6 ‘Retirement Killers’ to Avoid at All Costs

If you’re starting to wonder if you’ll ever have enough money saved to retire, you aren’t alone.

According to the Employee Benefit Research Institute’s 2022 Retirement Confidence Survey, only 28% of respondents said they were “very confident” they would have enough money for a comfortable retirement. And 58% said preparing for retirement makes them feel stressed.

I get it – planning for retirement can be challenging, even if you start early, have help and earn a good living.

But when I see those numbers, it also reminds me of all the things I’ve seen folks get really wrong – actions that, at the very least, can throw a retirement off track and, in some cases, have potentially irreversible consequences. 

I call them “retirement killers.” Here are six I see all the time:

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1. Failing to have an income plan (in writing)

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Soon-to-be-retirees and retirees often say their No. 1 worry is outliving their money. Yet, many are just winging it, moving to and through retirement without a plan that tells them how much they will need from year to year, or where to find the money that will replace their paycheck, or even worse, how long their money will last.  

The remedy: A written income plan is like a compass: If you use it correctly, you’ll always know where you are and where you’re going. You may have to make some adjustments each year, as priorities and costs are bound to change as you move through retirement. But if you understand and stick with your income plan, it should help keep you on course.

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2. Using pie-in-the-sky investment return assumptions in your plan

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If you’re counting on a 9% return to make your plan work, for example, and the market doesn’t cooperate, you will most assuredly run into trouble!

The remedy: Be a bit conservative when making assumptions about market performance. As a rule of thumb, your income plan should use a withdrawal rate of no more than 4% from your investments to provide income and be sure that your investment portfolio is positioned in a way that avoids wild swings in the market.  Keep at least 18 months to two years in cash available in that portfolio so you are not forced to sell investment positions to pay income when the market value is down. Cash and more stable investments in your portfolio help you get through a bear market. It’s better to get a pleasant surprise when the market is stronger than expected than to have to deal with a devastating disappointment.

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3. Taking too much risk with investments

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Some people get so caught up in accumulating money they forget to protect what they have in or near retirement. Others mistakenly think they have a moderate or conservative portfolio when what they actually have is quite aggressive.

The remedy: A financial adviser can do an exhaustive review of your investments, simulate how they would react to historic market crises (the 2000 and 2008 corrections, for example) and assess how vulnerable your current portfolio might be to future corrections. Once you have an idea of your true risk exposure, you can reconstruct your investment strategy to suit your needs and goals. This is huge when you’re counting on a stress-free and enjoyable retirement.

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4. Being so miserly you can't enjoy retirement

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Some retirees are so uncomfortable with seeing the balance of their retirement account go down that they spend less than they can afford – not taking the trips they once dreamed of or visiting their grandkids as often as they could. Then, 20 years into retirement, they turn 85 and realize as time has ticked away, they haven’t done a thing.

The remedy: The goal here is to find a happy middle ground, and a “bucket” strategy for your assets can give cautious retirees the confidence they need to enjoy their money throughout their lifetime. In this approach, each bucket provides for a different need.

For example, you might have a “safety” bucket for money you can get your hands on any time (cash and cash equivalents) to use for vacations and big purchases. An “income” bucket would include assets that are protected from the market and reliable income streams (Social Security, a pension) you can use to pay your bills. And a “growth” bucket would hold riskier assets that are chosen to build wealth for future needs and to counter inflation. 

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5. Giving away too much money (too soon) to the kids

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I have seen this retirement killer in many forms: Parents with grown children who still depend on them for everyday living expenses and others who are paying off their children’s student loans. Some parents loan their kids money at low or no interest, or agree to co-sign on a car loan or mortgage. Parents may gift money to their children too soon and then come up short on what they need for themselves early or later in retirement. I’ve seen way too many examples of couples giving everything they have to their kids, and it’s not helping anybody. It doesn’t help the children, and it’s certainly not helping the parents.

The remedy: When you fly, they always tell you to put your oxygen mask on first, before you help the person next to you. That should be a rule for parents when it comes to gifting or lending money to their children. Always make sure you are OK first – whether you’re still saving for retirement or you’re already there. And if that makes you feel stingy, think of it this way: You’re giving your kids a different kind of gift – the gift of financial independence, for them and yourselves, too.

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6. Blindly believing when your financial adviser says, ‘You will be OK’

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If you don’t have a plan, or you don’t understand your plan, you aren’t OK, no matter what your adviser says.

The remedy: If you’re paying for advice, you should be getting it. If your financial professional can’t make time to build a plan for you or doesn’t have the ability to do so, you should be concerned. Or, if he or she is focused primarily on growth vs. conservation and income it may be time to move on.

Don’t let these and other mistakes cause you to come up short in retirement. A good plan can help you overcome bad choices – and the sooner you can get back on track, the better you’ll feel about your financial future.

Kim Franke-Folstad contributed to this article.