Top Ten Retirement Mistakes

1. Planning for an average life expectancy.

If you only plan for an average life expectancy, by definition you have a 50% chance of being wrong. Today, a couple both aged 65 have almost a 40% chance of one of them living to age 95.

2. Failing to adequately account for inflation.

Even at mild inflation, you lose about 1/3 of your purchasing power every 10 years. With today’s longer life expectancies, you need a strategy to at least double and possibly triple your income during retirement or you will be forced to decrease your standard of living.

3. Not understanding the 70 ½ tax trap.

Forced distributions from IRA’s and 401k’s at age 70 ½ can force retirees into a higher marginal tax bracket and cause up to 85% of their Social Security to be taxed.

4. Not having investments properly diversified.

Most people work their whole lives toward a comfortable retirement! Proper diversification is one of the best strategies for protecting your assets.

5. Withdrawing from growth investments in down years.

If you have to withdraw money from growth oriented investments during the inevitable “down” years, the odds are overwhelming that you will not be able to recover your original principal over the short or long term.

6. Not being financially prepared for a Long-Term Care needs.

A significant need for long term care is the biggest risk to a retiree’s nest egg. You must have a strategy to deal with this potential risk.

7. Withdrawing too much income from your investments.

Studies indicate that anything higher than a 5% withdrawal rate has a high degree of depleting all assets before average life expectancy. You might run out of money!

8. Not rolling employer retirement plans to a personal IRA.

By rolling your employer’s retirement plan to an IRA you can gain greater investment control, give yourself and your beneficiaries the potential for more guarantees and greater account protection as well as allow your beneficiaries significant advantages for continued tax deferral after your death.

9. Using average rates of return.

It is quite common to see individuals and their advisers using average rates of return when doing retirement projections. What most people don't understand is that these average returns are based on a "buy and hold" scenario. If an individual was withdrawing from this same investment, his or her return could be dramatically different from the "buy and hold" return.

10. Not having a plan to accomplish your goals.

Most people don't understand how complex retirement planning really is. People don't plan to fail, they just fail to plan. Having a well thought out retirement plan can greatly improve your retirement.

If you think you or someone you know may be making some of the mistakes listed above, feel free to contact my office to schedule a free phone consultation to discuss the issue in more detail and what type of solutions may be available to you.

Diversification can be thought of as spreading your investment dollars into various asset classes to add balance to your portfolio. Although it doesn't guarantee a profit, it may be able to reduce the volatility of your portfolio, and increase your probability of achieving your goals.