Retirement will be one the biggest life transitions you make.

Think about it, you spent your adult life working. Long hours at the office, listening to a boss you don’t like, most likely you felt underpaid and taking advantage of. But that’s over the day you retire.

Once your retire you will be doing what you want: trips with your significant other, spend time with the grandkids, volunteer work, if it puts a smile on your face, you can do it in retirement!

Unfortunately, it’s not that simple. You could make huge mistakes the few years leading up to and after retirement that will greatly impact your lifestyle. As financial advisors, we have seen the mistakes that people have made and we have built our business helping them avoid those mistakes. The below article are the 8 biggest retirement mistakes people make.

Retirement Mistake 1: No Financial Plan

We often talk about the importance of financial planning. It usually goes over people’s head. They don’t understand why they would need a plan or what is even included in a plan.

In the simplest form, a financial plan combines your goals with your money to see what you can achieve and how you can achieve it.

Do you want to buy an RV and travel the US? What about purchasing a beach house or downsize from your current house? Dreaming of taking a big trip to Europe? Taking grandkids on Disney cruises? Helping your kids with the down payment on their first home?

Do you even know what your goals are? Most people don’t know and even if they did know, how do you know if you truly can afford those goals once you retire?

The answer is you can’t (unless you have a strong understanding of finance).  That’s where a financial plan comes in. It can help you optimize your money in order to achieve your goals.

A strong financial plan will look at your various sources of retirement income, your investments, your insurance, your estate and your taxes. The planning will then help you achieve your goals.

When we meet with a prospective client who is already retired, their number one problem is that no one sat down with them and helped them build out the next 25 to 35 years of their life.

Retirement Mistake 2: Not Enough Saved

According to the Federal Reserve, the median retirement account balance for American’s aged 55 to 64 is $103,000. Sounds pretty good right?


Research has shown that if your goal is to maintain the principle throughout retirement you cannot withdrawal more than 4% of your money per year.

So with that $103,000 you could only withdrawal $4,120 per year. That equates to a monthly paycheck of $343 and that’s before taxes.

If you are just relying on social security in retirement, you are going to want to have at least $500,000 or more in your retirement accounts. Having that much can get you an income of about $20,000 a year which is about $1,600 a month.

Most people who are behind on their savings and getting close to retirement will have to save a lot to make up for the missed time. How much will you have to save to cover your shortfall?

Retirement Mistake 3: Collecting Social Security at the Wrong Time

For most Americans, Social Security is the largest retirement asset they have. It’s been described as the best annuity that money can buy. When you decide to collect is one of the most important decisions you make during retirement.

That said, once you retire and file for Social Security, you will probably find out that the check you are getting isn’t enough to cover your living expenses. Further, we have found that most people collect Social Security at the wrong time. The average person files for Social Security at age: 62, 65 and 70. More times than not, this is not the best time to collect Social Security.

We use social security maximization software to help pinpoint when the best time for you to collect social security. Your goal when filing for social security should be to try and collect the largest total benefit over your time that fits with your financial plan.

Retirement Mistake 4: Paying too much in investment fees

Usually in life, the more expensive an item, the better quality that item is. For example, a $300 pair of shoes is usually better made and will last longer than a pair that costs $70. This is not the case with investments, actually, the opposite is true.

Most people that we meet with seem to not understand that investment fees are taking money directly from your pocket. Generally speaking, the fewer fees you pay on investments, the better your investment will perform. The average actively managed stock mutual fund has a fee 1.50%. Only 20% of those stock mutual funds beat the S&P 500!

You can buy an index fund from Vanguard that investments directly in the S&P 500 for a fee of 0.05%. That’s a difference of 1.45%.

I know, percentages are confusing. The real world works in dollars and cents. Below is the breakdown:

If you invest $100,000 in a fund that has an expense ratio of 1.50% you are going to pay $1,500 a year in investment fees. If you invest in the Vanguard fund with a fee of 0.05% you pay $50 a year. That’s a one-year saving of $1,450! Over a ten year time period, you would save $14,500!

Retirement Mistake 5: Asset Allocation Does Not Align With Your Goals  

You can do some serious long term damage to your retirement plan by not having the proper asset allocation (asset allocation is the mix of stocks, bonds, real estate, cash, etc. inside your portfolio).

If over a 10 year period, stocks returned 9% on average and cash returned 1%. A portfolio invested in all stock of $100,000 would have $236,000 at the end of 10 years.  If that same $100,000 was invested in a money market fund (cash) there would be $110,000 in the accounts at the end of 10 years. That’s a difference of $126,000! And that’s just over 10 years, imagine the difference over a 20 to 30-year time horizon. It will be a big lifestyle difference in retirement.

We’ve seen a lot of other asset allocation mistakes over the years, those mistakes basically get summarized into people are either invested too aggressively or too conservatively.  Below is a list of the top five problems I see with people’s portfolios.

  1. Investing too much money in company stock.
  2. Own income property that is difficult to manage and or more costly than willing to admit.
  3. The majority of money is in low-yielding cash or CD’s.
  4. Own only US stock base mutual funds
  5. Bought a variable annuity.

I’m highly confident that if you have read this far, you most likely have made a mistake with your asset allocation. It’s not your fault, you are not a professional.


When people retire, they make the mistake of not taking their retirement planning seriously. Remember, the goal of retirement is to enjoy your life after spending thirty to forty years working. As we have shown, it’s not that easy, you will need help from a professional you can clearly define your goals and help you optimize your assets to achieve those goals.