Retirement Mistakes to Avoid
Retirement Planning and Avoiding Sabotage
Joe Anderson and Al Calpine emphasized the importance of intentional retirement planning to avoid sabotaging decades of savings. They encouraged having realistic expectations about retirement, accounting for market fluctuations, and making informed decisions. They also raised awareness of elder fraud, citing 88,000 victims over age 60 who lost $3.1 billion in 2022—an 84% increase from the previous year. Planning for lifestyle and purpose, not just finances, is essential for a happy retirement. Despite 55% of people expecting to work past 65, only 19% actually do, showing the gap between expectations and reality.
Financial Missteps and Buyer’s Remorse
Common financial missteps include buying RVs, dream homes, or boats without thorough research, often leading to buyer’s remorse. Joe and Alan advised visiting destinations multiple times and in different seasons before making major purchases. They also warned about overestimating investment returns, underestimating inflation, and overlooking medical expenses, which can all disrupt retirement plans.
Inflation and Investment Strategies
Inflation erodes purchasing power over time—$100 in 2000 equals about $180 today. Coffee prices have risen from $0.25 in 1970 to over $3 today, illustrating the need for investment strategies that outpace inflation. Joe and Al recommend maintaining a diversified portfolio that includes equities to grow wealth over time. They discussed sequence-of-return risk, which occurs when retirees withdraw funds during market downturns, and encouraged mitigating this with a diversified and flexible withdrawal strategy.
Required Minimum Distributions (RMDs)
Understanding RMD rules is critical. Depending on birth year, RMDs start at age 72, 73, or 75. RMDs must be taken separately from each 401(k) but can be aggregated for IRAs. Mistakes can lead to double taxation or higher tax brackets. Early planning, especially for large account balances, allows retirees to explore tax-saving strategies like Roth conversions.
Social Security Claiming Strategies
Claiming Social Security too early can reduce benefits permanently. Waiting until full retirement age (typically 67) or age 70 increases monthly payouts. Attendees were advised to consider their health, assets, and spousal needs when deciding when to claim. The gap between retiring at 62 and qualifying for Medicare at 65 was highlighted, as private insurance costs during this period can be significant.
Long-Term Care and Medical Expenses
Long-term care is expensive, with nursing home rooms averaging $10,000 per month. In high-cost areas like California and New York, it’s even more. Joe and Alan recommended ensuring enough capital is available to cover such costs, even without long-term care insurance. Planning for the financial needs of a surviving spouse is also crucial.
Estate Planning
Estate planning is often neglected, with half of Americans dying without a will or trust. This can result in assets going through probate and distribution being determined by state law. Joe and Al advised creating key documents: wills, trusts, durable powers of attorney, and healthcare directives. Ensuring beneficiary forms are up to date is also vital.
Retirement Lifestyle and Communication
Retirement isn’t just about money—it’s about how you spend your time. Unrealistic expectations, like spending every moment with a spouse, can cause friction. Jim from Solana Beach shared that having too much unstructured time led to challenges in his marriage. Joe and Alan encouraged developing hobbies, volunteering, or part-time work and having open discussions with partners to align retirement expectations.
Legacy and Investment Decisions
Kristen from Tacoma asked whether retirees should exit the stock market once they have enough money. Joe and Al explained that the answer depends on whether assets are intended for personal use or as a legacy for heirs. If the goal is to grow a legacy, staying invested makes sense. If not, capital preservation may be more appropriate. They advised aligning investment strategies with long-term goals, risk tolerance, and retirement objectives.
Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.
IMPORTANT DISCLOSURES:
• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.
• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.
• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.
• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.
