17 retirement mistakes to avoid at all costs (that you probably still make)

Retirement mistakes abound, whether it’s bad advice, bad planning, or just a misconception about what a pension is really for.

According to financial experts, here are some of the biggest retirement mistakes people make. What’s most interesting is that most of them have nothing to do with finances, which should come as a revelation to anyone planning or approaching retirement.

Mistake #1: Treating 401(k) Like a Credit Card

While there are absolutely reasons to take out a 401k loan, a huge mistake I’ve seen over and over again is people taking out repeated loans against their 401k, essentially treating their retirement account like a credit card. Save 401k loans for real emergencies and only when you are sure you can pay them back.

Kelly Long

Mistake #2: Not planning for health complications

Here’s one big retirement mistake: believing you won’t face any health complications for the rest of your life. You may stay healthy, but having a back-up plan in case things go wrong can help prevent unnecessary pain and stress.

Marcus Blanchard

Mistake #3: Missing Free Money on the Employer Search Form

One big mistake people tend to make is that they don’t deposit enough into their retirement accounts to get full employer matching. If you don’t deposit enough funds into your 401(k) to get a match, you’re just giving up free money.

Also, it’s not early enough to save up to take advantage of compounding. The sooner you start saving, the longer your money can accumulate over time, resulting in more value. When people take early retirement, they think they have an infinite amount of money and tend to spend too much on things like extravagant vacations and then run out.

Daniel Yerger, CFP

Mistake #4: Thinking that retirement planning is only for your finances

The biggest mistake I see retirees make is people who don’t consider all the non-financial aspects of retirement. They think that they will just stop working and spend all their time on semi-holidays playing golf or relaxing.

But people don’t think their daily routine will be disrupted, and they can feel free without a structured schedule, social interaction with colleagues, and the pride and sense of accomplishment that comes from contributing to work. Yes, you need to plan for your financial future, but also consider your lifestyle and daily routine.

Russ Thornton

Mistake #5: Using Retirement Money to Pay for Your Kids’ College

An unfortunate mistake I see people make when they raid their retirement accounts to pay for their kids’ college expenses. It may seem like a smart idea to take out a 401(k) loan to pay for college, but parents often lose out because of the higher return their money could make in the stock market compared to the small percentage they “pay themselves.” borrow.

If you don’t have enough savings in your old age, there is no retirement credit! You will achieve this only by investing consistently over time. And there are many ways to pay for your child’s college education: on-the-job training, loans, part-time jobs, scholarships, and grants.

Christine Luken

Mistake #6: Misunderstanding the Different Types of Retirement Accounts

A common mistake I see is not having a plan for which you are building an investment. This is known as the location of assets, which is a combination of taxable accounts (individual/joint), pre-tax accounts (IRAs, pension plans) and Roth accounts (Roth IRA, Roth 401k). All of these accounts have different rules, some with age restrictions, storage restrictions, and different taxation.

Not having a thoughtful plan for where to put your money between those three buckets can have a big impact on your retirement. This affects when you access funds, taxes paid, and whether it counts as future income.

Valerie Rivera, CFP

Mistake #7: Not planning what you will actually do in retirement

People spend so much time on financial planning but often spend little time on retirement planning. The clients I have helped to retire and who have enjoyed life most after their careers are the ones who planned how they spend their free time.

What will your retirement life look like to you? Do you want to travel, play golf, volunteer, etc.? Whatever your vision, it is best to have a plan for this initial transition so that you can adjust to your new life accordingly.

Ayad Amari, MBA, CFP

Mistake #8: Trying to time the market

The worst mistake people make is to move investments within their 401k at the wrong time. This mismatch is often made on the basis of the past performance of the current investment holding. Investors will look to the past, move money, and then miss the bounce.

Darryl W. Lyons, CFP

Mistake #9: “Retiring early without a plan”

As a child, I watched my dad work hard and retire at the age of 40, and I soon realized that he never made a plan for what to do next. He wanders around the house all day, watches TV a little, but everyone can see that he is unhappy; he lost his drive. Work was all he had; when he left, there was nothing left. Finding hobbies and interests now is the solution to future retirement boredom.

