We must learn from our mistakes. Some mistakes can cost more than others, especially when it comes to retiring. This isn’t something you can go back and fix. You have one chance to make it right. The good thing is that we can learn from other people’s mistakes and make sure we don’t do them to ourselves.
Garrett Harper is a CFP at Harper Financial Strategies LLC, and he has high-fived the three mistakes he sees retirees repeatedly make.
Learn from these mistakes and make sure you don’t make the same ones.
Current Spending
The biggest mistake is not understanding your current spending. The biggest trigger of being ready to retire is being able to stay within your spending limits. Not understanding what you spend now only opens the door to spending more in retirement once every day becomes a Saturday.
Being Conservative
Another common mistake I see is the idea that you must become very conservative with your investments at retirement. Understanding that your retirement could be 20 years or more means that you should have investments positioned for that timeframe.
Realistically, assets should be positioned in 3 categories. First is cash needs for the next 2 years, earning interest rate with no market risk. Second is assets for the next 3 to 8 years, earning a rate of return to keep up with inflation but not taking too much market risk.
Third, for 9+ years, these assets need to grow to keep up with potential health costs, leaving money to charities or children and any other unknown that could happen 10+ years from now.
Not Understanding Taxes
The last common mistake I see is not understanding how taxes affect your way of living. Most clients have never thought about how they will take money from their accounts and the tax implications that come with those withdrawals. Not fully understanding the tax side could cost with higher tax rates as well as medicare surcharges.
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