8 Mistakes Retirees Make That Harm Their Retirement

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Here are eight ways workers and retirees could err that could sink their retirement—or make it much less pleasant than it could have been.

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1. Failing to cut back spending in the teeth of inflation.

If inflation is on the rise but a retirement portfolio isn’t, it only makes sense to budget a little tighter and perhaps postpone some less-essential expenses, such as vacations or a home makeover, unless and until the situation improves. Otherwise retirees could find themselves running out of money before they run out of retirement.

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2. Not taking into account the effect of a down or volatile market.

Drawing on retirement assets in a down or volatile market can end up compromising a portfolio’s ability to see a retiree through retirement. The retirement guide points out that greater diversification among noncorrelated asset classes and annuities with guarantees and/or protection features can help ward off the damage that can be done to a portfolio under such conditions.

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3. Not saving for a long enough retirement.

As the probability for a longer lifespan increases, the report points out that workers “may need to plan living much longer—perhaps 30+ years in retirement”—which means they’ll have to continue to invest for growth rather than retreating to asset preservation only.

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(Image: Shutterstock)

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5. Having unrealistic plans about retirement age.

While 69 percent of workers plan to work till they’re 65 or even older, that’s not how it usually plays out; just 31 percent of retirees actually managed to stick it out that long. Illness, layoffs or other obstacles to remaining in the workplace meant that their actual average retirement age was 62.

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6. Claiming Social Security benefits too soon.

Many would-be retirees fear, thanks to all the talk in Washington about Social Security’s trust fund “running out of money,” that the benefit relied on by their parents won’t be there for them. As a result, most people file to collect Social Security benefits too soon, at age 62, thus locking themselves into a reduced benefit for the rest of their lives (if they held out till 70, they’d receive the maximum benefit instead). And with the transition of full retirement age from 66 to 67, which began in 2017, the report points out that early claiming has become even more of a benefit reduction.

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7. Failing to plan on alternate income while delaying Social Security benefits.

Those who intend to wait till age 70 to file for Social Security are doing themselves a big favor regarding the size of their benefits, but they may not have taken into account what they’ll have to use for income until age 70 rolls around. They may have to draw on retirement savings in 401(k)s and other accounts to see them through, and will need to manage their portfolios so that money will last.

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8. Failing to consider how inflation will affect other retirement expenses.

Again, inflation is a blind spot for many would-be retirees, who may not take into account how much some things—like health care—will cost them in retirement, particularly if they’re spending little or nothing on it now. But expenses--and their size--change in retirement, and few plan properly to take those factors into account.

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