9 Retirement Pitfalls—and How to Steer Clear
Below are nine frequent mistakes—and straightforward ways to avoid them.
1) Waiting too long to start saving
Putting off contributions cuts the power of compounding. Even small, steady deposits made early can grow meaningfully over decades.
Fix it: Begin now. Use workplace plans and IRAs, and automate contributions so saving happens every payday.
2) Overlooking healthcare costs
Medical expenses are a major budget item in retirement, and Medicare doesn’t cover everything. Surprise bills can drain savings.
Fix it: Price out premiums, out-of-pocket costs, and long-term care possibilities. Consider supplemental coverage and, if eligible, fund an HSA for tax-advantaged medical spending.
3) Ignoring inflation
Rising prices slowly erode buying power. Over long retirements, even modest inflation adds up.
Fix it: Include assets with growth potential and inflation awareness—such as equities and inflation-protected bonds—to help preserve purchasing power.
4) Holding a lopsided portfolio
Concentrating in one asset, sector, or theme raises risk. A downturn in that area can hit hard.
Fix it: Diversify across stocks, bonds, real estate/alternatives, and cash. Revisit your mix regularly to keep risk in line.
5) Underestimating longevity
Many retirees live longer than they expect. Running out of money is a real risk.
Fix it: Plan for a longer horizon than average. Stress-test your plan for different lifespans and market scenarios.
6) Skipping tax planning
Taxes can quietly shrink retirement income if withdrawals aren’t coordinated.
Fix it: Build a tax-aware plan using a mix of account types (pre-tax, Roth, taxable). Consider withdrawal sequencing and, where appropriate, Roth conversions.
7) Claiming Social Security too early
Taking benefits before full retirement age locks in a smaller check for life.
Fix it: If cash flow allows, delay claiming to increase monthly benefits. Compare breakeven points and coordinate with your overall income plan.
8) Lowballing lifestyle expenses
Travel, hobbies, home projects, and helping family can add up more than expected.
Fix it: Create a realistic budget that includes discretionary and one-time items. Revisit it each year as needs change.
9) “Set it and forget it” planning
Markets, laws, and life evolve. A static plan drifts off course.
Fix it: Review your plan regularly. Adjust withdrawals, investments, insurance, and taxes to stay aligned with your goals.
Take steps now for a calmer retirement
Avoiding these mistakes can boost confidence and financial security. With steady saving, smart investing, and periodic tune-ups, your money can work for you throughout retirement.
Frequently asked questions (FAQs)
What’s the most common misstep?
Starting late. Delays cut compounding time and make it harder to reach your target.
Why do health costs get missed?
Many assume Medicare covers everything. It doesn’t. Budget for premiums, deductibles, and gaps—and consider supplemental policies.
How does inflation affect my plan?
It reduces buying power over time. Include inflation-aware assets (e.g., equities, TIPS) to help keep pace.
What if I take Social Security early?
Benefits are permanently reduced versus waiting until full retirement age (or later). Delaying can meaningfully increase lifetime income.
Why is tax planning so important?
Coordinated withdrawals, tax-efficient account use, and potential Roth conversions can help you keep more of each dollar.
Can lifestyle estimates really throw things off?
Yes. Underestimating discretionary spending is common. Build a detailed budget—and update it as your plans change.
Want a second set of eyes on your retirement plan?
FMD Wealth Advisors can help you review your strategy and shore up weak spots. Schedule a Free Assessment to ensure you’re on the right track.
Disclosures: FMD Wealth Advisors LLC (“FMD Wealth Advisors”) is a Registered Investment Adviser.
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