Don’t Put Your Dream Retirement at Risk! 6 Common Retirement Planning Mistakes – and How to Avoid Them
While making mistakes is inevitable – we’re all human, and that comes with the territory – in many cases mistakes can be at least mitigated by course correction. Retirement planning – and, indeed, all financial planning – is, thankfully, one of the areas where we can adjust.
But it’s important to make that course correction as soon as possible – and keep a clear eye ahead, so as to avoid making more mistakes (insofar as we can).
There are common mistakes people make when planning for retirement – and they may not all be what we think they are.
Here are some of those mistakes – and ways to avoid them:
Not Starting with a Clear Goal
From the moment you start saving for retirement (ideally, as soon as you start working), you need a clear goal for those retirement savings. That goal is your destination – and without a destination, you can’t map a clear course. This is not to say your goal can’t change – very likely it will, and that’s when we re-draw the map. But without a goal, a destination to aim for, it’s all too easy to get lost along the way.
And that goal is what you – not your friends, not your colleagues – want out of your retirement. That’s personal, unique to you as an individual. You want a certain, specified amount of capital and/or income so you can (fill in the blank – spend more time with your family, open a bed and breakfast in your dream location, buy a racehorse, volunteer for your favorite charity, etc.).
Again, this goal can alter – the important thing is that you save with a purpose. Write your purpose down – keep it, refer to it, change it when your goals change. But keep it like a talisman, to remind yourself of your purpose in saving.
Trying to Navigate Your Road Alone
Now that you have your goal, your purpose, you’re all set, right? All you have to do is save! Unfortunately, that’s an unwise attitude, which usually doesn’t pay off. Take guidance – ask your virtual CFO or other trusted financial advisor to help you devise a plan – your roadmap to get you from where you are now to where you want to arrive at the end of the journey.
Your advisor is the mapmaker who can point the clearest path toward your goal – avoiding circuitous routes, helping you move down your road effectively and methodically – in line with your purpose. S/he can point out that what you may be doing isn’t actually advancing your stated purpose. Sometimes that will mean correcting what you’re doing; other times your advisor can help you realize your goal has changed without your knowing it. Then, it’s time to re-draw your map in light of the new destination.
But your trusted financial advisor is also your guide along that road – your co-pilot, your wingman (or woman), riding shotgun for you. S/he will be there to ensure you are on track at every checkpoint.
Spending Time and Money Against Your Purpose
Part of developing your goal is understanding what you value – and, even before you retire, your time and your money should be spent, not only on working and saving for the future, but living toward your goals – i.e., spending your time and money consistent with your purpose in the present. While delayed gratification is an important part of planning and saving, it’s important that your goal, your purpose, is paramount, and you should be furthering that purpose throughout your life.
Don’t put in 80-hour weeks on a regular basis (sometimes this may be necessary, but it shouldn’t be your default). This will result in burnout for yourself, shortchanging not only your work itself, but your family and friends, your recreational activities – starving yourself and them of the attention and focus on the super-values away from work which will give you a well-lived life. And if a well-lived life isn’t part of your goal, ask yourself why.
Studies show that over time, the happiest people are those who spend their time and money on what matters most to them. So, do that, and be happier.
Letting Your Money Sit Idle While You Work
Your virtual CFO or trusted financial advisor can help ensure you are saving enough, and investing it wisely, so that it will always be working for you; growing as you grow.
Spend what your financial planning allows for – it may come as a surprise, but a lot of people spend less than they could, given their income, even when they are saving a generous amount toward the future.
Don’t be afraid to live as big as you dream – and never be afraid to dream big, bigger, biggest – to the limit of what’s realistic for you in light of your purpose and goals.
Again, delayed gratification is an excellent habit, but it’s no substitute for a purpose, or for a fully experienced life. There’s room for all of these in everyone’s life.
You work hard for your money – make it return the favor.
Letting Money Become Your Goal
Investing is not the game, it’s the strategy. Because the game itself is living life as you want to – now and in the future.
Money shouldn’t be an end in itself – it’s a means toward an end – and that end is your goal – the place you want to get to.
Investing for its own sake becomes an empty pursuit. What you should strive toward, in your work, your free time, and your financial planning, is something far more real and personal to you.
Don’t get me wrong – it’s great to save, to invest, to watch your assets grow. But growth means harvest – never lose sight of the fact that your money is invested to bear fruit to sweeten your life, and the lives of your loved ones.
Not Letting Your Guide Help You on the Downslope
More mountain climbers die on the way down than they do reaching the peak. The reason these deaths on the downslope have declined is that more climbers take guides with them all the way, up the mountain and down.
Once you’ve saved enough (or think you have) to achieve your retirement goals, you still need guidance in developing and executing a plan for what comes next.
You have enough money to fund your goals – but have you taken into account the other expenses reaching retirement age will bring?
Your virtual CFO or financial advisor will help you develop a retirement plan which can help you safely navigate your way through retirement – achieving your end-goals (whether they are exactly the same as when you started saving or have evolved into something altogether different) while ensuring you and your family are taken care of in the day-to-day process of living.
At Rigby Financial Group, we aim for long-term relationships with our clients. We don’t stop working for you when you have a financial plan, or when tax season is over. Rather, we want to be there for you and with you as you travel your unique, individual path.
We will help you:
- Identify why money is important to you – what you want from it, what it can help you avoid, etc.
- Clarify what you value in your life and help devise ways to get more of that now, even while saving for the future.
- Get to know your unique picture – your life, your goals, your family, your financial picture, are not the same as anyone else’s – and RFG celebrates you in all your individuality.
- Devise plans, strategies, and processes to help the unique you follow your singular path through an irrepeatable life toward your individual goal.
- And be there with you all through the long process of implementing, revising and adjusting the plans and processes as your life, family, and financial picture change.
For better or worse, you are in your life for the long haul – don’t you deserve an advisor who is, too?
Whatever stage in the retirement planning process you are in, RFG can help you get your ducks in a very tidy row! Please click here to email us directly – we are always here to help.
Until next time –
Peace,
Eric
For more on planning for retirement, see:
What Your HSA Can Do for You – Now and in the Future
Increased Retirement Plan Contribution Limits for 2024
Roth IRAs and Income Tax Liability – How to Protect Your Assets
SECURE 2.0 Enacted – Key Highlights
Taxation in Retirement – Be Prepared!
Roth IRAs – To Convert, or Not to Convert?
Should You Roll Your 401(k) Into an IRA When You Retire?
The Ins and Outs of RMDs – Explained
Allocating Your Retirement Portfolio
Planning for Retirement in a Volatile Market