Nobody wants to wake up during retirement and discover that your retirement savings can’t support your retirement lifestyle. Proactive planning always provides more options than reactive ones.

Here are four retirement mistakes you will want to avoid.

1) Unrealistic goals

It is OK to dream and even healthy and motivating at times…but remember…reality is your friend. Your retirement goals can stretch you a bit but make sure they are not delusional.

The process is relatively simple.

Start by estimating how many years you have before retirement.
Estimate the one-time (dream purchases) and annual fixed expenses you expect to have during retirement.
Estimate the life expectancy of your retirement years. (Remember, we are living longer)
How much can your retirement plans, investments, and savings produce before you begin retirement?
Do the math!
Adjust as needed.

2) Managing Risk

Managing risk becomes easier the more time you have. Bear markets have always recovered over time, but realistically, the more time you have, the better chance you can experience the recovery and potential growth.

Also, managing risk on the expense side is critical. Unknown expenses during retirement always pop up. Health care, long-term care, and possibly helping your adult children through a financial hurdle are expenses you may not be able to negotiate. The earlier you plan for those unknowns, the less risk you will take.

3) Starting your retirement planning too late

Time is of the essence when it comes to retirement planning. If you wait only a few years, you may have to significantly adjust your monthly contributions to compensate for lost time.

Take a look at the following scenario of a 40-year-old planning to retire at 65 with a rate of return of 7%:

Current principal: $20,000
Monthly addition: $500
Years to grow: 25
Interest rate: 7%
Total savings after 25 years: $488,042.88

Here’s how much a 50-year-old can expect to save by 65 with the same parameters:

Current principal: $20,000
Monthly addition: $500
Years to grow: 15
Interest rate: 7%
Total savings after 15 years: $205,954.76

In order to save as much as the 40-year-old by retirement, the 50-year-old would need to put aside over $1,400 each month.

4) Having Incorrect Beneficiary Designations

In the event of your passing, you don’t want to leave a financial mess behind for your family. Avoid this problem by ensuring your retirement plan beneficiaries and the designations listed in your will are aligned. That way, your loved ones won’t have to struggle over dividing up your assets.

If you have additional questions or concerns about avoiding these mistakes, click the link below, and let’s schedule a time to talk.

Let's Talk

* Opinions expressed in the attached article are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. The scenarios above are a hypothetical example for illustration purpose only and does not represent an actual investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.