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6 Mistakes to Avoid When Planning for Retirement

The Social Security Administration reports that one quarter of 65 year olds will reach age 90, and ten percent will live past 95. This means that if an individual quits their job at age 65, they could spend 25 years or more in retirement. As a financial advisor, you must be prepared to help your clients navigate the retirement planning process and help them avoid these six common mistakes.

Not taking advantage of tax-free retirement savings

Certain types of retirement accounts allow for some tax breaks. The Roth 401(k), for example, are funded with money that has already been taxed, so it won’t be taxed again when a withdraw is made. Do some research and take a continuing professional education class on retirement planning to help your clients find the best tax-free options.


Lack of planning

The biggest mistake workers make is not setting a budget for their retirement funds. Help your clients come up with different cash flow scenarios that look at expected retirement income from investments, Social Security and pensions to make sure it will cover all living expenses. If they’re falling short, help them decide if working a few more years or making more investments is the right fix for them.

It’s also important for your clients to consider that $100 today might not be worth $100 when they retire 10, 15 or 20 years from now. Make sure your clients’ investments account for inflation when discussing their cash flow in retirement.

Not saving enough

The key to a good retirement plan is saving enough money. Emphasize the importance of setting aside money from their paychecks and bonuses for their retirement account. Also encourage them to invest in their 401(k) and take advantage of employer's 401(k) matches.

Taking funds out of retirement accounts early

Just because you can take a loan from a 401(k) or IRA, doesn’t mean you should. The more money that is present in those accounts, the more interest it will accumulate over time. Think carefully about what it will mean for your client’s future before advising a loan from a 401(k) or IRA.

Not accounting for healthcare expenses

Go over Medicare options carefully with your clients to make sure they select the right plans to meet their health needs. Healthcare can be a potentially huge expense in retirement, so it’s important to make sure your clients take it into account. 

Have questions? Make sure you are prepared to help your clients plan for retirement by registering for one of our
pension planning and IRA webinars.


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