Whether you’ve just opened your first 401(k) account or you’re already mentally composing the invite list for your retirement party, making mistakes when it comes to retirement planning can have a long-term impact on your golden years.  Don’t blame yourself.   Putting a roadmap in place for what’s likely to be a three-decade long chunk of time can get complicated and emotional.  Knowing where the pitfalls are is the first step in making sure that you can avoid them.  Here’s the lay of the land.

1. You haven’t run the numbers.

The only way to really know whether you’re actually on track when it comes to retirement saving is to know how much money you’ll need for the retirement you envision, and how much money you’ll need to save to get there. If you haven’t run these numbers yet, you’re not alone. More than six in 10 Americans don’t know how much money they’ll need to save for retirement, according to a Bankrate survey.1

When you’re young and retirement is still far off, ballpark numbers will work. You can get a sense of your numbers by using online calculators, such as those available via your 401(k) website. If you don’t have a 401(k), you can use a free online calculator, such as this one from Jackson.

As you get older and retirement gets closer, you may want a professional opinion. A certified financial planner (find one via the Garrett Planning Network, The National Association of Personal Financial Advisors, or the Certified Financial Planner Board of Standards ) can take a look at your entire financial picture and make recommendations. If you find out you’re right on track, you’ll feel relieved. If you learn otherwise, you’ll know what you need to do to get there. 

2. You’re putting your adult children first.
It’s hard to say ‘no’ to your kids, even when they’re not really kids anymore, and parental instinct is to always do what you can to make life easier for your children. But providing too much financial support to adult children (or grandchildren) can make it harder for them to achieve independence and hurt your own financial position.

50 percent of Americans say they have sacrificed or are sacrificing their own retirement savings in order to help their adult children financially.2

Take a hard look at any assistance that you’re providing your children to see if it’s having an impact on your own long-term financial security. If it is, it might be time for a frank conversation with your kids to set expectations on what you’ll be able to assist with going forward.   “Taking care of yourself now can actually help you take care of your children as well,” says Steve Vernon, a consulting research scholar in the financial security division at the Stanford Center on Longevity. “You don’t want to screw up your retirement and then end up being a burden on your children financial”

3. You’re underestimating how long you’ll live.
Older adults are living longer than ever before: One out of every four 65-year-olds today will live past age 90.3 “That’s a very long time to support yourself without any money coming in,” says Alicia Munnell, director of Boston College’s CRR.  Since it’s impossible to know how long you’ll live, Munnell recommends considering an annuity to supplement your Social Security and insure that you won’t run outlive your nest egg.

Another way to make your money last is by staying in the workforce for a few more years, if you can.  Every year that you’re working is a year that you can save a little more for retirement—and it’s one more year that you can put off drawing down your savings. Even in your 60s, you should be thinking of those savings as long-term investments. You’ll need at least some exposure to stocks in order to get the inflation-beating growth necessary to make your money last.

4. You’re not on the same page as your partner.
While it’s common for one member of a couple to take on many of the financial tasks and decisions, when it comes to retirement planning, it’s important to make sure that both parties share a similar vision and agree on the strategy to achieve it. Discussing retirement plans as early as possible will also give you a chance to suss out areas of potential disagreement.

If you’re planning to work into your 70s, for example, and your husband wants to be fishing from your lake house as soon as possible, you may need to have a few more conversations. If you’re too far apart, a third party such as a financial planner or financial therapist may be able to help your find common ground. Once you’ve reached some agreement on what your retirement will look like, you get to enjoy discussing and planning for your shared dreams, including how you’re going to pay for them.

5. You haven’t planned for the non-financial aspects of retirement.
Even if all you’ve been a diligent saver and know you’ve built up a retirement fund that will more than cover your expenses once you’ve left the workforce, you may not be completely finished with retirement planning. It’s also important to think about the other facets of your life when you quit work.

“Before a person actually retires, make a plan of action of what a typical week would be like in retirement,” says Victor Riccardi, a finance professor at Goucher College in Baltimore and co-editor of the book Financial Behavior. “What are your interests? Do you want to take a college course? Do you want to travel? Do you want to do volunteer work? Do you still want to work part-time? Do you want to remain close to family and friends?

As retirement gets closer, you can start trying out the answers to those questions. Spend time in the places you want to buy a retirement home or reconnecting with friends and family members that you’re planning to spend more time with. Not having to worry about finances in retirement is a huge relief, but if you can’t use that money on activities you enjoy or with people you love, you may be missing out.

With Beth Braverman

 

1 “How Much Will You Need to Retire? Most Americans Have No Idea,” Bankrate, June, 2018.

2 “Half of Parents Financially Helping Their Adult Children Say It’s Putting Retirement at Risk,” Bankrate, April 2019. 

3 “A Snapshot of Today’s Older Adults and Facts to Dispel Myths About Aging,” American Psychological Association, 2020 

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