From my experience and having the benefit of working with thousands of clients over the years, I’ve learned that there are five common mistakes a lot of people make in retirement planning. I am writing about them in an upcoming book, but here’s a preview:
Mistake #1: Not understanding your options for starting Social Security.
Nearly every leading edge baby boomer wonders, “when should I start Social Security.” Making the right decision is almost impossible without understanding your options under the Social Security law.
Mistake # 2: Not following at least a basic financial plan.
Regardless of your finances, you need a financial plan. Not only does a plan make it more likely that you’ll achieve your financial goals, you will also have more satisfied in retirement knowing how your nest egg-large or small-will treat you based on your expected lifestyle.
Mistake # 3: Never becoming a student of your own investment planning.
Don’t just rely on others for your investment advice. Become and educated investor. Some people can invest on their own, others find a trusted advisor. Be alert to the different types of financial advisors, and which one would be right for you. And above all, learn about investing so that you are an educated consumer, or risk wishing you’d been a better student of your finances when the advice doesn’t work out.
Mistake # 4: Underestimating the length and cost of retirement.
People are living longer than ever. More than half the men age 65 today will live past age 83. And more than half of the women age 65 today will live past 85. Today people need to understand crucial factors such as taxes and inflation, and the true costs of living in retirement can greatly increase the amount of money you will need, over more years than you expect.
Mistake #5: Ignoring nonfinancial planning.
Despite what Jerry McGuire said in the move “Show Me The Money,” it’s not all about the money. In retirement, stay connected to others, and do things that you enjoy. The people who are the happiest in retirement are not always the richest. And simply relaxing gets boring fast. As my clients often say, they would rather “wear out than rust out.”