Top 7 Retirement Planning Mistakes
- An Incomplete Plan or Not Having One
- Proper planning should start long before actual retirement. Even if it is too early to be 100% reliable and accurate, having at least a basic plan started will allow you to start seeing your goals and setting some expectations and developing a timeline. The closer you get to retirement, the more accurate these projections and budgets become.
- We have Planning and Budget tools available to help our clients build and maintain a comprehensive wealth plan or make it as simple as you would like.
- Early Social Security and Overspending
- Though social security can be taken as early as 62 if you don’t need to, then waiting might be the best approach. Longer life spans make waiting to take social security later a great choice for many, but not for all. Spouses should coordinate this to maximize social security income.
- With a fixed income comes the need to have a fixed spending plan as well. Though travel and hobbies might make up a larger part of your early retirement years, healthcare is likely to replace those costs in the later years.
- Not Understanding Risk
- Interest rates change, returns on investment fluctuate, and keeping up with inflation is a minimal necessity. Investing too conservatively can be as dangerous as investing with too much risk.
- Your risk assessment is critical to building the portfolio that will accomplish your goals. There are different levels of risk; your risk tolerance, your acceptable risk, and often the risk level necessary to meet your goals. These risk levels will likely change over time. Understanding risk and its role over time will help you gain confidence.
- Underestimating Costs of Retirement
- As life expectancies rise, the cost of retirement is rising. It may continue to rise while you’re working and saving but may continue to rise once in retirement where saving more may not be an option.
- Planning for all costs through retirement is an ongoing planning process that our advanced technology helps us maintain for our clients.
- Not Accounting for Taxes
- Taxes can erode your income and spending power. Many people are shocked and surprised by their taxes when making decisions they didn’t think would have much tax impact. The effect income has on social security taxation has also been a painful surprise to many people.
- Tax and retirement advice from your morning coffee group is typically not the best place from which to make important financial decisions. Make sure to include advice from tax and investment professionals that will know your unique financial and tax situation and apply decisions based on your financial life. Annual tax planning and retirement income projections are part of our clients financial plans.
- Not Incorporating Inflation into your Plan.
- Investing should at a minimum keep up with inflation. Living on a fixed income today will be more painful in the future if it doesn’t keep up with inflation. Certain investment products may not keep up with inflation.
- Seek advice and incorporate inflation into all your planning projections and investment decisions.
- Not Planning with a Power of Attorney and a Healthcare Directive
- These are simple to do, and your plan is not complete without them. If you become incapacitated, who will make the decisions for you, financially? Medically? A random stranger or trusted loved one?
- This list might be needed for children that are of the age of majority. You may want this for your college-bound children especially. These five documents might make your life much easier should they be necessary:
- Advanced Healthcare Directive
- HIPPA authorization
- Financial Power of Attorney
- FERPA authorization
- Simple will
