6 Common Retirement Planning Mistakes You Need to Avoid

6 Common Retirement Planning Mistakes You Need to Avoid

February 06, 2024

As both a financial planner and a seasoned runner, I can tell you that retirement planning is much like running through a woodland trail. There’s definitely no straight road; it’s a long and winding path that takes tenacity and grit to navigate - and be sure to watch for exposed roots and potholes along the way. 

I have managed to step in quite a few potholes when out for my morning runs. And while missteps during running only leave your socks soaked and shoes muddy, a wrong foot in retirement can lead to costly mistakes.

Calling them "mistakes" may be a bit harsh, as not all of them represent errors in judgment per se. Sometimes it’s more a case of unpreparedness or lack of awareness. But no matter the shape or size of the pothole, learning how to run right on past them without stumbling in is the surest way to reach retirement successfully.

The Top 6 Retirement Planning Mistakes

#1: Not Understanding Your Tax Accounts

Some people enter retirement with investments in both taxable and tax-advantaged accounts. Which accounts should you draw money from first? To answer that question, a qualified financial professional would need to review your financial situation so they can better understand your goals and risk tolerance.

#2: Taking Social Security Too Early

Social Security benefits are structured to rise about 8% for every year you delay receiving them after your full retirement age. Is waiting a few years to apply for benefits an idea you might consider? Filing for your monthly benefits before you reach your full retirement age can mean comparatively smaller monthly payments.

#3: Underestimating Future Medical Costs

One report estimates that the average couple retiring at age 65 can expect to need $315,000 to cover health care expenses during the course of their retirement, even with additional coverage such as Medicare Part D, Medigap, and dental insurance. Having a strategy can help you be better prepared for medical costs.

#4: Overlooking the Rise in Longevity 

Actuaries at the Social Security Administration currently project that a 65-year-old man has a 34% chance and a 65-year-old woman has a 45% chance to live to age 90. The prospect of a 20 or 30-year retirement is not only reasonable, but it should be expected.

#5: Mismanaging Retirement Fund Withdrawals

You may have heard of the "4% rule," a guideline stating that you should take out only about 4% of your retirement savings annually. Each person's situation is unique but having some guidelines can help you prepare.

#6: Giving Too Much Weight to Other Savings

There is no "financial aid" program for retirement. There are no "retirement loans." A financial professional can help you review your anticipated income and costs before you commit to a long-term strategy, and help you make a balanced decision between retirement and helping with the cost of college for your children or grandchildren.

Buddy Up with a Financial Professional

Just like running with a friend can really help keep you motivated, when it comes to retirement planning, there’s no substitute for an expert partner who can keep you on track and help point out the potholes along the way.

At Truman Wealth we bring years of industry experience to help you navigate your path. From investment planning to social security strategizing, we’ll help you find the best way forward. Book a complimentary 30-minute discovery call and let’s start planning your retirement journey.

See you on the trail, friends.

This article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, and accounting professionals before modifying your investment strategy for tax considerations.

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 and produced by FMG Suite to provide information on a topic that may be of interest. 

FMG, LLC, 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. Copyright FMG Suite.