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The Top 5 Retirement Planning Pitfalls

Every journey has obstacles along the way. There are certain dangers or pitfalls that can make the path smoother if avoided. However, failing to avoid the pitfalls can slow your journey or maybe even end it prematurely. Your retirement journey is no different. There are many pitfalls when planning for retirement, and today we want to share 5 of the most prominent ones we see. Let’s take a look!

All your eggs are in one basket 

Diversity is key when it comes to retirement planning, and your portfolio should reflect that strategy. Even though there will be volatility along the way, it is important to make sure there is a proper mix of investments based on your comfort level with risk. Another key to diversity in your investments is understanding where you are in the retirement planning process. A portfolio that is 20 years away from retirement will many times look very different than one that is 5 years away from retirement. Ensuring there is a proper mix at the proper time can help weather a volatile market, while also leaving the door open for growth potential.

Making decisions based on emotion

It is hard to know what to do in our world of 24-hour news, when nearly every week there is some “crisis” that the media is opining on. Many people struggle with trying to make retirement planning adjustments based on the emotion that can come with the evening news. This is a very dangerous way to make decisions. Major retirement or investment decisions should be based on facts and data, and unfortunately, the media doesn’t always deal in facts or data. A good financial advisor will help you set up a plan that creates triggers in your investment plan that are based on data trends so that decisions are made without the emotion. Of course you are always the one in control of your investments, but working from facts and data can be a huge help in making better, data-driven decisions.

You aren’t working the plan 

Maybe you’ve saved since your first job in your 20’s or maybe you didn’t consider retirement until your early 50’s, either way you need a plan! A proper retirement plan will help you have a complete understanding of what it will take to retire, and how to get there. One of the best ways to build a plan and work the plan is to meet with a financial advisor that understands you and your risk tolerance. Once the plan is built, it is vital that there are regular checks with your advisor to make sure you’re still on course and that the plan is working. It’s an ongoing and worthwhile process.

Failing to factor in rising healthcare costs

Some studies show that health care costs could average around $280,000 for a couple retiring in 2018. The outlook for health care costs continues to rise in the coming years and a proper retirement plan must consider these costs. Your financial planner will be able to help you have a better understanding of maintenance costs, insurance premiums, deductibles, prescription plans, and long-term care considerations.

Retiring with debt

If you currently carry high credit card balances or have a home equity loan or a substantial mortgage, it may be time to work on getting rid of those balances. Addressing your loans now may free up cash that could be put toward other living expenses in retirement. Eliminating debt before you retire, will also help you weather the curves life may throw once your income is more fixed and adjustments are harder to implement.

These are just a few of the pitfalls those planning for retirement might face. By understanding what the dangers are, you can make sure you are on a plan to avoid them. The financial advisors at Sound Financial have been helping people navigate the pitfalls of retirement for over 30 years, and we would love the opportunity to help you navigate your retirement too! Give us a call today!

Investment Advisory Services offered through Sound Financial Strategies Group, Inc. (“SFSG”), a Registered Investment Adviser. Certain representatives of SFSG are also Registered Representatives offering securities through APW Capital, Inc., Member FINRA/SIPC, 100 Enterprise Drive, Suite 504, Rockaway, NJ 07866 (800)637-3211. SFSG and APW Capital are separate and unrelated companies. 

The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by APW Capital. 

Neither diversification nor asset allocation can ensure a profit or protect against a loss. Past performance is not indicative of future results.

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