What Not to Do When Planning Your Retirement
Committing any of these four common mistakes can set you back in your golden years. Here's how to increase your chances of a successful retirement.


People spend years, even decades, doing everything they can to save enough for retirement. The last thing you need is a costly mistake that could derail everything you’ve worked so hard to build. Your retirement could last 20 years or more, and you want to enjoy every moment.
Retirement planning doesn’t stop once you retire – you need to consistently check in on your investments and other retirement savings. You must understand what not to do in retirement in order to protect and preserve your nest egg and increase your chances of having a successful retirement.
Here are four mistakes to avoid.

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1. Underestimating health care costs
The cost of health care continues to rise. On average, retirees may need $165,000 in after-tax money to cover health care costs. When you estimate how much you will spend on healthcare in retirement, you must factor in your health, the history of your family and your expected lifespan.

Tony has helped clients prepare for retirement for more than a decade. He specializes in asset preservation, retirement planning and tax strategies. He’s passionate about building strong relationships with his clients so he can help them build a strong plan for their retirement.
As people continue to live longer, they will have a greater “longevity risk” — in other words, the financial burden of paying for a longer life. According to a YouGov survey, the average Millennial expects to retire at age 59, which means they will likely have to pay for 20, 30 or even 40 years of retirement expenses. In addition, living longer tends to lead to more healthcare expenses. As you get older, it can cost hundreds of thousands of dollars to cover the cost of prescriptions, Medicare premiums and out-of-pocket expenses. Many people are unaware of longevity risk, which is why I talk to clients regularly about how they can lower their risk.
Have you thought about long-term care? On average, 70% of those over age 65 will need some kind of long-term care service or support during their life. Long-term care is not covered by Medicare and can get expensive. If you want to avoid running out of money, it’s important to have a plan that addresses both healthcare spending and long-term care expenses.
Something I tell my clients that they can do now to help their future selves is to consider saving money in an HSA. A health savings account is a tax-advantaged savings option that can be used for qualifying healthcare expenses. While it can cover current healthcare costs, the balance of your HSA carries over every year and can also be used for future costs.
2. Overspending
As you enter a new stage of your life in retirement, it may take time to get used to the newfound free time and flexibility you have, making it easier to overspend. It’s common for many people to look at their retirement savings and think it looks like a healthy amount, but you need to remember that this money is meant to last for quite some time. You will likely spend more early in retirement because you will want to do the things you've been dreaming about like taking trips, completing a home renovation or indulging in expensive hobbies.
The exact amount you will need to retire depends on your lifestyle, which changes from person to person. A common rule of thumb is to have 10 times your salary saved by the time you turn 67. The sooner you start saving, the better!
To help reduce your chances of overspending in retirement, create two budgets — one for essential needs, like bills, and the other for fun expenses like trips.
3. Taking Social Security benefits too early
Claiming Social Security too early is one of the most common mistakes we see. Even though 62 is the earliest age to claim your benefits, your monthly check can be reduced permanently by as much as 30% if you decide to take it at that time. Just because you can start applying for your benefits three months prior to your 62nd birthday doesn’t mean you should.
If your budget can handle it, I recommend waiting until your full retirement age to start claiming your benefits. Full retirement age is 66 to 67, depending on when you were born. There's a big bonus for delaying your claim even further. Your benefit will grow by as much as 8% per year from your full retirement age through age 70.
4. Miscalculating your required minimum distributions
Planning for your required minimum distributions (RMDs) is extremely important to your retirement success. The amount you must withdraw from your account is based on your account balances from the previous year, and the amount you have to withdraw increases every year as you age. Forgetting to satisfy your RMDs can result in a tax penalty.
Be strategic about which accounts you take your distributions from. You don’t have to take distributions from every account subject to RMDs; you only need to satisfy your total RMD amount. If you have certain accounts that are more aggressive and need time in the market to see gains, you could leave those alone. Instead, consider withdrawals from your other accounts to allow your more aggressive investments to grow. This strategy can help lower your risk of selling at a loss if the market is down while still fulfilling your RMDs.
Your plan for how you will spend your retirement is just as important as the plan leading up to it. Seeking advice from a financial adviser can help you stay on track now and years into retirement.
Drake & Associates is an independent investment advisory firm registered with the U.S. Securities & Exchange Commission. This is prepared for informational purposes only. It does not address specific investment objectives, or the financial situation and the particular needs of any person who may view this report. Neither the information nor any opinion expressed it so be construed as solicitation to buy or sell a security of personalized investment, tax, or legal advice. The information cited is believed to be from reliable sources, Drake & Associates assumes no obligation to update this information, or to advise on further development relating to it. Past performance is not indicative of future results. Registration as an investment adviser does not imply a certain level of skill or training.
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Tony Drake is a CERTIFIED FINANCIAL PLANNER™ and the founder and CEO of Drake & Associates in Waukesha, Wis. Tony is an Investment Adviser Representative and has helped clients prepare for retirement for more than a decade. He hosts The Retirement Ready Radio Show on WTMJ Radio each week and is featured regularly on TV stations in Milwaukee. Tony is passionate about building strong relationships with his clients so he can help them build a strong plan for their retirement.
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