Planning For Your Retirement

Four Retirement Planning Mistakes to Avoid

by Donna Fuscaldo

Everyone knows you have to save for retirement, but creating and following a proper plan is easier said than done. Whether it’s establishing a savings plan too late or collecting Social Security too early, mistakes abound when it comes to adequately funding our nest eggs. 

“The biggest mistake is retiring without any real plan or investment strategy,” says Nigel Green, the chief executive of the deVere Group, a financial advisory firm. “Most aspects of life require planning in order to maximise their chances of success, and retirement is no different.”

Here’s a look at four common mistakes to avoid when planning for your retirement.

Mistake No. 1: Taking Social Security Too Early

Current regulations dictate that you can not receive full Social Security benefits until age of 66 and 2 months for those born after 1955. But just because you are eligible, doesn’t mean it makes financial sense to claim benefits.

Too often people take their benefits too early because they are worried the program won’t be adequately funded in the future or they feel they are better investing the monthly payment, according to Kevin Luss, founder and president of the Luss Group.

“The old paradigm that you retire at 59 is getting to be outdated,” says Luss. “People are living so long that if you retire at 65 you’ll have to live in retirement for 25 years or more.” The longer you wait to collect Social Security, the greater the monthly check will you start collecting.  “There’s an exponential increase when you wait even one or two years longer.”

Mistake No. 2: Not Saving Enough

The general guideline when it comes to funding retirement is you will  need 80% of your preretirement income to maintain your current lifestyle after work.

A recent surveyed conducted by the deVere Group found that even retirees able to create a $1 million nest egg are concerned they may not be able to afford their lifestyle in retirement.

“Despite their wealth, the vast number of respondents told us that their money does not go as far as they had expected due to constantly increasing prices,” says Green.  “Our research shows that if you want to receive a pension of $33,000 a year, this currently requires pension savings of $485,000.  Naturally, if you want a higher annual retirement income the required savings also increases proportionately.”

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