Ignoring annuities is one of the top retirement mistakes, according to Mark Miller’s article “Top 10 Retirement Planning Mistakes” in Second Act. Compare annuities with other retirement vehicles and you’ll find that they are a great way to pay for your basic living expenses while protecting against the risk of outliving your money. The biggest risk mentioned in the article is a failure to plan. It is important to calculate what you’ll need for retirement and make a plan on how to get there. More than half of Americans live longer than they think they will. When you underestimate your longevity, you are just setting yourself up for a financial hardship.
Another common mistake is retiring before it is financially right to do so. Working a few more years keeps income coming in and gets more money into a work retirement account if you have one. Older workers need to keep on top of technology and stay in the game to maintain jobs longer and get new jobs if need be. Not saving enough is a huge mistake. Workers are only contributing about half of what experts say they should to their retirement plans. And those without typical retirement plans are simply not saving enough. It’s important for individuals to lower their risk as they get older. Taking on too much risk close to retirement can set you up for disaster if something happens in the stock market like the recent crisis.
Taking money out of your retirement plan early is a big mistake. If you switch jobs, transfer to another plan rather than taking the money out. Avoid early withdrawals for hardships or other expenses that come up. Plan for an increase in health care costs. They are inevitable as we age and many people use their life savings paying for health care and long term care costs. The final mistake made most often is ignoring the advice of a professional. Whether they tell you to compare equity linked cds or give you advice on a retirement plan, using a fee-based adviser could save you hardship down the road.