Gregory J. Gaynor

Mistake #10: Thinking you can wait before you start saving for retirement

When it comes to planning for retirement, people make the mistake of not starting early enough. No matter how much money you make, it would be best if you try to start saving for retirement as soon as you start making money.

Even if you can only afford $5 a month, you must put $5 into your retirement account. The best time to start saving for retirement is during adolescence. The second best time to start is today.

Robin | Saved penny

Mistake #11: Forgetting to assign account beneficiaries

One pension mistake that most people make is that they don’t designate beneficiaries. Retirement plans allow you to add multiple beneficiaries. You can designate primary and secondary beneficiaries and set up distribution of benefits between them.

The next mistake they make is that they appoint a beneficiary but do not re-evaluate and update every year. Life and situations change every moment. Thus, it is always wise to review your beneficiary yearly and update, reevaluate and revise your selection.

Finally, most people do not discuss their retirement plans with their beneficiaries. If something happens to the account holder, the pension funds may go unclaimed.

Ram Chakradhar

Mistake #12: Forgetting to enjoy life before retirement

The retirement mistake that people make is that they wait until retirement to do what they love (like travelling, spending time on hobbies, etc.). While delayed gratification is important in life, you may not have the energy to do what you want to do. If there is something you want to do, do it now.

Bella Vanana

Mistake #13: Overspending in Retirement

With money saved up, a paying investment, and a healthy retirement, you may feel like you can keep spending money after you retire. After all, why so much money if you can’t have a good time?

While there’s nothing wrong with spending money, overspending in retirement can leave you bankrupt and stranded. You don’t want to retire and go broke; it’s a pitiful state. So, apply a little frugality to your lifestyle and curb your spending. Remember, there is still life after retirement.

Jude Uccella

Mistake #14: Misunderstanding the Power of Compound Interest

The one retirement mistake I see the most and kick myself for not starting saving and investing sooner. When you learn about the magic of compound interest and let it do its thing without cashing out, it’s pretty amazing.

As Charlie Munger says, “The first rule of compound interest is never to interrupt it unnecessarily.” Just sit back and watch the power of compounding. Typically, you will see interest gains start to rise after about ten years and continue to rise.

Devin Eberhardt

Mistake #15: Not setting goals for retirement

A huge mistake people make when retiring, especially when retiring early, is that they don’t have a plan for life. Sometimes people want to quit their jobs or just not work so badly that they find retirement boring. They are going away.

Instead, make a plan for what you will do in retirement. Find something that interests and fascinates you, and commit to doing it when you quit your job. Consider taking up hobbies like painting or crafts, leisurely travel for long periods of time, or volunteering. A variety of interests to explore will make your retirement as fulfilling as possible.

Melanie Allen

Mistake #16: Not being prepared for unexpected health crises

Thinking about the possibility of becoming incapacitated with age is not very pleasant. However, this is a mistake. Therefore, preparing for a Financial and Medical Power of Attorney (POA) is essential to protect yourself and your family.

Don’t wait until your health deteriorates to start the process. Being active will allow you to choose someone you can trust to make decisions about your health care and manage your financial affairs. Finally, try to do it well before retirement, no matter what age you plan to retire.

Lisa| Tailor Your Dollars

Mistake #17: Running away from work instead of running towards something new

I see one of the most common mistakes people make when retiring is when people only treat it as missing something (their job) and not as space for something new. Retirement is a great opportunity to discover new possibilities in life.

Whether it’s spending time with family, a casual hobby, getting involved in a community, or a new semi-professional adventure, it can be a stage of life filled with joy, growth, and excitement!

Sam | Smarter and tougher

Retirement Mistakes to Avoid at All Costs

Did you catch the theme running through expert advice? Nearly half mentioned to some extent the fact that people cannot plan what they will do in retirement.

While there are many things you can do to ensure a smooth financial retirement, make sure you also plan where you are retiring, not just where you are retiring.