The Anti-Retirement Plan: 7 Ways Your Financial Planning Could Keep You Working Forever

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Planning for retirement can be complicated, and there are plenty of little things that can end up stopping you from retiring when you want. Nobody wants to have to continue working just because they overlooked a preventable problem in the past. It’s always a good idea to run your retirement plan by a financial advisor before committing to it so you can get a second opinion. 

Here are some of the mistakes that could stop you from retiring on schedule, and how you can avoid making them.

1. Not Changing Your Spending Habits

When you’re living off your savings and Social Security benefits, your net worth is likely to slowly decrease instead of increasing like it used to when you were getting regular paychecks. This means that if you spend too much, you risk running out of money early. 

Plan out how much you can spend each year, and change your habits to fit that budget.

2. Not Preparing For Market Downturns

If your retirement portfolio crashes right as you retire, you may need to sell some investments before they have a chance to recover. Sometimes the stock market and other investments can take years to recover from a market downturn, and you probably won’t be able to wait until that happens before you start withdrawing money.

That’s why it may be a good idea to gradually move your money from riskier assets to safer ones like government bonds as you get closer to retirement. Your annual returns may be smaller, but there’s also less of a chance that you’ll lose a major chunk of your portfolio’s value to a stock market crash right before you need to start selling.

3. Collecting Social Security Before Reaching Full Retirement Age

If you choose to collect your Social Security benefits before you reach the full retirement age (67 for anyone born after 1960), it can significantly reduce your monthly benefits. If you start taking your benefits early, your payments are permanently reduced by a percentage for each month you collect before reaching full retirement age. Starting to collect your benefits at age 62, for example, would mean a permanent reduction of 30%. This may mean receiving less money when you need it most.

It may be better to wait and get the full benefit or even to delay past your full retirement age, which would increase your payments.

4. Not Considering Cost-of-Living Increases

The cost of living generally rises each year due to inflation. If your retirement planning doesn’t account for increasing costs over time, you might find that your savings aren’t stretching as far as you expected. 

Make sure you factor inflation into your retirement expenses. While you probably won’t want to have your money in risky assets once you’re already retired, certain safe investments, such as high-yield savings accounts, can help compensate for inflation. 

5. Relying On Just Social Security

If your retirement plan relies solely on Social Security, you may be in for a tough time. Social Security isn’t designed to be the only source of income for retirees. Instead, it’s supposed to supplement pensions, savings and other sources of retirement income.

The Social Security Administration says that the average American will need to have around 70% to 80% of their previous annual income each year during retirement. For the average worker, Social Security benefits will replace only 40% of their pre-retirement income. The rest will need to come from other sources.

Social Security benefits do get increases for cost-of-living hikes, but the program is already strained at the moment. At current tax rates, the Social Security fund may become insolvent and have to decrease benefits in 2033. It’s better to have savings and other sources to supplement your retirement income.

6. Planning For a Retirement That Isn’t Long Enough

Life expectancy rates are averages, which means that some people may live for less time, and some may live for more. If you underestimate your lifespan and plan for a shorter retirement, you could run out of funds later in life. 

Plan for your finances to last until at least age 90, or even longer, to ensure you don’t outlive your savings.

7. Not Planning For Healthcare Expenses

Healthcare is often one of the largest expenses for someone in retirement, but many people fail to adequately plan for that. Medicare covers a lot, but it doesn’t cover everything. You’ll likely need to cover supplemental insurance, co-pays, dental care, eyeglasses and other health-related expenses out-of-pocket.

It may be a good idea to set aside additional savings specifically for your future healthcare costs. You can also look into options like health savings accounts while you’re still working.

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