4 Red Flags That Indicate Your Retirement Plan Won’t Last Long

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If you plan to retire at 65, you’re likely to have a lengthy retirement. For a man who retires at age 65, the average retirement lasts 19 years, and for women, the average retirement lasts 22 years, USA Today reported. With around two decades to fund in retirement, being financially prepared will require careful planning. However, many Americans can fall short of adequate funding without the right plan in place.

Here are a few red flags that indicate your retirement plan won’t last as long as you need it to.

You Don’t Have Clear Objectives

You should have a clear goal for each aspect of your retirement savings portfolio.

“One sign your retirement plan is inadequate is if all assets and objectives have not been identified,” said Jason Bernat, financial professional at American Financial Services. “If something hasn’t been identified, you won’t be able to set an end objective. Determine the purpose of the money in your retirement plan, whether it is for income, discretionary spending, to pass on to beneficiaries or used for other purposes.”

You Don’t Have a Realistic View of Your Retirement Expenses

If you’re just guessing at how much money you will need in retirement, you’re likely to fall short.

“Another sign your retirement plan is inadequate is if you are not well-informed about your expenses,” Bernat said. “If you are approaching retirement and you don’t know how much you are spending and where the money is going, chances are you won’t be able to manage your assets if it turns out you don’t have enough earned income coming in.”

You Have Too Much Risk

Your risk tolerance should decrease as you get closer to retirement, but many people don’t rebalance their portfolios to reflect this.

“Not identifying your risk tolerance and incorporating that in a plan may be a sign that your retirement plan is inadequate,” Bernat said. “Too many times, a plan is started because the market is on a run, but the plan isn’t reviewed and assets are exposed to more risk than they should have been. Now, you must play catch up. To combat this, try to have your financial plans meet a set objective and try to review the plan at least annually.”

You Have All of Your Savings in Tax-Deferred Accounts

Saving money in a tax-deferred account can be a great way to build retirement savings — but it should not be the only place your retirement nest egg is stored.

“A serious red flag when it comes to a proper retirement plan is keeping all your savings in tax-deferred accounts, such as IRAs, 401(k) [plans] or 403(b) [plans],” said Jessi Chadd, CFP, CEFT, chief wealth officer at Aspyre Wealth Partners. “It means every dollar withdrawn during retirement is going to be taxed. It’s equally important to build up after-tax savings in accounts like Roth IRAs, brokerage investments and high-interest savings accounts.”

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