We’ve put together a fair number of articles on the “Road to Retirement” that all deal with different aspects you’ll need to consider before you’re on your way to regular 10am tee times or finally having time in your schedule to get into pickleball.
Across all of those articles we’ve learned the most important tip is to plan like your life depends on it, because, well, it kind of does! We’ve also learned about a lot of pitfalls you might trip into if you’re not careful. Below is a list of some of the most common mistakes you can make while heading toward retirement.
Skipping or Skimping on a Plan
There are dozens of variables when it comes to retiring, and it can honestly seem exhausting to try and figure them out! This leads to people under planning or not planning at all. Most of the retirees we interviewed considered this their biggest mistake.
There are a number of sneaky costs when it comes to retirement: the cost of medical care, the cost of insurance, and other expenses that might be specific to you! When planning for retirement, you really need to consider all of your regular expenses and how much you’ll be spending on average so that way you don’t under save!
Not Diversifying Your Portfolio
As much as it can seem like it, your retirement savings aren’t “set it and forget it” accounts you can ignore after you get your IRA set up. Depending on the type of plan you have, you could be making active decisions to make sure your portfolio is protected from market fluctuations. Plus, you aren’t limited to just one 401k/IRA/Pension. You can put money into a wide array of places further insulating you from a volatile day on Wall Street.
Most IRAs allow you to allocate specific portions into stocks and bonds. You can also deposit money into a high interest savings account or actively invest money into other revenue generating areas such as real estate or the stock market on top of your IRA/401k.
While diversifying your portfolio isn’t the secret to making sure you’re making a lot of money in retirement, it is key to making sure you have options. By having multiple revenue streams, you’re insulated from market volatility, you can pay yourself out at various rates, and you can better protect yourself in case you need to use your retirement funds for longer than you’d expect.
Starting Too Late/Never Starting at All
Yeah. This one is obvious. The earlier you start saving the easier its going to be in the long run. We have a couple of articles on what you can do to start saving as soon as you’re employed and we seriously recommend checking them out. Start here: Planning for Retirement while Young
But the biggest issue we heard is that a lot of people felt like they didn’t have a chance to even start saving because they waited too long. That’s actually a common misconception! You can create an effective retirement plan as late as 5 years prior to retiring. It’s going to be harder, but its never too late to start.
Chasing Fads
This is a more recent issue that financial planners have brought up, rather than actual retirees, but it does have merit in the past. Beanie babies, sports cards, and newer things like crypto and NFTs all have had a bumpy ride when compared to a high interest savings account. And while there have been massive success stories selling collectibles and cryptocurrency, just remember that there have also been huge failures. It’s easy to get caught up in the story of a lucky lottery winner without considering the thousands of unlucky losers. While some new investments, such as cryptocurrency, seem to be stabilizing, this is new and there really is no history we can use to see if this leveling is going to continue.
That being said, they are fun and interesting! One of the best pieces of advice I’ve heard is to only invest what you’re comfortable losing, this comes from a financial planner, who I suggest you talk to before dabbling in anything investment related because our last mistake is:
Not Getting a Financial Planner
If you’ve been keeping up on these articles you probably saw this coming. The markets are changing all the time and your assets/needs/wants are all unique to you, so find someone who can guide you and help make the best choices for you!
While I’d be happy to explain to you my process for finding a financial advisor. I actually just used this site: https://www.investopedia.com/updates/find-financial-advisor-planner/ and follow their advice. I also spoke with friends and family. It took me around an hour to find the perfect one for me and set up an introductory appointment. It was eye opening! I highly recommend you find the time!
Ultimately…
The biggest takeaway I got from talking to retirees and financial planners is to really sit down and think about what you want and how much everything would cost. At the end of the day, you know your workload, you know your situation, and you know (or can figure out) what you want. So long as you find the time to put those three together, you’ll be set.
Past Articles
Want more advice? Check out these older articles we wrote in this series!
How your Benefits Translate into Retirement
How do you keep an Income while Retired?