8 Common Retirement Planning Mistakes

Here are some of the most costly and common retirement planning hurdles you’ll want to make sure you avoid

  1. No Strategy. If you don’t have a game plan, goals, and a timeline – there’s no clear path to get there or determine when you’ve arrived. It’s like getting in your car with a quarter tank of gas in the middle of nowhere and hoping it takes you to a yet-unknown destination on time.
  1. Chasing the Market. Whether it’s up or down, emotional trading decisions don’t pay off. Chasing a “hot” stock or pulling investments when the market dips aren’t winning strategies. Create an asset allocation with a risk tolerance and timeline you’re comfortable with – and stick to it. Readjust as needed based on your personal situation – not the market.2
  1. Not Maximizing Tax-Deferred Savings Vehicles. Take advantage of your 401(k) or employer-sponsored plan contributions annually where you can defer taxes until distribution. You’ll have a greater pre-tax base for interest to compound on, and if available, you’ll be scooping up all the free money offered by your company’s employer-matching program.3
  1. Paying for College Instead of Retirement. Don’t sacrifice your retirement for your child’s college education. Yes it’s important, but it shouldn’t take priority over your retirement. There are no loans, grants, or scholarships for retirement. There are many ways you can contribute to their education, even if you can’t fund it entirely.
  1. Forgetting to Factor In Healthcare Costs. Life expectancy is increasing, healthcare costs are increasing, and benefits from Medicare could change before you reach retirement age. Long-term care is expensive and over half of the population 65 and older will need it at some point. 1 Factor in healthcare costs so you don’t undermine your planning.
  1. Failing to Reassess Your Strategy Before Retiring. Leading up to your retirement date, consider adjusting your asset allocation to something more conservative to help manage investment risk as you move into the distribution phase.2 Optimizing distribution is important too – leave tax-deferred accounts to grow as long as possible, take social security later to maximize benefits, hit those RMDs, and pay attention to taxes incurred by distribution activities.
  1. Retiring with Too Much Debt. Debt becomes exponentially more challenging to deal with when you don’t have a traditional income. Pay down and manage debts before you retire.
  1. Only Planning for the Money Part. Having a plan about what else you’ll do in retirement is just as important to your quality of life – and can help you plan financially for things like extensive travel. Stay intellectually and physically active and do the things that bring you joy for the most fulfilling retirement.

1. https://www.morningstar.com/articles/879494/75-mustknow-statistics-about-longterm-care-2018-ed.html

 2. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost. Asset allocation and diversification are approaches to help manage investment risk, and do not guarantee against investment loss. Past performance does not guarantee future results.

 3. Distributions from 401(k) plans and most other employer-sponsored retirement plans are taxed as ordinary income and, if taken before age 59 ½ maybe be subject to a 10% federal income tax penalty. Generally, once you reach age 70 ½ you must begin taking required minimum distributions.

Portions of this material were prepared for FMG Suite. The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state, or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.