Avoiding Common Retirement Planning Mistakes

Sidestep these common retirement planning mistakes and enjoy more confidence in retirement.

Retirement is more complex now with the decline of traditional pension plans and increased job mobility. Unlike the past, where a single employer and a reliable pension were the norm, today’s retirement planning is more self-driven. Social Security offers some support, but it’s unlikely to cover all your needs in your golden years. To promote financial stability in retirement, take proper steps with your savings, avoiding the common retirement planning mistakes outlined below.

Common Mistake #1: Waiting to Save

Embarking on a successful retirement plan may seem like a distant goal, particularly for young professionals. However, initiating your savings early is a crucial step in achieving that long-term financial objective. If you wait to save until you are further along in your career, you’ll be playing catch up in your later years, which puts more financial strain on you. By putting aside money as early as you can, not only will you be able to save in smaller increments, but you will also reap the benefits of compound growth over decades as that money sits and collects interest for you. So, starting early helps you avoid one of the most common retirement planning mistakes.

Common Mistake #2: Being Too Selfless

This is a difficult one because it represents one of the most common retirement planning mistakes impacted by our emotions. There will always be competing ways to use your money other than saving for retirement. After all, plenty of friends and family could use that money for myriad reasons from getting out of debt to buying a first home to paying for college. Remember, though, that if you don’t save for your own retirement, no one else is going to do it for you. It’s best to get your own financial house in order before dipping into your savings for anyone else – and that includes paying for your children’s education.

Many parents want to start their children off on the right foot financially by covering the cost of college, but it can be among the most costly retirement planning mistakes. While it’s a nice idea to fund your children’s education, you need to make sure it’s feasible. After all, there are plenty of student loan options available, but no “retiree loans” to speak of. If you cover the cost of college at your retirement fund’s expense, you may have no reliable way to recoup that money later.

Common Mistake #3: Making Early Withdrawals

All that money sitting in your 401(k) or IRA account can be quite tempting, especially when emergencies situations arise – and we all experience these curveballs from time to time. From unexpected medical costs to natural disasters, there can be compelling arguments for dipping into your retirement savings earlier than intended. It’s easy to convince yourself that you should take from savings meant for the future to deal with a situation happening in the present, but you won’t be doing yourself any favors in the long run. Instead, you should commit to building an emergency fund with three to six months’ worth of living expenses. That way, when a financial hardship arises, you have resources set aside to help you avoid another of the most common retirement planning mistakes.

Common Mistake #4: Ignoring Inflation

We all know the realities of inflation – and we have experienced them quite a bit in recent years. As you plan for retirement, it’s essential to factor in the impact of inflation on your purchasing power. Everyday expenses like groceries, fuel, and entertainment have seen increasing costs over time. In the face of inflation, the real value of your nest egg diminishes, emphasizing the need for careful consideration in your retirement planning.

Here’s an example: Let’s say you could retire at age 65, potentially living for another 25 years or more. While the money you saved might permit for a $3,000 per month budget at the time of your retirement, that amount could wind up climbing over the years as the small increases from inflation compound. Take any of the items from above (the milk, gas, or movie ticket). How much did those items cost thirty years ago? It’s imperative that you think about how much inflation might affect your monthly expenses during your golden years.

Common Mistake #5: Failing to Consider a Plan for One

If you’re married or have a long-term partner, it’s difficult to fathom being without your significant other. Unfortunately, one of you will pass before the other someday. In addition to the emotional toll such a loss will bring, you will also face financial consequences associated with their passing, including taxes, income, and your estate. Some pensions and benefits will change when your spouse passes, and you’ll lose some Social Security income. Take a look at your will, life insurance, retirement accounts and other assets to make sure you are financially prepared to be on your own.

Common Mistake #6: Planning to Continue Working

An AARP survey revealed that 52 percent of respondents expected to work beyond the age of 65, which used to be the traditional age to retire. By working longer, you can avoid dipping into your retirement accounts. That means your savings will continue to grow, and you will also need to use that money over a shorter period of time.
However, it’s important to note that you can’t account for every eventuality. You may become ill and not be able to keep working. You may lose your job or have to leave it to take care of a loved one. Be thoughtful about the reality of working late into life as you consider your financial plan.

Common Mistake #7: Thinking You’ll Spend Less

Retirement expenses are unique to each individual, shaped by personal plans and aspirations. While retiring eliminates some work-related costs like professional attire and daily commutes, it opens the door to new adventures, projects, or indulgences. Realism is key in setting spending expectations for your golden years, allowing you to create a budget that aligns with your unique retirement lifestyle.

Are You Being Intentional About Avoiding Retirement Planning Mistakes?

Successful retirement requires you to be focused, patient and steadfast as you work toward your goals. Start saving early, keep saving over the years, and avoid dipping into your retirement savings until you reach that milestone. While it can be daunting to think about all the pitfalls surrounding saving for retirement, it’s important to be aware of these mistakes so you can do your best to avoid making them. By keeping your eye on the future, you can work toward your financial goals even when challenges arise.

And, you don’t have to do it alone! If you’d like guidance from experienced financial professionals as you work toward the retirement of your dreams, we can help. Contact the Cornerstone Wealth Management team today to learn more about retirement strategies and how we can serve your unique needs.


Registered Representatives offer securities through Independent Financial Group, LLC (IFG), Member FINRA/SIPC. Investment Advisor Representatives offer Advisory services through Independent Financial Group, LLC (IFG), a Registered Investment Adviser. Cornerstone Wealth Management, Cornerstone Tax Advisory and IFG are unaffiliated entities. Investors should be aware that investing based upon a strategy or strategies does not assure a profit or guarantee against loss. There is no assurance that any strategy will achieve its objectives.

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