Common Retirement Financial Mistakes

July 20, 2016

Over the years we have found a number of mistakes when it comes to planning for retirement. We have narrowed it down to the 3 most common mistakes you can make when it comes to your retirement.

Underestimating your life expectancy. A generation ago, it was probably safe to assume that men would live to approximately age 70, and women to perhaps 75. But advances in medical science have pushed those ages up at least fifteen to twenty years. Realistic financial planning should probably assume that at least one spouse will likely live to age 90 or beyond. To make sure your money lasts, you may need to annuitize your assets to help create a sufficient income.

Are you thinking that you will be able to retire when you want? In financial planning for retirement, many workers plan on working into their 70’s or until illness, disability, or mere fatigue forces them to reconsider. If you plan on working past the normal retirement age, do not count on the extra money earned to pay for essential expenses. Sound financial planning for the future would have you save a sufficient nest egg by age 65 in case health reasons prohibit you from working longer.

Neglecting to adequately factor in health care costs. Failure to do this can be disastrous, especially if long-term care is needed. And don’t count on the government to pick up the bill for you either. Make certain that your health coverage is adequate and that you have a plan to help cover other elder care needs. This is a common error in  financial planning, as it is estimated that half of the bankruptcy in the United States is caused by health failures and the accompanying costs.

Failure to monitor or control your distribution rate. Your financial advisor can run some basic calculations based on the size and allocation of your portfolio that show a safe rate of withdrawal. A general rule is somewhere between two and three percent per year, depending on your portfolio’s allocation between equity and fixed income investments. We have seen some financial planning disasters when people spend beyond this level.

If you would like a retirement projection or to find out if you are on track, please call us at 763-231-9510.

The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Nicole Middendorf and not necessarily those of Raymond James.

There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

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