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Five Retirement Planning Mistakes To Avoid

Many retirees underestimate the risks associated with their investments and financial plans, which can result in costly mistakes that could have easily been avoided if they had adequately planned for retirement.

Today, we’ll reveal some of those key planning mistakes and share tips on how you can avoid them!

Read on to learn more! 

Retirement Planning Mistakes To Avoid

While it’s important to know what you need to do when planning for retirement, knowing what not to do is just as critical if you want to retire right! Below are 5 common planning mistakes that should be avoided to help prepare you for retirement success. 

1. Not Knowing How Much To Spend in Retirement

The first mistake we see our clients make is not knowing how much they can spend in retirement or whether they will be able to live comfortably. Remember, retirement is an important part of your life and should be treated as such. So, you'll need to figure out how much you can expect to spend in retirement so you don’t feel like you’re playing a guessing game with your retirement dollars. 

Many retirees tend to spend more money in the first 10 years of retirement because they have more to spend, all while underestimating how much they can spend over their lifetime because they’re so worried about running out of money. However, when we run the numbers, we often find that they can be spending more, or can stop working earlier and still live comfortably without running out of money.

You don't want to put off planning until you're retired. You should do this well before retiring so that you know what your goal is and what you want to achieve. Once you do this, you can then spend as much money as you want in retirement without worrying about running out of money.

It is also worth noting that most people do not change their lifestyle in retirement. Instead, they end up looking to keep their pre-retirement lifestyle and enjoy knowing what they need to do and how much they need to save. Hence, understanding how much you can spend by forecasting your retirement expenses and ensuring that you have a solid plan in place can help you achieve the retirement success you deserve!  

2. Employing an Income-Only Strategy

In retirement, many people prefer an income-only strategy over a total-return strategy because they want a fixed rate of return with no risks. However, in reality, you can’t get very much return on any fixed-rate investments. There are also numerous disadvantages to only using a fixed rate of return, and most people are unaware of these risks.

For instance, a lot of people find it difficult to fully understand how a bond works. They say their bond has a coupon, and since many bonds have a 5% coupon rate, they think they're getting 5% and don't realize they're paying premiums for it. Ultimately, they are paying more than the bond's maturity value. As a result, their total rate of return is extremely low. 

This is why you need to fully understand every part of your bond, not just the income. At its maturity, your return on a tax-free 10-year bond is only going to be 1% these days, even though you've got the income upfront. This is another potential risk to keep in mind.

Instead, we encourage you to understand and create what we call a “total return strategy.” This is a strategy where you have your short-term money in cash and your intermediate-term money in bonds. Since you will be living for a longer period of time and will require growth to keep up with inflation in order to obtain higher rates of return, this strategy will better serve your income needs compared to an income-only approach.

3. Being Too Conservative With Your Investment Portfolio

People become anxious when there are market corrections, and we have seen significant market corrections in the last 10 to 20 years — most recently in March of 2020. These market swings can lead many people to believe that they should have a more conservative portfolio so they won’t lose money. 

While we recognize that everyone is different and that how much each person should have in equities, cash, and bonds is different, putting together an overly conservative portfolio in such a low-interest rate environment can also put you at risk of running out of money. 

When investing, you must account for longevity. Some people plan for a retirement that is far too short, while others plan for a retirement that is far too long. So, plan with longevity in mind and use an estimated lifespan you’re comfortable with. This is a great topic to discuss with your financial advisor if you haven’t already. 

For example, if you're 23 years away from retirement right now, you'll probably invest more aggressively and put some money in growth investments like the stock market. This is because you recognize that you still have many years ahead of you and need that money to grow and serve you down the line.

But if you're 65 today, there’s a 50% chance that either you or your spouse will live another 23 years. If you put your portfolios in different reservoirs now for the short-term, medium-term, long-term, even if it’s only for 10 years, that long-term reservoir needs to have some growth because you’re likely going to have a couple of decades to live out during your retirement. 

So don’t be too conservative with your investment portfolio! 

4. Not Optimizing Your Social Security

Taking Social Security too soon and failing to coordinate Social Security with your spouse are both major mistakes people tend to make. However, when it comes to Social Security, numerous strategies can assist married couples in avoiding losses and can increase the high-earning Social Security benefits.

If you go to our website at https://hellerwealthmanagement.com, we have a great report on the Social Security Claiming Guide that you can download to answer your questions. Making the wrong decision around your Social Security could affect your retirement and how much you receive over your lifetime. This is a mistake you don’t want to make!

5. Not Having Your Estate Planning Documents and Accounts Set Up the Way You Want. 

The more documentation you have, the easier it will be for your heirs. Make sure your assets are titled and that you have a healthcare proxy and power of attorney in place so that you or your loved ones don't have to run around if someone gets hurt or becomes too ill to pay their bills. 

You want your children to be there to help you. You don't want them figuring it out on their own. We’ve seen and heard many stories out there and you do not want to be a part of one. You want to have plans in place to make your life and retirement organized. 


These are just five of the most common mistakes we've seen. There are others, but we thought these were important for most people to know and be aware of so that they don't make the same mistakes in their retirement planning!

If you're looking to find out more about your retirement plan be sure to check out the Retire Right Podcast or to reach out through our contact page!