What Is the Biggest Retirement Planning Mistake?

Suze OrmanThat’s easy to answer: Not having a plan!

Building a financially secure retirement doesn’t happen by itself. You need to make a commitment to smart financial decisions long before retirement — starting in your 20s would have been ideal — and then keep carrying through on your retirement plan.

Here are some other big retirement-planning mistakes I want you to avoid:

  1. Not maximizing your Social Security retirement benefit. I strongly encourage you to wait until your Full Retirement Age (FRA) to start receiving your Social Security benefit. That’s between age 66 and age 67 depending on the year you were born. The payout will be 25 to 30 percent higher than what you are eligible for if you start at age 62, which is the earliest you can claim.  And ideally, if you are in good health and there is longevity in your family, I encourage you to devise a financial plan that allows you (or your spouse — whomever is the highest earner) to delay starting until age 70. Every year past your FRA through age 70 entitles you to a payout that will grow by a guaranteed eight percent. You can’t get eight percent guaranteed investing these days!
  2. Not saving on your own. Yes, Social Security will be an important source of income in retirement. But chances are it won’t cover all of your basic needs, to say nothing of a few wants. You don’t have a workplace retirement plan? Then, I want you to save up in a Roth IRA. If you are over 50 this year you can contribute $6,500. That’s $125 a week. Please take a hard look at all your spending and see if you can free up more money to build a strong retirement fund.
  3. Not accounting for medical costs in retirement. It’s so important to understand that Medicare doesn’t cover everything, and not many people have retirement health benefits from an old employer. On average, retirees end up needing to cover about 30 percent of their health care costs.
  4. Not Planning for a Very Long Life. There is a 50 percent chance a 65-year-old woman today will still be alive at age 88. And for a 65-year-old male there is a 50 percent chance he will still be alive at age 85. (Check out this free online life expectancy calculator.) Given the possibility of living a long time, you need to make sure your savings will last longer than you! One smart way to stretch your savings is to keep working in your 60s, even if it is part-time work. Delaying your Social Security start date, and reducing your withdrawal needs from IRAs and other accounts in your 60s will provide you more income for what I hope is a wonderful and long retirement.

 

SSA does not endorse any particular financial advisory product or service.

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98 thoughts on “What Is the Biggest Retirement Planning Mistake?

  1. i draw my social secerity am 66 plus a retirement will it affect me on social secerity plus am still working will I be penalize

  2. Can I collect full retirement benefits(age 66) for a year, still work and then stop and restart at age 70 How will it effect the amount I will collect

  3. I have been given a projected social security payment i would receive at age 66 1/2. Is this amount dependant on my working until age 66 1/2 or can I stop working before that age and still receive the full amount when I apply for S.S. benefits at 66 1/2?

  4. THANK YOU! Although I’m not sure it would be higher, I qualify to receive social security benefits based on my ex-husband’s income. Social Security’s site says that I can receive on his once I reach full retirement age (67) and delay mine in order to get more later. I understand others to say that I would get a “combination” of the two and I would receive the higher amount. Which is true, can I delay mine and do I have to wait until FRA to draw on his? If I would be drawing totally on his at age 67 can I begin to draw mine at age 62 and change over to his at age 67 without affecting the amount I’d receive from his? The reason I’m asking is that we divorced when I was 50 (ten years ago), he illegally got all we’d worked for,…I got the clothes on my back, so I will never be prepared to retire. I think I may be able to collect SS and continue with my current job as I earn less than $17K, the annual income limit for under FRA. I have full benefits, but no longer pay into SS. (I pay into OPERS but just started last year.)

    • Hi, Cheryl. Thanks for your questions. To be eligible for divorced spouse’s benefits, you had to be married to your former spouse for at least 10 years, and you cannot be eligible for a higher benefit on your own record. Also, keep in mind, if you were born before January 2, 1954, and have already reached full retirement age, you can choose to receive only the divorced spouse’s benefit and delay receiving your retirement benefit until a later date. If your birthday is January 2, 1954 or later, the option to take only one benefit at full retirement age no longer exists. If you file for one benefit, you will be effectively filing for all retirement or spousal benefits. For more information, visit our Benefits Planner: If You Are Divorced. We hope this helps.

  5. Great article! All are valid points in preparing for retirement. I believe another retirement planning mistake that would make sense on the list would be, not getting out of debt. Would you agree? Debt can take a huge chunk out of your savings if not properly managed. It’s important that you get in front of it early before it gets out of control.
    Melvin Pritchett

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