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Horizon Elder Law & Estate Planning Blog

Friday, February 11, 2022

10 Worst Retirement Planning Mistakes to Avoid

Planning for retirement can be overwhelming. Either it feels so far away that you might not think you need to do anything about it yet, or you might think that it will be impossible to save enough money, so you give up entirely. A sound retirement plan could help you avoid both of these extreme positions and give you financial security and peace of mind.

It is challenging to plan for something you have never experienced, like retirement. The fear of making a mistake can lead to anxiety. It could help if you knew the 10 worst retirement planning mistakes to avoid. Life tends to be easier if you learn from other people’s mistakes. A California estate planning attorney can answer your questions about retirement planning and help you develop a strategy for your future.

1. College Debt

The student loan crisis is getting worse, not better. Many parents take on significant education loans or second mortgages to pay for their children to go to college because they do not want their children to start out life drowning in student loan debt. Some adults go back to college in their 40s or 50s to finish their degree or get an advanced degree to stay competitive in the market. Either situation could leave you with massive debt that makes it difficult for you to save for retirement or pay the bills when you do stop working.

2. Credit Card and Other Debt

Ideally, you will be able to retire debt-free. Millions of Americans retire every year relying solely on their Social Security retirement income. Living only on Social Security without a retirement account can be challenging, particularly if you have a mortgage, credit card debt, or other debt payments. Some people take on a second job before retirement for the sole purpose of paying off the debt.

3. Thinking You Can Work Forever

People who love what they do for a living or have not set aside enough money to stop working off might assume that they will never retire. They want to continue at their jobs for the rest of their lives either because they want to or have to. The problem with this “plan” is that a significant number of people have to stop working against their will due to job loss or health struggles.

4. Investment Risk Mistakes

Making decisions about investments can be intimidating. If you take too little risk, your nest egg might not grow adequately. If you try to make up for lost time by making high-risk investments, you could lose your shirt. It could help if you talk with a financial advisor about a balanced risk portfolio that could meet your needs in your situation.

5. Evaluate Your Insurance Needs

As people get older, they might want to consider taking out insurance policies that might not have felt necessary before. Long-term care insurance and disability insurance might be worth evaluating.

6. Staying Healthy

Millions of Americans every year file for bankruptcy because of medical bills they cannot afford to pay. Even with Medicare, medical expenses are a significant portion of the budget for retired people. It stands to reason that the healthier you are, the less money you will have to pay for prescription drugs, doctors, and medical treatment.

7. Pulling out of Investments After a Market Fluctuation

Every few years, the stock market experiences fluctuations ranging from hiccups to flat-out explosions. We can anticipate these fluctuations to continue to happen for the foreseeable future. You might want to talk with a financial advisor about how to plan your investments accordingly, so that you do not lose your life savings or panic and pull out of the market.

8. Different Retirement Contribution Rules Starting at Age 50

Many people in their fifties admit that they have not saved as much money as they wish they had for their retirement. The good news is that beginning at age 50, the Internal Revenue Service (IRS) applies different rules about maximum annual contributions to retirement accounts.

9. Adjusting Long-Term Financial Goals After Divorce

Divorce is one of the most devastating hits to a person’s financial stability. If one continues living at the same lifestyle after divorce as they did during the marriage, they might not have sufficient cash flow to pay off debt and save money for retirement. You might want to rethink your long-term financial goals after divorce, based on only your income in financial resources.

10. Update Your Estate Planning Papers

Of course, one of the worst retirement planning mistakes a person can make is to procrastinate about drafting a will, living trust, and other estate planning documents. One of the second-worst mistakes is to prepare and sign those papers and then shove them into a drawer, never to look at them again.

You will want to read over your papers once a year and when a significant life event happens, like a marriage, divorce, or birth or death of a spouse, child or grandchild. You do not want your estate planning documents to become obsolete and fail to accomplish the purpose for which you wrote them. Contact our dedicated team today.


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