Often, prospective clients come in to my office and ask me, "Can I retire?" Unfortunately, there is no magic age or value or equation that allows everything to work perfectly and can give them a straight answer to that question. There are lots of ways to find retirement success. What I am typically more concerned about are potential pitfalls in retirement. Fundamentally, my clients are, too. Here are my thoughts on why people miss the mark in retirement planning:
1. People don't know their expenses.
I am regularly shocked by how little folks know about their own cash flow—I mean their current expenses, not to mention what their expenses could be in the future. Do you owe any money on a house, car or credit cards, and when will it be paid off? What expenses will go away when you retire, and will there be any new retirement expenses that start when you leave your job? One of the big questions we are asked about is how to budget for healthcare expenses. Unfortunately, there is no easy answer to that one. But generally, you have to have a good idea of how much outflow you will have each month. Whether a retiree needs $500 or $5,000 per month will make a huge difference in their lives and future plans.
2. People aren't sure where their income is coming from.
Once you figure out your expenses, the next step is to figure out how you will pay for them. Most people will have some Social Security benefit, and many have a pension payment as well (although these are going away for most young people). If you are lucky enough that those two amounts cover your low expenses, then you may not need other income. But for many, more income will be necessary to cover your expenses. This may come from part-time work, dividends or interest from investments, other retirement accounts or guaranteed annuity payments, which are backed by the financial strength of the issuing insurer. Your needs and desires should dictate your mix of these income streams and should allow you to balance monthly income versus flexible money for one-time expenditures.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free 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.
3. People retire from something rather than to something.
Retirement is one of the most stressful things that can happen in your life. Why is that? Upon retirement, most people who worked at the same place for their whole life leave behind not just their reason to get up in the morning, but much of their social structure. I have clients who have retired from companies after 35, 40, 45 years, and they have lived life with their coworkers for that long. Not only are those working hours hard to replace with different activities, but the friends (or at least being able to see them every day) are hard to replace also. You must know what you are going to do when you retire and how you are going to spend your time. Some may yearn for travel; others may just want to fish off their back porch. You must realize the hole that will be left in your life when you retire, and make plans to address it so that the transition is as smooth as possible.
4. People forget to consider their legacies.
They may consider what they will leave materially, but few go beyond that. It is normal, of course, to consider how those you will leave behind will be taken care of. A legacy is far more than that. How do you want to be remembered? What do you want people to say about you at your visitation? What will they say was important to you? After nearly 20 years in the financial services business, I've had a bunch of clients die, and none of them boasted beforehand, "I have no friends, but I have lots of money!" Think about your relationships, and do what you need to do today to make them flourish. Maybe even spend a little money to create some memories with those you care for. Give them something to talk about at your funeral.
Certainly, financials are top of mind for those who consider themselves successfully retired. Heeding points one and two will go a long way to helping avoid retirement pitfalls in that sense. Points three and four, though, make it clear that you have more to think about than just money to retire well. Preparing for all facets of retirement, fiscal and relational, is the best way to succeed.
Andy Burdsall is the president of Riverbend Financial Group in Jeffersonville, Indiana, where they focus their clients on income creation and legacy planning. He is a Registered Principal with Securities America, Inc. and an insurance professional.
Steve Post contributed to this article.
-
Seven Things You Should Do Before 2026 Because of One Big Beautiful Bill ChangesThe new law ushers in significant changes for most taxpayers. Make these moves now to take advantage of them.
-
Where the Ultra-Rich Are Buying Real Estate NowWhy the ultra-rich are flocking to new corners of the world — and what their moves reveal about real estate hotspots.
-
I'm a Financial Adviser: The OBBB Is a Reminder for Older People to Have a Long-Term PlanThe new tax bill presents a good opportunity for retirees to revisit tax plans, look into doing some Roth conversions and consider plans for long-term care.
-
Moving Abroad? You Might Need a Cross-Border Financial AdviserIf you want to live in another country long term, you could benefit from an expert's guidance. Here's how to find a good qualified adviser to help with residency requirements, documentation, financial laws and tax impacts.
-
I'm a Financial Planner and a Parent: Here Are Five Money Habits Every Young Family Should HaveWhen children are young, it can be hard to meet immediate costs, let alone save for the future, but these five habits can help build lasting financial security.
-
Advisers Face a Fiduciary Challenge When Discussing Alternatives to Trump AccountsWhile Trump Accounts offer some benefits for early savings, investment advisers need to be cautious when recommending alternatives like 529 plans or Roth IRAs, as those suggestions could create fiduciary conflicts.
-
Financial Advisers: Here's How to Help Soon-to-Be Married Clients Get Their Financial House in OrderGetting married changes a couple's life in more ways than one, so it's a good idea to discuss financial and legal issues like pre-/postnuptial agreements, estate plans and life insurance.
-
It's Not Too Late for Wealth Advisers to Participate in the Silver TsunamiWith so many business-owning Baby Boomers set to retire, wealth advisers need a plan to ensure their business-owning clients and prospects become and remain their best clients.
-
Boomer Retirement Reality Check: The Numbers Look Bleak, But Here's What You Can Do About ThatYour retirement probably won't look like your parents' retirement, thanks in part to rising costs . Here are some ways to assess your finances to get yourself into a better financial position.
-
Should You Be an Active or Passive Investor? A Financial Adviser Breaks It All DownUnderstanding the pros and cons of the two types of investing strategies can clarify what works for you. Hint: Sometimes a blend is best.
