The Biggest Retirement Mistakes People Make and How to Avoid Them
Retirement planning usually includes IRAs, wealth management and low-risk investments, but what about planning for medical insurance denials, kids that might need money or sudden home emergencies?
Given the recent boom with the stock market, a lot of people crossed a major threshold – making their first $1 million in retirement money. If you’re one of these savvy investors, you’ve read all the articles and taken the best tips from your broker or advisor. But before you get too comfortable with your retirement savings, there are a few mistakes you still want to avoid.
Below, you will find some of the most common mistakes investors make. Included are a few tips to help you maximize your savings and keep your nest egg protected.
Mistake #1: You Don’t Plan for the Unexpected
While you might think "the unexpected" is the untimely death of a spouse, there are other unexpected events you might not consider with retirement:
- Your adult children might need a loan.
- You could make a costly tax mistake with your IRA or a bad investment.
- You or your spouse becomes sick and requires long-term care, but their medical expenses are not covered — or are even denied — by insurance.
- You have a home emergency and need to make costly repairs.
- You leave your money to your children (heirs), but a lot of your assets are eaten up in taxes.
- You don’t know how much of a financial contribution to make to maximize your savings.
To help you with each of these, speak to your financial advisor. They can help you solve a lot of these problems before they become a financial burden you’re not ready to take on.
Mistake #2: Taking Advice From People Who Are Not Financial Advisors
Financial advisors are experts who can help with everything from tax reform to standard deductions to help you with your investment strategy based on your retirement planning goals. Your neighbor or your coworker, on the other hand, while they might have an opinion, is not a financial planner or investment advisor. So why take their financial advice?
To help you manage your retirement money, keep your savings goals and financial priorities between you and your advisor so they can create a strategy that works effectively for you. As tempting as it might be to take advice from others, while they likely mean well, you have a financial planner for that.
Mistake #3: Not Setting Retirement Goals
A common mistake that people make in planning their retirement is they don’t consider how they want to live the rest of their lives. If you don’t know what you want to do with your time, you might find yourself thinking about going back to work. You may even want to find part-time projects that make you feel like you’re working again.
To help you plan for your golden years, you may want to start a new hobby or start traveling. Here are a few ideas that can help "jump start" this new era in your life:
- Consider visiting every state in the U.S. or start traveling globally
- Start writing books about your career, your talents or a particular hobby
- Take up a few new hobbies, like woodworking, or start training for a triathlon
- Think about consulting work, especially if you retired as a CEO or CFO of your firm.
Having a plan can help you enjoy every day. If you don’t, you’ll start to feel bored because you’re so used to that "get up and go," so do it!
Mistake #4: Living on Interest and Not Principal
It can be tempting to live on the interest and never touch your principal. Everyone aspires to do that at first. The problem is you might actually be reducing the lifetime of your investment for when you need it most: your golden years.
To help you have some liquidity, speak to your financial advisor about which investments you might want to liquidate (principal and interest). That way, you don’t touch the interest on your other assets so it can accrue.
Mistake #5: Retiring Early and Not Maximizing Your Social Security
Retiring early can be a goal, but while it might show that you’ve managed your investments wisely, it can actually prove to be a costly mistake. Early retirement is between the ages of 62 and 67, while most people retire between the ages 65 and 75. Taking an early retirement can reduce your Social Security income (SSI) benefits by as much as 30 percent.
If you want to tap into your Social Security and your spouse is deceased, the Social Security Administration suggests using your spouse’s SSI benefits if they are higher. If you meet the eligibility requirements, you might be able to receive a combination of the benefits that are equal to the higher spouse benefit.
Mistake #6: You’re Worried You Will Outlive Your Money
A big problem for retirees and those already retired is fear that they will outlive their money. And this can come from millionaires.
If you are worried about your finances, express your concerns to your financial advisor. By regularly reviewing your portfolio and long-term growth strategies, you can rest easier in knowing that your quality of life won’t be affected. Focus on finding enjoyment in your retirement. You’ve certainly earned it!
For more tips on retirement or to speak to financial advisors about ways to avoid retirement mistakes, Ross Wealth Management can help. Ross Wealth Management specializes in creating retirement income strategies that can help maximize your savings and make your investments last as long as you do. Speak to a financial advisor today!