retirement planning

3 Retirement Mistakes You May Be Making Right Now

You’ve been saving and investing so carefully, what could go wrong? Unfortunately, several things, if you’re making these all-too-common retirement mistakes.

People who faithfully stash away money for retirement do so in hopes that their post-working years will be, relatively speaking, a stress-free environment where they can enjoy the fruits of decades of hard work without concerns about running low on  cash.

But pitfalls lie in wait for the unwary. As you near or enter retirement, be alert to these three common mistakes:

Investing like you’re still working

As you approach retirement, you need to adjust your mindset about your portfolio. Up to this point, you may have been aggressive, willing to take calculated risks that helped grow your money. That approach may have become deeply ingrained in you, making it a habit that is hard to kick.

But it’s time for a behavioral change. Portfolio growth is no longer the top priority. Instead, it becomes more important to preserve what you have and think about creating income for your retirement.  

Unfortunately, some people hitting the retirement red zone – the roughly five years right before and right after their target retirement age – don’t realize it’s time to ease up on the investment gas pedal. Or they just can’t break those old investment habits. One way to do that is to begin to reduce your stock exposure.

If you don’t, here’s what can happen: When you retire and that weekly paycheck ends, you will begin withdrawing money from your investments to live on. Imagine the results if we hit a recession and the market takes a plunge. Suddenly, your account balance is suffering a double blow. The bad market combined with your withdrawals can drain your savings quickly. If you haven’t retired yet, you can fix these problems by perhaps saving more or working longer. Once you are in retirement, your options start to thin out.

Failing to be proactive in preventing a big  drop in your portfolio. 

Once you have made that psychological adjustment about how you will approach investing, it’s time to take some specific actions. You want to be proactive now, not wait until you are in retirement, the market drops, and you are scrambling. At that point, it’s too late.

I mentioned the retirement red zone that begins when you are about five years out from retirement. That’s the opportune time to shift more of your money into stable assets, such investments as CDs, bonds or fixed-index annuities. But don’t eliminate your stock exposure completely. Even though growth has dropped further down your priority list, you still want room for some growth that those stocks provide. You just don’t want to be in a position where a big market drop derails your entire retirement plan. 

Work with your financial professional to make sure you understand your potential portfolio losses and to make sure your plan will still fund your retirement needs for 30 to 35 years, even with a big market drop. For example, a portfolio could be designed so that, even if the market dropped 50%, you might just endure a 15% loss. Then you and your adviser would gauge whether you could tolerate such a loss.

Another way to be proactive is to rebalance your portfolio after big gains in the market during retirement. You don’t want to lose those gains, so after a good run, you should shift some of your “winnings” into more stable assets.

Thinking retirement means a lower tax bracket for you.

People often anticipate that in retirement they will drop neatly into a lower tax bracket and the IRS will claim less of their money. Sadly, this is not necessarily so. The most popular way to save for retirement is through tax-deferred accounts, such as a 401(k). But if all your money is in a 401(k), and like most people you would prefer to have more income in retirement than you do now, you are never going to be in a lower tax bracket.  You’ll be in the same bracket – or possibly even a higher one. Yet, the conventional wisdom is to keep adding money to a tax-deferred account, even though Uncle Sam looms as the piper who needs to be paid at some point.

When I do live presentations, I ask people this: Do you think in 10 or 20 years, taxes will be lower or higher than they are now? Everyone predicts higher. But think about that. Many of them are choosing to defer paying their taxes to a later date, yet at the same time they are certain taxes will be higher then.

That’s why now is a good time to begin moving that money into a tax-free bucket, whether that’s a Roth IRA or perhaps indexed universal life insurance. You pay taxes as you make the conversion, but those taxes are likely to be less than you will pay if you defer them. (For more, please read Your Guide to Roth Conversions.)

Many people think they have a retirement plan by virtue of saving money, but a portfolio is not a plan. If you don’t proactively take control of where you are headed and what you need to do to get there, you can end up making mistakes that can cause great damage to your retirement.

Some people manage fine on their own, but if you don’t feel confident about your ability to avoid the potential perils of the retirement red zone, check with a financial professional for guidance. The sooner you do, the better the odds that retirement will be what you always hoped it would be.

Ronnie Blair contributed to this  article.

Heise Advisory Group is an independent financial services firm that utilizes a variety of investment and insurance products. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Heise Advisory Group are not affiliated  companies.
Please remember that converting an employer plan account to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences including (but not limited to) a need for additional tax withholding or estimated tax payments, the loss of certain tax deductions and credits, and higher taxes on Social Security benefits and higher Medicare premiums. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA.
It is generally preferable that you have funds to pay the taxes due upon conversion from funds outside of your IRA. If you elect to take a distribution from your IRA to pay the conversion taxes, please keep in mind the potential consequences, such as an  assessment of product surrender charges or additional IRS penalties for premature distributions. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any  purchasing decisions.  Any  media  logos  and/ or trademarks contained herein are the property  of their respective owners and no endorsement by those owners of Heise Advisory Group is stated or implied. 973625-7/21

About the Author

Ken Heise, Investor Adviser Representative

Co-founder and Financial Adviser, Heise Advisory Group

Ken Heise is co-founder and president of the St. Louis-based Heise Advisory Group ( He is an Investment Adviser Representative and a Registered Financial Consultant, a designation awarded by the International Association of Registered Financial Consultants to advisers who meet high standards of education, experience and integrity.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger was not compensated in any way.

Most Popular

5 Beaten-Down Stocks to Buy on the Dip
stocks to buy

5 Beaten-Down Stocks to Buy on the Dip

The market has delivered some nauseating volatility of late. The good news? That has teed up a few great stocks to buy at a discount.
September 27, 2021
10 Best Stocks for Rising Interest Rates

10 Best Stocks for Rising Interest Rates

The 10-year Treasury yield is hovering near its highest level in months. Here are 10 of the best stocks to buy in a rising interest-rate environment.
September 30, 2021
13 States That Tax Social Security Benefits
social security

13 States That Tax Social Security Benefits

You may have dreamed of a tax-free retirement, but if you live in these 13 states, your Social Security benefits are subject to a state tax. That's on…
October 4, 2021


Robo-Advisers: Weighing the Worth of Automated Advice

Robo-Advisers: Weighing the Worth of Automated Advice

Some people do just fine with bare-bones advice that’s essentially generated by an algorithm. Until your financial life gets more complicated, you mig…
October 17, 2021
When A ‘Lifequake’ Hits: What to Do When Your Whole World Breaks Open
personal finance

When A ‘Lifequake’ Hits: What to Do When Your Whole World Breaks Open

If life has thrown you for a financial loop, how do you pick up the pieces? One at a time. Start small and you’ll be amazed how you can bounce back fr…
October 16, 2021
6 Things You Can Do Right Now to Ensure Your Money Will Last in Retirement
retirement planning

6 Things You Can Do Right Now to Ensure Your Money Will Last in Retirement

Your retirement plan needs to take a holistic approach. Because there are so many decisions to make, it’s easy to get lost in the weeds. Follow these …
October 15, 2021
10 Least Tax-Friendly States for Retirees

10 Least Tax-Friendly States for Retirees

When it comes to state and local taxes, retirees in these states are likely to pay more than retirees in other states.
October 14, 2021