Why did this happen..?

[WillAdams (William Adams (Carbide 3D))]

Your safety/retract height is only 0.050", so retracting and losing steps at the top doesn’t seem to be the problem.

I suspect the issue is attempting to cut a 1.625" deep slot — does your endmill have cutting flutes that long?

Best practice is to add geometry and cut as a pocket down to at least tab depth — where possible avoid slotting and add geometry and cut as a pocket:

Making vacuum hose adapters

While cutting up vacuum extension wands for this is expedient, it’s a bit problematic given that Shop Vac recently filed for bankruptcy, was bought at the last minute, and production hasn’t caught up. I need a receptacle for the Sweepy 2.0 dust fitting — one option would be to purchase one from Woodcraft, but Carbide 3D sells blocks of HDPE: which looks to be just barely big enough for things to fit. Measuring the hose fitting I get a diameter of ~63.5mm — offsetting that twice we arrive at…

and/or

Adding geometry to cut as a pocket with a finishing pass

One technique which is often suggested to avoid slotting is to add geometry around a part which one wishes to cut out and cut as a pocket down to tab depth — here’s one technique for that. In this case, the project is a bevel gauge which will be cut out of 0.0625" (~1.5mm) thick aluminum: [bevelgauge] Due to the narrowness of the angles, an 0.03125" endmill has to be used, so after importing and scaling the file (we will be cutting out one which is 3") we select the perimeter and offset it tw…

and consider leaving a roughing clearance and taking a finishing pass.