I Retired Without a Financial Planner and It Cost Me — Here’s Why

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For lots of folks, having a professional financial planner in their corner is considered mandatory when it comes to retirement planning. But not everyone thinks about it until it’s too late.

GOBankingRates talked with retirees Phil and Karen M. realize now they missed out by not having a financial planner. Here are the ways in which it cost them.

Underestimating Healthcare Expenses

“Our biggest mistake was not having a financial planner when we retired,” said Phil. “We didn’t have a full understanding of healthcare costs and tax implications, which ended up costing us.”

A financial advisor or planner could have given them a realistic estimate of healthcare costs in retirement, including future costs like skilled nursing home care. This helps protect retirement savings from being depleted too quickly.

Understanding Tax Implications of 401(k) Withdrawals

Financial planners help optimize things like 401k distributions so more of your money stays in tax-advantaged retirement accounts. This maximizes compounding growth inside that plan, rather than having to pay taxes on 401(k) money when withdrawn.

Maximizing Social Security Benefits

A financial planner working closely with Phil and Karen‘s family might have steered them towards delaying Social Security benefits until maximum retirement age. “I can’t lie, this one especially hurt as I always considered myself so good with money,” said Karen. “You live, you learn.”

Let’s say someone is eligible for $2,000 per month ($24,000 per year) in Social Security at their full retirement age of 67. If they claim Social Security at age 62, their benefits would be reduced by around 30%, down to roughly $1,400 per month. If they waited until age 70, their maximum benefit would be around $2,640 per month (32% higher than the full retirement age amount). So by claiming at age 62 instead of 70, they would receive around $14,400 less per year in Social Security income. Over a 25-year retirement, that could equate to $360,000 in lost Social Security income by claiming early and depleting retirement accounts too soon. If you have a good financial planner, they can help you understand what the right time is for you to retire — everyone’s unique and it’s worth seeking help to get the most out of your retirement.

That could yield higher Social Security payments down the road and ultimately maximize other assets like 401(k) money that’s tax-deferred in qualified retirement plans.

Avoiding 401(k) Tax Pitfalls

Based on what Phil and Karen learned, families should avoid taking money out of their 401(k) plans early, as it runs the risk of losing out on that compounded wealth. 

“To some this might seem like a no-brainer, but it isn’t for many people — myself and Karen included,” Phil said. “We just didn’t fully grasp how heavily raiding our 401(k)s before age 70 could torpedo our total retirement income down the line between taxes, missed compound growth and reducing our eventual Social Security payments. It was an expensive lesson in being patient with those accounts.”

The Value of Retirement-Planning Expertise

While their regrets are plentiful, Phil and Karen’s situation illustrates the real value professional financial planners can provide when preparing for retirement:

• Accurate healthcare cost forecasting for the long run
• Tax optimization across income sources and retirement accounts
• Social Security timing and maximization guidance
• Sustainable withdrawal strategies to make savings last
• Estate planning and leaving a legacy
• Objective, cooled-headed expertise to avoid rash decisions

By going it entirely alone, the couple was flying blind into some of retirement’s most critical financial areas. Partnering with an experienced financial planner could have helped avoid costly mistakes and kept their money working smarter.

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