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Created: February 1, 2021
Modified: December 28, 2023

5 Retirement Mistakes to Avoid

If you’re like most retirees and people preparing for retirement, you’ve made some financial decisions you

regret. Imagine being able to go back and get a do-over on all of them.

You can’t do that, of course, but you can learn from the mistakes others have made and benefit from their collective wisdom.

Here are five common financial mistakes you can avoid:

1. Not having a plan

A financial plan is important for everyone regardless of their income or assets. At JB, we believe most clients don’t need a complicated plan that’s hundreds of pages long. A short, actionable plan can address the essentials for a financially secure retirement: how much to save, smart ways to save, how to pay off debt, and ways to make your money last a lifetime.

2. Living beyond your means

How many of us are guilty of intending to buy one item and filling up a shopping cart instead? Unfortunately, with the Internet and credit cards, it’s easier than ever to overspend. An effective way to curb this habit is to establish a realistic budget and stick to it. By “realistic,” I mean a budget that allows for a little discretionary spending. Without a bit of fun money, it’s just a matter of time before you fall off the wagon. (Just think of that last strict diet plan you tried. How long did that last?) Try to pay in cash or use a debit card and charge only what you know you can pay off as soon as the bill arrives.

3. Ignoring the high cost of health care

Have you estimated what your healthcare expenses will be after you retire? Fidelity Investments has, and their projection may shock you. According to the company’s recent survey, a 65-year-old couple retiring this year will need $295,000 after taxes to cover their future healthcare expenses. It’s a substantial sum of money and one of the very largest expenses you’ll face as a retiree. You can plan ahead by earmarking a percentage of current retirement plan contributions for health care or setting aside a portion of your accumulated nest egg. If you’re under 65 and have a high deductible healthcare plan, a Health Savings Account can provide a tax-advantaged way to save for your future care.

4. Relying on Medicare to pay for long-term care

If you need long-term care (LTC), which involves assistance with some or all of the aspects of daily living (eating, dressing, showering, etc.), don’t expect Medicare to cover the costs. The program specifically excludes custodial care.  You’ll have to pay the bills out of your income and assets unless you’ve planned ahead by purchasing long-term care insurance or establishing an irrevocable trust.

5. Underestimating the impact of inflation

Inflation can have a major impact on a retiree’s cost of living. Let’s say, for example, that an individual spends 30 years in retirement. Looking back at the last 30-year period, the cumulative U.S. inflation rate was 99.0%. That means a $100 expenditure in 1990 would cost approximately $200 in 2020. In other words, the cost of living roughly doubled in that time. At Johnson Brunetti, we address the potential for future inflation by designing retirement income plans with periodic raises built-in.

As financial advisors, we get a great deal of satisfaction from helping clients retire successfully. Working with us can allow you to sidestep common mistakes and achieve your retirement goals more expeditiously.

Information presented in our podcasts is considered current as of the created date. Over time, some information presented may become stale. We recommend you consult with your Financial Professional before making any changes based on information contained here.

Johnson Brunetti is a marketing name for the businesses of JB Capital and JN Financial.

Investment Advisory Services offered through JB Capital, LLC. Insurance Products offered through JN Financial, LLC.

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