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The 4 Biggest Retirement Mistakes Americans Make

IN THE PRESS:

May 22, 2021

Retirement is often seen as the reward for a lifetime of working and saving. While retirement is sweet, it can be more financially complex than the “asset accumulation” phase in which you spend most of your life.

It's a good time to bring in an expert because you don't want to gamble with your retirement. In fact, Voya Financial found that 79% of people who use an advisor said they “know how to pursue achieving their retirement goals.”¹

SmartAsset’s free tool makes finding the right financial advisor for you easy and safe. After submitting a short questionnaire, you receive up to 3 local fiduciary financial advisor matches that you can compare and interview at your convenience and without obligation.

Each is vetted and legally bound to act in your best interest. Additionally each is registered with the U.S. Securities and Exchange Commission (SEC) or the appropriate state regulator, possess the proper licenses and have no pending or valid regulatory disclosures within the past 10 years.

Avoiding these common retirement mistakes and choosing an advisor can help you find peace of mind for years to come.

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Investing involves risk and no situation is the same. This is in no way intended as a personal recommendation and investment decisions are solely those of the reader.

2. Withdrawing from Your Retirement Accounts in the Wrong Order

A 2019 analysis by Kindur found a $61,000 difference between the most tax-efficient draw down strategy and the least tax-efficient plan for a 62-year old married couple. As you can see, a tax-optimized retirement withdrawal plan can have significant implications on how long your money can last in retirement.

3. Underestimating How Much You’ll Need

The stark reality is that healthcare for a 65-year old couple is estimated to cost $295,000, not including long-term care.⁴ And, according to the Federal Reserve's 2019 Survey of Consumer Finances, the median retirement savings of people aged 55-64 was $134,000. For people aged 65-74, the number increased to $164,000.

It's possible to plan better for healthcare costs if you don't have $295,000 now. If you want to take action, a financial advisor can help you build a cash flow for the times when you might need more care.

4. Walking the Road Alone

Retirement planning alone can be costly as evidenced by the pitfalls above. However, an expert with investment management experience and knowledge of tax strategies can improve your bottom line while making your life easier. But just how much could it add up to? You may be surprised to hear that households who use a financial advisor could end up with 15% more to spend in retirement.⁵

Our no-cost tool helps make it easy to find the right financial advisor for you. Now you can get matched with up to three local fiduciary investment advisors that have been rigorously screened for regulatory disclosures and to confirm their licenses. The entire matching process takes just a few minutes.

SmartAsset is a personal finance technology company that features a financial advisor matching service. Financial Advisors who appear on SmartAsset are from companies with which SmartAsset receives compensation. SmartAsset takes into consideration wealth and location to determine how to match users with advisors. SmartAsset doesn't include the entire universe of Financial Advisors.

Sources:
1. Advisor Value. Voya Retirement Research Institute®, 2015.
2. How Best to Annualize Defined Contribution Assets? Center for Retirement Research at Boston College, 2019.
3. 2019 Retirement Confidence Survey Summary Report, Employee Benefit Research Institute and Greenwald & Associates.
4. How to plan for rising health care costs. Fidelity Investments, 2020.
5. Harlow, Brown, and Jenks. “The Use and Value of Financial Advice for Retirement Planning.” December 2019..

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SmartAsset AWARDS & ACCOLADES

1. Missing Out on Social Security Benefits

According to a study by the Center for Retirement Research at Boston College, 62% of men and 65% of women claim Social Security before their full retirement age. In fact, 35% of men and 40% of women claim Social Security when they are first eligible, at age 62. But, waiting to claim at one's full retirement age (67 for people born after 1960), will entitle you to your full benefits amount.

If you can find ways to postpone claiming your Social Security benefits until your full retirement age, by relying on other income streams you'll be able to enjoy your full entitlement.

A qualified financial advisor can help you assess your options for delaying when you claim Social Security.

Source: Kitces.com