Posted in Triplett & Carothers on July 3, 2025
When setting up your retirement plan, it’s helpful to avoid common mistakes that can diminish your savings and impact your future. Planning carefully for your budget and lifestyle needs increases your chances of enjoying a comfortable retirement. Below are some common missteps to watch for.
Starting to save too late: Delaying retirement savings can make it harder to achieve your desired lifestyle. The power of compound interest means early, consistent contributions grow significantly over time. Even small contributions help, and if your employer offers a 401(k) match, take full advantage of it.
Neglecting to review and adjust your plan: Life changes, and so should your retirement plan. Regularly review and adjust your investments to ensure they align with your goals and risk tolerance.
Failing to rebalance your portfolio: Regularly adjusting your investment mix ensures your portfolio stays aligned with your financial goals and risk tolerance as you approach retirement.
Failing to diversify investments: Diversifying your portfolio reduces risk. Relying heavily on one type of investment exposes you to financial challenges. A mix of savings, pensions and investments provides a stable foundation for long-term growth and helps reduce overreliance on Social Security.
Underestimating medical expenses: Health care costs can be one of the largest expenses in retirement and yet are often overlooked. Planning for these costs is essential to protecting your savings. Staying proactive about your health can also prevent financial strain from unexpected medical issues.
Overlooking long-term care needs: Long-term care, often not covered by traditional health insurance, can be extremely costly. Failing to plan for these expenses can quickly deplete your savings. Consider insurance or other strategies to cover these potential costs.
Withdrawing too early or too much: Early withdrawals from retirement accounts can incur penalties and reduce compound interest growth. Similarly, withdrawing too much too quickly risks depleting your savings. Develop a withdrawal strategy that prioritizes which accounts to draw from and how much to take annually.
Ignoring tax implications: Retirement income is subject to taxes, so understanding how Social Security and investment and retirement fund withdrawals will be taxed is crucial. Efficient tax planning, including consulting a tax professional, can help you minimize tax burdens and keep more of your savings.
Relying solely on Social Security: Social Security is designed to supplement your income, not replace it entirely. Depending on it alone can lead to financial difficulties, as benefits often fall short of covering all retirement expenses.
Neglecting inflation: Inflation erodes purchasing power over time; it is critical to ensure your savings retain their value. Accounting for rising costs of goods and services will help you create a realistic budget. Be sure to regularly adjust your budget to reflect your changing needs.
Overlooking estate planning: Estate planning ensures your assets are distributed according to your wishes and can reduce the tax burden on your heirs. It’s a critical component of retirement planning.
Failing to account for debt: Carrying debt into retirement can strain your finances. High-interest debt in particular can erode your savings. Create a plan to reduce or eliminate debt before retirement to free up income for living expenses and enjoyment.
A financial planner can help you avoid these potential miscalculations and make adjustments as needed, providing you with a retirement strategy that supports a secure and fulfilling future.
Reach out to Roz Carothers and her team at Triplett & Carothers to learn more.
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