What is the most reported retirement planning mistake? (2024)

FAQs

What is the most reported retirement planning mistake? ›

According to professionals, the most common retirement planning mistakes are time-related, like outliving savings or not understanding how inflation can affect a portfolio over time.

Retirement Mistake #1: Failing to take full advantage of retirement saving plans.

1) Not Changing Lifestyle After Retirement

Many retirees also tend to forget that healthcare and long-term care costs usually come into play as a person ages. With some appropriate adjustments to your budgeting and proper planning, you can make sure you are prepared for any possible event.

Some common retirement mistakes are not creating a financial plan and not contributing to your 401(k) or another retirement plan. In addition, many people take their Social Security distributions too early, don't rebalance their portfolios to match risk tolerance, and spend beyond their means.

1. Not saving enough. One of retirees' biggest regrets is not setting enough money aside for their retirement. A recent survey showed that 59% of retirees say they regret not saving more, and 60% say they should have started saving earlier.

Master the 20:20 rule: Given your flexibility to retire late, you can start retirement planning in your 50s (by then your business is established). Assuming you retire at 70, you have at least 20 years to expand your investments. 2 decades, to invest for your next 2 decades.

The 4% rule says people should withdraw 4% of their retirement funds in the first year after retiring and take that dollar amount, adjusted for inflation, every year after. The rule seeks to establish a steady and safe income stream that will meet a retiree's current and future financial needs.

In some cases, it can decline for months or even years. As a result, some retirees like to use a 3 percent rule instead to reduce their risk further. A 3 percent withdrawal rate works better with larger portfolios. For instance, using the above numbers, a 3 percent rule would mean withdrawing just $22,500 per year.

What does Suze Orman say about investing? ›

No investment is without risk. That's just as true of having an investment portfolio made up of stocks as it is of anything else. But you may need to ride out that risk — or the declines in the stock market — to see true long-term growth.

Retirement planning mistake #1: Having an incomplete plan

If you have not thought about what you plan to do in retirement, your savings goal may not match up to your retirement spending needs.

1. Running out of money. The number one concern Jordan Gilberti, a senior financial planner at Facet, says he hears from retirees and pre-retirees is the fear of running out of money.

Retirement planning is important for creating a financial buffer that allows you to maintain your lifestyle without the need for regular employment income. It involves setting aside a portion of your current income through savings and investments to fund your future needs.

The IRS has defined “mistakes of fact” to include mathematical and typographical errors that occur during the contribution process.