save 6%, the balance would double to $1.6 million, Vanguard calculates.

It’s not just the match that many employees are missing out on. Fewer than 20% of participants, for example, use a plan’s financial wellness tools, which often include free personalized assessments, calculators to help with building emergency savings and paying down debt, and low-cost access to human advisers.

Brestowski notes that participants who engage with their financial wellness tools are more likely to increase contributions to their 401(k)s and take other positive steps toward retirement readiness.

“By helping people deal with the other financial pressures they’re facing, you remove some of the barriers that get in the way of saving for retirement,” she said.

Tapping your savings early

Sometimes retirement investors can be their own worst enemies, doing the hard work of saving, but then tapping the account early to cover current cash needs. Depending on the plan, anywhere from one-third to half of 401(k) savers withdraw part or all of their money following a job change, the Employment Benefit Research Institute has found. And Vanguard research showed that 13% of workplace savers borrowed from their accounts last year and 3.6% took hardship withdrawals. New federal rules taking effect this year will make it even easier to tap retirement accounts for emergencies by allowing annual withdrawals up to $1,000 without the usual 10% penalty for early distributions.

Not every early distribution or loan is a mistake. Emergencies happen; debt can become overwhelming. “If you’ve been laid off and need the funds to get by or you have high-rate credit card debt, a distribution might actually be the best use of your funds,” said Benz.

Benz suggests comparing the payoff of using the cash now — for instance, the “return” on erasing a credit card balance with a 21% interest rate — against the potential gains you’d give up in your 401(k). The straight math, especially for younger savers, typically favors staying the course. Considering a $5,000 withdrawal? Leave the money untouched, and it will grow to $50,300 in 30 years, assuming 8% average annual returns, or to $108,600 in 40 years, according to a Vanguard analysis.

Math won’t pay unforeseen medical bills, though, or cover your living expenses if you’re out of a job for an extended period. The key to rebounding if you do need to tap your account early, says Brestowski, is to mentally recommit to retirement once the crunch has passed. “Treat any withdrawal like a loan that you’ll pay back with interest,” she said “As long as you go back to saving within the structure of a 401(k), the power of compounding will do the rest.”