By Daniel Stewart
“Retirement is one of the most significant milestones in a person’s life. However, for many older
Americans what should be a happy, stress-free time can easily become full of money challenges
and other unanticipated hurdles.”
If you are a pre-retiree witnessing what seems to be an economy on the edge of a deep recession,you may feel that you will never achieve a successful retirement. However, the good news is that with aggressive, focused planning, you can avoid making mistakes that will prevent you from achieving your financial goals once you stop working. Some of the most common mistakes in
retirement planning can also be anticipated and avoided with a well-designed retirement income blueprint that uses every available tool to maximize your income and ensure you don’t pay too much in taxes. With this in mind, let’s consider some retirement mistakes you must avoid to achieve retirement success.
1. Many seniors have no retirement plans. When I first entered this business, I was shocked at how many well-educated, affluent seniors have no retirement plans. Many
pre-retirees have no plan at all. Or, they have loose, incomplete blueprints not updated in years. Some of these pre-retirees assume that their accumulated wealth and investments
will be enough to sustain them throughout their golden years. When something happens, they reason, they’ll be able to cash out some accounts and deal with it. This is a huge
mistake. While it’s true that no plan can anticipate every life situation, having no plan at all can mean you will have knee-jerk reactions when an emergency strikes. Or, because timing
the marketing is nearly impossible, your account values may not be enough to cover your expenses.
2. Spending like a sailor on shore leave. You’ve heard of that restaurant chain that gives you “never-ending” soup, haven’t you? Well, I find that there are seniors who treat their
retirement money as if it is a never-ending fountain of cash. Overspending is common among retirees, especially during the first four or five years after leaving the workplace.
It’s an understandable phenomenon. After decades of scrimping, saving, and sacrificing, many people feel they must let loose and live a little. They may feel freer to splurge on
expensive vacations, hobbies, or gifts for family and friends. However, overspending depletes retirement cash faster than you can imagine. When you go wild with your
money, financial stress nearly always follows. If you want to splurge occasionally, make a budget and stay within it. If you need more money, you might take on a side gig you
can use to finance your spending sprees.
3. Some people are like Congress; they keep moving their debt ceiling. Rising inflation and market volatility mean that some pre-retirees are in financial pain. To ease the pain, they may take on larger debt loads to offset cash shortfalls. Unfortunately, this is a short-term solution with long-term consequences.
4. Not adjusting investment portfolios regularly. Another mistake that retirees make is not changing their investment strategies. You may have invested in higher-risk
instruments during your working years in an attempt to maximize gains. But as you prepare to enter retirement, you should consider shifting some investment money to more
conservative options. These “safe money”choices may provide steady income and protect your savings from market volatility.
5. Ignoring the rising cost of healthcare. Many retirees and pre-retirees believe that they no longer need to worry about medical bills once they reach Medicare eligibility.
Unfortunately, this is not true. Numerous healthcare expenses have limited or no Medicare coverage at all. For example, skilled nursing facility care is generally covered
only on a short term basis. Medicare covers up to 100 days of care in a skilled nursing facility in a single benefit period as long as you remain eligible. There may be times
when you will need more time in a nursing home. Paying for such care can quickly deplete your savings or force you to dip into other retirement accounts sooner than
anticipated. For this reason, you cannot afford to overlook healthcare costs. When estimating your needs in retirement, you should factor in the price of insurance
premiums, deductibles, and co-pays. You may also want to consider long-term care insurance to protect yourself. Medical treatment and preventative care, while never a
waste of money, are expenses you can manage.
6. Not staying active. Some retirees take relaxation to an extreme once they stop working. But, the lack of physical and mental activity often leads to health problems, cognitive
decline, and emotional issues. Of course, all of these things can negatively impact the quality of your retirement and may result in you running out of money more quickly.
7. Supporting your grown children or grandchildren. Times are challenging, and understandably, parents and grandparents want to help their kids as much as possible.
However, footing your loved ones’ bills may not make sense if you’re retired or getting ready to do so. Ongoing expenses such as food, transportation, housing, and cell phone bills add
up quickly, giving you less money to save and invest. If possible, sit your kids down and explain why they must take responsibility for their expenses and do their own financial
planning. Don’t be afraid to let your kids know that paying their bills is putting a strain on your ability to plan for the future.
8. Having the wrong retirement advisor or having no advisor at all. No matter how financially savvy you may be, making friends with a retirement and income specialist is
never a bad idea. Unlike most advisors who work in the “accumulation” phase, retirement specialists have the specialized skills and product knowledge necessary to help you
properly spend what you have saved, so you won’t run out of money when you’re older.
Summing it up: Even with our current economic challenges, a prosperous and secure retirement
is still possible. By avoiding common mistakes, seniors can navigate the complexities and create their perfect retirements.
