Created: December 10, 2020
Modified: September 16, 2022

Episode 29: What is the Biggest Retirement Mistake?

Thank you for joining us for Episode 29 of our Money Wisdom Question Series, where we answer common financial and retirement investment questions. Today’s question is, “What is the biggest mistake people make in retirement?”

Too Much Investment Risk

I’m going to answer that question two ways. First, I’m going to discuss what happens before someone retires. Let’s talk about the “financial red zone”.  This is five years before retirement and five years afterwards. Here, many people take too much risk with their investments. They get hit with a market downturn that severely impacts the amount of money they can spend.

Retirement is a fundamental change in life. What should happen is at least five years before you retire, you should make a fundamental change in your investment goals. This means moving from growth (growing assets as quickly and as much as possible) to preservation of principal and a reasonable rate of return. When you’re retired or when you’re getting close to losing your paycheck for the rest of your life, you don’t want to get into a situation where the market goes down 30-35% (this happens from time to time) and all of a sudden you have to cut your income.

Too Much Debt Before Retiring

One of the biggest mistakes we see people aged 45-50 make is that they take on too much debt. Furthermore, they don’t have a plan for paying off their debt. That could even mean taking on debt to pay for your kid’s college. I always like to say, if you sacrifice your own retirement to pay for your kid’s college, you’re going to end up living with your well-educated kids. Make sure your financial plan is taken care of first.

Don’t Sacrifice Your Retirement

For anyone at or above 60 years old, their biggest mistake is usually taking too much risk with their investments. For those under 50, the biggest mistake they can make is spending so much that you don’t save. Don’t sacrifice your own retirement.

Thanks for joining me and I hope you found this information helpful!

P.S. If you enjoyed this topic and want to learn more, download our offer, “Five Retirement Planning Mis-Steps to Dodge”.

P.P.S. Feel free to submit questions here for a chance to have them answered!

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