5 Ways to Compromise Your Retirement Plan

Quick Answer: Discover 5 pitfalls that can jeopardize your retirement plan. Learn how to secure your future with safe money alternatives. Explore more at SafeMoney.com.

Through careful deliberation, many Americans have figured out their retirement planning requirements. But a comfortable retirement needs more than just creation of a financial strategy. It also means sticking to the plan you have developed.

Of course, there are some events beyond our control, events which can disrupt a retirement plan. Stock market downturns, costly unforeseen situations, and medical emergencies are a handful of such occurrences. There are some ways to mitigate the effects of these situations, but there are other mistakes which can prove detrimental to retirement security.

Here’s a look at some pitfalls which can put a retirement plan on the line – and which we recommend you take measures to avoid.

Retirement Plan Catastrophes to Avoid

Putting off saving. You may have outlined your financial goals in retirement and what you’ll need to achieve them. Nonetheless, people delay saving for a variety of reasons. It could be to pay for existing obligations, due to uncertainty over retirement accounts, due to money already being tight, or simply because of forgetfulness. However, because accumulating retirement savings is a long-term goal, it should be a top priority. Delays can otherwise prove far too costly.

Evaluate what sources of income you’ll be relying on in retirement. Do they have the sums of monies you need for your goals? If not, develop a plan of what you need to invest and save to attain those numbers, advisably with the guidance of a qualified financial professional. That way you can have greater financial security in your golden years.

Not getting help from a financial professional. According to research data, retirement often lasts for 20 years or longer. That is a long stretch to plan for. When you retire, monthly income and asset protection take on more importance. If your financial plan doesn’t prioritize these objectives, it may be in your best interest to work with a wealth planner specializing in retirement strategies.

The outcomes may be painful otherwise: a shortfall in income over time or unnecessary losses due to inadequate diversification. A wealth planner can help you evaluate existing income and asset preservation strategies, see if there are any gaps, and determine some options for customized solutions. You may also want to consult with a professional qualified in tax planning to solidify your plan’s tax-efficiency and minimize your tax liability.

Poor timing on Social Security, Medicare, account withdrawals, and other decisions. There are many retirement milestones: filing for Social Security, signing up for Medicare, and age deadlines for early withdrawal penalties and required minimum distributions, to name a few. In these matters and other decisions, timing is paramount. Claiming your Social Security benefit at the wrong time can mean missing out on tens of thousands of dollars, and a late sign-up for Medicare leads to costly lifetime surcharges.

Taking action at the right time for these deadlines is vital. In addition, if you withdraw money before you’re age 59.5, on top of paying income tax on your withdrawn sum, there is a 10% penalty. Likewise, when you reach age 70.5, required minimum distributions, or required minimum withdrawal amounts per year, kick in. You will want to carefully time when you take monies from your retirement vehicles so you avoid the effects of these deadlines.

Using retirement monies for impulse buys or things you don’t need. After many years of saving, it can be tempting to spend money on stuff you have put off buying. But some time down the road, that decision likely won’t seem as attractive. When you take money from your retirement accounts, you’re foregoing money in more than one way:

• Your retirement savings are less the sum you withdrew
• That is money that can no longer grow at a compound rate and make more money
• You have to pay taxes on your withdrawn sum, along with a penalty from the IRS if taken early

If you keep your money in your retirement account, it will continue to work for you. It’s definitely in your interest to leave your retirement savings alone and let them grow so you have more “retirement reserves” later on.

Asset allocation: not separating your “pay money” from your “play money.” During the working years, many Americans work with an advisor. You get guidance and look for investments which are likely to rise in value over time. However, in retirement, protecting your assets from market losses is important. In our professional opinion, the focus of a financial strategy should shift from net-worth to income and asset preservation.

Of course, it may be in retirees’ interest to have a suitable proportion of assets in the stock market. It helps to combat inflation. And of course many of us would like to try our hand at getting nice returns on certain stocks we favor. Nevertheless, putting too much of your nest egg into riskier vehicles can be disastrous, as recovery could take time you don’t have. Be sure your portfolio has a balance of risk and security which is suitable to your age, circumstances, and goals.

Ready for Help?

Before retirement, it’s beneficial to work with a financial professional who understands retirement issues. They can help you avoid these misshaps and other issues that can jeopardize your retirement lifestyle. If you’re ready for personal guidance to empower you to achieve your income and financial goals, SafeMoney.com can help you.

Use our Find a Licensed Advisor section to connect directly with an independent financial professional, and to request a personal strategy session to discuss your needs and goals. And should you have any questions or concerns, call 877.476.9723.

Frequently Asked Questions About 5 ways to compromise your retirement plan

What are common mistakes that can jeopardize my retirement plan?

Common mistakes include underestimating expenses, failing to diversify investments, relying too heavily on Social Security, not having a clear withdrawal strategy, and neglecting to account for healthcare costs. Each of these pitfalls can significantly impact your financial security in retirement.

How can I protect my retirement savings from market volatility?

To protect your retirement savings from market volatility, consider allocating a portion of your portfolio to safe money alternatives like fixed annuities. These options can provide a stable income stream and preserve your principal, allowing you to weather market fluctuations without jeopardizing your financial future.

What is the importance of having a withdrawal strategy in retirement?

Having a withdrawal strategy is crucial to ensure that your retirement savings last throughout your lifetime. A well-thought-out plan helps you manage your income sources, including Social Security and safe money alternatives, while minimizing taxes and avoiding the risk of running out of money.

How can I ensure my retirement plan accounts for healthcare costs?

To ensure your retirement plan accounts for healthcare costs, it's essential to estimate potential medical expenses and include them in your overall budget. Consider options like long-term care insurance and safe money alternatives that can provide liquidity for unexpected health-related expenses.