Broker Check

Retirement Mistakes You Want to Avoid

August 31, 2023

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 three retirement mistakes a proactive plan can help you 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 how long you plan live. (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. For example…health care, long-term care, and possibly helping your adult children through a financial hurdle. The earlier you plan for those unknowns the better.

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. 

First let’s look at the following scenario of a 40-year-old planning to retire at 65:

  • Current principal:$20,000
  • Monthly addition:$500
  • Years to grow:25
  • Interest rate:7% (Using for this illustration only)
  • Total savings after 25 years: $488,042.88

Now let’s compare to a 50-year-old planning to retire at the same age of 65.

  • 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 almost triple their contribution ($1400 per month).

Remember, proactive planning is always better than reactive. And the sooner you start…the better.

If we need to have a proactive or reactive conversation, let’s schedule a time to talk.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Stonegate Financial is not a registered broker/dealer and is independent of Raymond James Financial Services. Any opinions are those of Stonegate Financial and not necessarily those of Raymond James.  Expressions of opinion are as of this date and are subject to change without notice.  The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

The hypothetical illustrations are for illustration purposes only and not intended to reflect the actual performance of any particular security. Future performance cannot be guaranteed and investment yields will fluctuate with market conditions. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

*The tax advice and/or services of Trey Stilley are independent of RJFS.