We think about it all the time, that last lovely chapter in the American dream.
Retirement.
Travel, golf, visits with the grandkids, time to do … whatever.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
But study after study shows that most people aren’t properly preparing to make that dream come true. According to the Economic Policy Institute, “nearly half of families have no retirement account savings at all.” And, in my opinion, even those who do save aren’t anywhere close to having what they’ll need to maintain a comfortable lifestyle for what could be a decades-long retirement.
What’s getting in the way? Here are five of the most common roadblocks I see to a successful retirement:
1. Failing to define how you wish to live your retirement years.
How can you make a plan unless you’ve set goals? You may think your expenses will go down when you aren’t working anymore — but many people discover this is not the case as they travel, pursue hobbies or otherwise fill their free time. How much are the things you want to do going to cost? (Don’t forget to consider inflation.)
It’s also important to mentally prepare yourself for this next chapter. You’ve been working for the last 30 or 40 years so, naturally, retirement will require a transition. Before you get there, decide how you’ll want to spend your retirement years. What projects will you start that you never had time for? With whom will you spend your time? Setting personal goals can also help guide your financial planning.
2. Not making a commitment to financial success.
It’s amazing how many people are not informed about personal finance. They don’t stop and take inventory of where they are on a regular basis (or ever). And often they can’t use the most basic tools to identify what their assets are, what their net worth is and how they’re spending their money.
Having a budget and tracking your monthly expenses is an important component to planning for what your retirement income needs will be. We see so many people who misuse credit. They have no real understanding of the various types of credit, or how credit can help or wreck them. And they aren’t seeking professional advice to figure out their current finances, much less plan for the future.
Making a commitment is not something anyone else can do for you. You have the power to take pre-emptive action in working toward a successful retirement for yourself.
3. Not planning for the unexpected.
Everyone needs a contingency plan. Life events happen: disability, divorce, premature death. Any of these could throw a rather large wrench into your savings and retirement plans. Sadly, getting older isn’t just about taking cruises and walking the beach. You need to consider the unfortunate turns that could interrupt your income flow and what you’ll do to stay on track. Insurance — life, disability, long-term care — can be a good foundation of the financial plan you’re building. All the other types of plans and investments people make are built on top of that. But none of it will be successful if there isn’t a strong foundation.
4. Not taking advantage of employer-sponsored plans.
People often feel they can’t afford to participate in their employer’s 401(k) plan, or they don’t look at the other benefits the company offers, such as disability or life insurance. Employer-sponsored programs are often the most cost-effective way to help protect yourself against the unexpected. If they’re there for you, why not take advantage?
5. Not creating a comprehensive financial plan.
Retirement is, bottom line, permanent unemployment — and being unemployed means no paycheck. Nearly everyone worries about accumulating enough money to be comfortable for the rest of their life – and maybe leave a bit behind for their loved ones and favorite charities. Having a comprehensive plan can help you make sure all your bases are covered. Included in this plan is asset allocation, income sources, budgets and much more. But few sit down with a professional to figure out how to incorporate each necessary component into one cohesive plan.
Make it a goal to find a financial professional you trust — then pull together your paperwork and make an appointment to build your plan.
Kim Franke-Folstad contributed to this article.
-
Amazon Resale: Where Amazon Prime Returns Become Your Online BargainsFeature Amazon Resale products may have some imperfections, but that often leads to wildly discounted prices.
-
IRS Watchdog: Three Problems the IRS Must Address in 2025IRS The tax season is over, but new changes to the IRS can pose risks to your taxpayer experience.
-
Social Security's First Beneficiary Lived to Be 100: Will You?Ida May Fuller, Social Security's first beneficiary, retired in 1939 and died in 1975. Today, we should all be planning for a retirement that's as long as Ida's.
-
An Investment Strategist Demystifies Direct Indexing: Is It for You?You've heard of mutual funds and ETFs, but direct indexing may be a new concept ... one that could offer greater flexibility and possible tax savings.
-
Q2 2025 Post-Mortem: Rebound, Risks and Generational ShiftsAs the third quarter gets underway, here are some takeaways from the market's second-quarter performance to consider as you make investment decisions.
-
Why Homeowners Should Beware of Tangled TitlesIf you're planning to pass down property to your heirs, a 'tangled title' can complicate things. The good news is it can be avoided. Here's how.
-
A Cautionary Tale: Why Older Adults Should Think Twice About Being LandlordsBecoming a landlord late in life can be a risky venture because of potential health issues, cognitive challenges and susceptibility to financial exploitation.
-
Home Equity Evolution: A Fresh Approach to Funding Life's Biggest NeedsHomeowners leverage their home equity through various strategies, such as HELOCs or reverse mortgages. A newer option: Shared equity models. How do those work, and what are the pros and cons?
-
Eight Tips From a Financial Caddie: How to Keep Your Retirement on the FairwayThink of your financial adviser as a golf caddie — giving you the advice you need to nail the retirement course, avoiding financial bunkers and bogeys.
-
Just Sold Your Business? Avoid These Five Hasty MovesIf you've exited your business, financial advice is likely to be flooding in from all quarters. But wait until the dust settles before making any big moves.
