Ten Common Retirement Mistakes

  1. Outliving one’s assets.  Modern medical technology has significantly increased the life expectancy of Americans in the past few decades.  At age 65, life expectancy for a man is now 84 and a woman is 87, and more and more people are celebrating 90 and even 100-year birthdays.  A good financial retirement plan will look to account for 30 or 40 years.

  2. Favoring accumulation over distribution.  Retirees have been in the “accumulation mode” for a long time, and a common error is to underspend in the early years of retirement.  There must be a plan to determine which assets to liquidate and when to do so in order to maximize resources and enjoy the best retirement.

  3. Ignoring the impact of inflation.  We have not seen significant inflation in the American economy in the past 10 to 15 years, which has led some to forget about its possible impact in the future.  Certainly we expect health care costs to continue to rise, and a good plan will hedge against the possibilities of various rates of inflation.

  4. Uncertainty about Social Security.  The younger generation, in particular, is concerned that social security benefits will cease to exist – that it will not be there for them.  In fact, social security is not projected to go away.  But the amount of benefits is expected to be reduced in 2034.  A good plan can take this into consideration and find other ways to accumulate revenue streams.

  5. Incorrectly titling one’s assets.  Correctly titling one’s assets is particularly important when we look to transfer assets between spouses or on to heirs.  The potential tax consequences of incorrectly listing beneficiaries or contingent beneficiaries can have a significant negative impact on resources.

  6. Failure to consider the potential impact of changes in tax law.  Tax law is constantly changing, and one’s plan must be continually updated to prevent negative consequences.  Tax laws are many and complex, but an advisor knows how to ease the tax burden’s on one’s beneficiaries – the key is to have the plan in place before a death occurs or assets need to be transferred.

  7. Mistaking diversification for asset allocation.  Some people tend to follow an old rule of thumb that states when you get older, you put more money in bonds.  That philosophy no longer applies, because so much of today’s retirement income is generated from personal savings and personal investments, not from pensions and social security.  Following old rules of asset allocation could actually end up harming one’s assets.  New research indicates that a healthy exposure to equities (50% or greater) might be a more prudent option.

  8. Being influenced by the media, especially social media.  Markets actually tend to move on data, and they react to sensational media news.  But the best strategy is to look at the long-term economic data and plan accordingly, not to be swayed by the frequent news alerts.

  9. Underestimating one’s financial needs.  Unfortunately, this seems to be a common occurrence among people beginning to consider retirement.  They may not think about that new car purchase, or multiple vacations, or visiting children and grandchildren, or any number of other possibilities. 

  10. Failure to get an annual “financial check-up” in retirement.  The world of finance is constantly changing.  Tax laws are modified, new products are introduced, and one’s personal circumstances and goals can shift.  All of this makes it imperative to review one’s retirement plan at least once a year.