When we think about retirement planning mistakes, most of us think of things like “not starting to save young enough,” “taking on too much debt,” “not buying a house,” or “not saving 10%.” What these mistakes have in common is that they are all things that we do (or don’t do!) in our 20s, 30s and 40s.
By the time we reach our 50s and 60s, it’s tempting to think that “the damage has been done.” We have either saved enough for retirement or we haven’t. So, from this point on, it really doesn’t matter if we save any more. Or does it?
In reality, as I learned when I spoke with financial expert Pam Krueger, today, is that many of the most important decisions that we make are actually made in our 50s and 60s. So, if you are approaching retirement, don’t give up! There is still plenty that you can do to change the direction of your financial future!
I hope that you enjoy today’s discussion! If you want to find out more about Pam and her work, please visit her website, Wealthramp.
Retirement Planning Mistake #1: Acting Out of Fear
There is an old saying that fear and greed drive the stock market. Well, this is not just true for stocks… it’s also true for most things that involve money.
This is especially true as we get a little older and we start to realize that we have fewer years ahead of us to make up for any mistakes. So, ironically, in trying to avoid mistakes, we often give in to our fear and make the wrong moves at the wrong time.
As Pam said, “If the stock market goes down and, acting out of fear, you pull your money out, you’re making a big mistake! In fact, you’re making a mistake that could be really hard to recover from.” She continued, “When you feel like you are about to make an emotional decision, try to give yourself time and space. When you stop yourself from reacting immediately, you’ll see more clearly.”
Retirement Planning Mistake #2: Not Knowing Where You Stand, Financially
Facing the reality of our financial lives is difficult. In fact, as Pam said, emotionally, it can feel like looking at yourself, naked, in the mirror. It’s much easier just to avoid looking at our retirement accounts, financial documents and other evidence of “how well we’ve done.”
Of course, life is not a competition. The only person that we have to prove something to is ourselves. So, overcoming this tendency to “stick our heads in the sand” is one of the best things that we can do to get back on track, financially, in the years leading up to retirement.
Pam hit this point home when she said, “This one mistake can derail your entire retirement, because, you don’t have time to go back and make up for it. Don’t let this happen to you. Again, carve out some time. It could be that Sunday morning, where you begin the process of reacquainting yourself with your financial life.”
Retirement Planning Mistake #3: Claiming Social Security Benefits Too Early
Many people don’t realize this, but, the time that you choose to start taking your Social Security benefits can have a huge impact on how much you actually receive. This is true, not only because of the size of your Social Security check, which decreases the earlier you take it, but, also because you may be more likely to retire early… even if you can’t afford it.
As Pam said, “Just because you’re eligible [to take Social Security benefits] doesn’t mean that this is in your best interest. Most people can start taking Social Security at age 62, but, if you wait until ‘full retirement age,’ at 66 or 67 years old, you are going to get 8% more every year in your Social Security checks. If you can wait until 70, the results are even better!”
Retirement Planning Mistake #4: Ignoring the 70.5-Years-Old Requirement for Withdrawing Some Retirement Savings
Did you know that, when you reach age 70.5, you may be required to start withdrawing (and paying tax on!) some money from your 401K?
As if this wasn’t bad enough, you may actually be setting yourself up for penalties if you forget to make the required withdrawals… or just ignore the letters entirely.
This is definitely a topic to discuss with a Financial Planner to make sure that you don’t get caught in a bad situation with the IRS.
At this point in our lives, it’s not about blaming ourselves for the decisions that we have made in the past. It’s all about starting to make better decisions now. So, I hope that you find today’s interview useful and inspiring! If you do, please share it with a friend!
What mistakes did you make in the years leading up to retirement that you would like others to learn from? What are you doing now to get your life back on track? Let’s have a conversation!
