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Top 5 Retirement Planning Mistakes and How to Avoid Them Thumbnail

Top 5 Retirement Planning Mistakes and How to Avoid Them

Jonathan M. Gardey, MBA, CFA®, CFP®

President and Chief Executive Officer

For people nearing the end of their working years, the reality of retirement is setting in. This is no longer their parent’s retirement. For the most part, our parents did not experience the fast-rising costs of retirement nor the expanding life expectancy we face today. Those with pensions were able to rely less on their own assets for retirement income. Some would even go as far as to say that our parents (and certainly our grandparents) had a significantly greater margin of error when planning for their retirement.

Today, though, with retirement costs skyrocketing and people living 25 years or more in retirement, there is less wiggle room. Planning mistakes can be difficult to overcome, making it even more essential to avoid them. After all, we want to give ourselves the best chance of getting it right.

With many people ready to retire or thinking about retirement in the next few years, here are some important avoidable retirement planning pitfalls to think about.

Retirement Planning Mistake #1: Not having a clear vision of your retirement

For many people, planning for retirement is all about the number—that is, how much money you’ll need by a certain date. But planning for a secure retirement is more than just knowing the numbers. It’s about having a clear vision of what you want to accomplish in retirement. That is, how will you spend your time? What will make you feel personally fulfilled? Without a clearly defined life ambition, the numbers have less meaning and motivation. 

Retirement Planning Mistake #2: Not tracking where you are in relation to your goal

Setting financial goals is essential to know what you are aiming for. However, the last few years have taught us that things can change quickly. A grave mistake many people make is setting their retirement goals and plans and then forgetting them. Wild market swings and economic distress can cause retirement targets to shift, and without making necessary adjustments, your plan can go way off course. Retirement planning isn’t like making your aunt’s famous chili in a crock pot—you can’t just set it and forget it!

It’s essential to revisit your plan frequently to know where you stand in relation to your goals and then making adjustments along the way according to your changing circumstances. When done frequently, the adjustments needed to keep you on track can be small and will certainly improve your odds of success down the road.

Retirement Planning Mistake #3: Underestimating retirement costs

The cost of retirement is increasing at a faster rate than most people realize. Between today’s rising inflation and growing healthcare costs, retirees can no longer expect to spend substantially less in retirement than in their working years. You can get ahead of it if you go into retirement debt-free and downsize certain aspects of your lifestyle. But it is critical to have a realistic spending plan going into retirement while building up sufficient reserve funds to smooth out unexpected bumps in expenses. 

Retirement Planning Mistake #4: Not accounting for all the risks in retirement

There is an unhealthy focus among those planning for retirement on investment performance. So, as the markets turn scary, as they have recently, the tendency is to “reduce” their risk by moving their money into “safe” investments.” The biggest risk retirees face is the prospect of outliving their income. Investing too conservatively increases that risk. 

The focus on market risk detracts from the more significant risks of inflation and longevity, which are inevitable. Markets will rise and fall, but they have historically trended higher over time. You can reduce market risk through a properly allocated and diversified retirement portfolio. It’s also the most effective way to mitigate the impact of inflation and ensure your investments keep pace with the loss of purchasing power. 

Retirement Planning Mistake #5: Trying to go it alone

Planning for retirement can be daunting. There are so many factors and variables that come into play. There are more moving parts to a retirement plan than the average person can fully understand. 

You need to be able to match your objectives and risk profile to the right mix of investments with a strategy you can stick to with conviction. You need to make the proper adjustments to your portfolio based on changing circumstances. You need to ensure you’re focused on achieving optimum tax efficiency for your retirement income. 

Perhaps the biggest mistake many people make is to try to muddle through on their own. At Gardey Financial Advisors, our high-quality, independent financial advisors and staff provide the expert guidance that can put you on the right course for a successful retirement. In addition to helping you make the right investment decisions, we work with you to avoid costly mistakes like those noted above so you enter retirement with two steps forward, not two steps back.

If you are in need of a financial ally who can help you plan for the next chapter, please visit our website, or call us to learn more about our services to see if Gardey Financial Advisors could be a good match. We best serve clients looking for exceptional client service, who value a long-term partnership, and have a minimum of $500,000 in investable assets.

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To better understand the nature and scope of the advisory services and business practices of Gardey Financial Advisors Inc., please review our SEC Form ADV Part 2A and ADV Part 3 (Form CRS) available via the SEC's website, www.adviserinfo.sec.gov. (Click on the link, select “Investment Advisor Firm,” and type in the firm name. Results will provide you with both Part 1, 2 and 3 of the Gardey Financial Advisors Form ADV.) Statistics from third-party sources are deemed to be accurate but have not been confirmed by Gardey Financial Advisors.

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