I’m a Financial Planner: 5 Retirement Moves You’ll Regret in 10 Years
Written by
Marc Guberti
Edited by
Zuri Anderson
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Financial planners help people make better retirement decisions, but through their years of experience, they often see the same mistakes play out over and over again. While working with a certified financial planner (CFP) can give you more clarity, you can get a lot of mileage out of your current financial plan if you avoid some of the most common mistakes.
Matthew Boersen, CFP, is the managing partner of Straight Path Wealth Management and served as the 2024 chair of the Board of Directors for the CFP Board. He shared with GOBankingRates some of the biggest retirement mistakes people will regret in 10 years.
Choosing the Wrong Investment Allocation
Portfolio construction isn’t something that you set and forget. It’s a process that evolves as your financial situation and long-term goals change. Boersen explains how choosing the wrong asset allocation can hurt retirees.
“We see this mistake happen on both extremes,” he said. “Some retirees get so nervous that their 401(k) [plan] or IRA needs to provide income for the rest of their life, that they can not stomach the possibility of the portfolio dropping. Because of this, they overemphasize conservative investments and stunt the needed growth in the portfolio long-term.”
“Alternatively, we see retirees get excited about significant market gains and thereby take on too much risk in the portfolio, exposing themselves to substantial market losses, which could result in them having to return to work part-time or significantly reduce their spending,” Boersen concluded.
Not Optimizing for Taxes in Retirement
You’ll have to pay taxes for the rest of your life, but if you don’t continue to stay on top of them in retirement, you can end up owing a lot more than necessary.
“Many retirees are used to being W-2 employees, with only a few basic tax planning techniques at their disposal. However, many people do not realize that when they transition to retirement, they receive much more control over how much taxable income they recognize and the timing of that,” Boersen said.
He suggested blending their retirement withdrawals between pre-tax, Roth and non-retirement accounts to minimize how much they end up paying.
“Detailed tax planning for not only the current year but with the next 15 [to] 20 years in mind, can often save 10% or more in taxes,” Boersen said.
Not Updating Their Estate Plan
Not updating your estate plan can create unnecessary complexities for your heirs, and it’s best to have it written in detail. Boersen recommends reviewing your key estate details every three to five years and explains what the review process should look like.
“This includes rereading your trust to ensure the distributions outlined fit your desired goals, making sure your power of attorneys, wills and healthcare documents still carry out your wishes, and ensuring your beneficiary designations on retirement accounts and life insurance are correct. Retirees commonly think that updating their trust automatically updates their IRA or 401(k) beneficiary designations, which is not true,” he said.
Not Creating a Budget
If you don’t know your monthly expenses, you risk outliving your nest egg. Once you create a budget, you must stick with it, as Boersen explains.
“Being intentional about the planning, setting a budget and then sticking to it is important. It doesn’t mean the budget can’t change or it shouldn’t adapt to changing priorities, but having one in place and tracking your spending is important,” he said. “I have numerous stories about seemingly successful retirements that went off the rails because spending ballooned each year more than anticipated.”
Not keeping a budget risks losing too much money on splurges.
It’s sometimes difficult for clients because, in reality, one-time unexpected expenses rarely have a large impact on the plan. But when that “one-time” extra withdrawal turns into an annual thing, the long-term success of the retirement changes quickly,” according to Boersen.
Waiting Too Long To Spend Their Money
While avoiding a budget can result in overspending, you don’t want to underspend either. Some people try to enjoy their nest eggs a bit too late and penny-pinch for too long.
“For a growing group of retirees, one of their biggest challenges is not actually spending the money they worked and sacrificed to save. They are so used to an extreme saving mindset that they continue to live too frugally in retirement out of concern for some large, unknown, and unlikely expenses later in life,” Boersen said. “In fact, most research shows a drop in spending in the late 70s and early 80s as people slow down and no longer want to travel or do as much. People artificially planning on spending in those later years miss opportunities to enjoy their healthy years more fully.”
You never know when a health issue may come up. It’s good to enjoy your money responsibly.Â
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