7 retirement-planning mistakes you need to avoid

Advisors


Without initiative or proper guidance, many of us never learn about fundamental retirement-planning steps until we’ve already made a mistake. Here’s a list of the top seven mistakes that hurt your chances to achieve financial security in retirement.

1. Assuming we should plan to retire

Rocking chairs, sunsets, golf and a sailboat. If you watch enough financial-planning ads on TV, you’ll notice a consistent theme: Your financial plan should reflect the singular goal of retiring at a specific age and sailing off into the sunset without a care in the world. Of course, there’s nothing wrong with looking forward to no longer working, but we tend to get so wrapped up in the Utopian promise of retirement, we forget to decide if full retirement will truly make us happy.

The fix: Don’t let outside influences decide your future. Think about what you truly want for you and your family. Work can often be one of the most rewarding aspects of life. If that’s the case for you, consider how you might continue to work in your later years. It could mean transitioning to a different role, cutting back hours or trying something totally new.

2. Waiting to plan for retirement

No matter how much of it we have, money often causes anxiety at every stage of our lives. In fact, finances have ranked as the top stressor among Americans, according to the American Psychological Association, since the survey began in 2007.

So, naturally, we’re all working to fix the most common and often most significant issue in our lives, right? Wrong. In 2015 just 38 percent of investors reported having a plan to reach investment management and retirement goals, according to a Gallup survey.

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Starting a new job? Don’t forget your 401(k) at your old one

The fix: Stop procrastinating and start planning. The burden of financial stress is far worse than the upfront challenge of putting a plan in place. To start, write down your current financial needs and future goals. Most important, seek help. Professional advisors can see the hidden gaps in your planning that might hurt your financial future.

3. Bad assumptions

A retirement plan often consists of cash-flow projections to determine the likelihood of success for future goals. These projections must make certain assumptions that can hugely affect the outcome. Therefore, unrealistic expectations regarding certain factors could skew the result, meaning retirees could face a far different reality than what the math suggests.

The fix: Be conservative. Don’t forget that, thanks to inflation, things will cost a lot more money in the future. Don’t assume that invested assets will grow at 10 percent every year. Finally, reconsider the length of retirement. As medicine and technology improve exponentially, retirees will live much longer than ever before.



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