Are you planning for a secure retirement?
What are your biggest financial goals? If you’re like most people, retirement is at the top of the list. But have you developed a retirement strategy that ensures you won’t run out of money?
Retirement is one of the most significant financial transitions of your life. After helping thousands of households retire successfully, we’ve seen some common mistakes that can derail even the best-laid plans.
If you want to retire with confidence, avoid these five major retirement planning mistakes—and take action now.
1. Retiring Without a Financial Plan
Many people assume they can retire as soon as they reach a certain age or savings milestone. But retirement without a plan is a recipe for disaster.
A retirement plan isn’t just a vague idea—it’s a detailed strategy that includes:
- Projected retirement expenses (housing, healthcare, travel, etc.)
- Sources of income (Social Security, pension, investments, part-time work)
- Withdrawal strategy (how much can you safely withdraw without running out of money)
- Age (age are you going to retire, life expectancy)
Solution: Work with a CERTIFIED FINANCIAL PLANNER™ who is doing comprehensive financial planning to calculate how much you need to retire and create a plan for withdrawing your savings in a tax-efficient way.
2. Not Saving Aggressively During Your Career
A common mistake is not saving aggressively enough for retirement. Many people believe that they can catch up later, but the earlier you start, the sooner you can start seeing the benefits of compound interest.
Here are a few best practices:
- Save at least 15% of your income for retirement.
- If you start saving late, consider increasing contributions to 20-25% or more, depending on your goals.
- Max out your 401(k), IRA, Roth IRA, or HSA whenever possible.
Solution: Complete a 5-factor retirement analysis to see if you’re on track. If not, consider adjusting your savings rate or exploring other retirement income options for your situation.
3. Not Maximizing Your Employer 401(k) Match
If your employer offers a 401(k) match, take full advantage of it. This is essentially free money that can significantly boost your retirement savings.
For example, if your company offers a 100% match up to 5% of your salary, and you earn $80,000 per year, that’s $4,000 of free money—but only if you contribute at least 5% to your 401(k). If you don’t contribute enough to get the full match, that portion of your employer’s benefit goes unused, essentially giving up part of your compensation.
Solution: Check your company’s 401(k) match formula and contribute enough to get the full match.
4. Making Poor Investment Decisions
One of the biggest retirement mistakes is not having a solid investment strategy and sticking to it. Some people take on too much risk, while others are too conservative and don’t invest enough for growth. Deviating from a long-term strategy can lead to emotional decision-making, missed growth opportunities, and increased financial risk.
Here are some Do’s and Don’ts:
- Don’t panic-sell during market downturns
- Do diversify across different asset classes
- Don’t let emotions drive your investment decisions
- Do rebalance periodically
- Don’t neglect to adjust as you near retirement
Solution: Follow a long-term investment strategy that balances risk and growth. A CFP® can help you create a diversified portfolio that aligns with your retirement goals.
5. Not Having a Tax-Efficient Withdrawal Strategy
Many retirees forget that taxes can significantly reduce their retirement income. Without a strategy, you might pay more in taxes than necessary. Failing to plan can also result in penalties or additional costs.
For example, withdrawing too much in a given year could unnecessarily increase your income, resulting in higher Medicare premiums due to IRMAA (Income-Related Monthly Adjustment Amount). Additionally, more of your Social Security benefits could become taxable, and you might lose eligibility for valuable tax credits or deductions that phase out at higher income levels.
Some common tax-saving strategies include:
- Roth conversions (to reduce future tax burdens)
- Strategic withdrawals (using taxable, tax-deferred, and tax-free accounts in the correct order)
- Minimizing Required Minimum Distributions (RMDs)
Solution: Create a tax-efficient retirement withdrawal strategy that keeps more money in your pocket.
Start Planning for Retirement Today
Avoiding these common retirement mistakes can mean the difference between financial security and running out of money in your later years.
Are you confident in your retirement plan?
Do you know how much you need to retire confidently?
Are you maximizing tax-saving strategies?
A CERTIFIED FINANCIAL PLANNER™ can help you create a comprehensive retirement strategy tailored to your unique financial situation and goals. Don’t wait until it’s too late—start planning today!
