The Top 10 Retirement Planning Mistakes

It’s easy to make big mistakes when saving and planning for retirement — and financial advisers say they see plenty of them.

Recently, investment management firm Natixis surveyed 2,700 financial professionals in 16 countries and asked them to identify the biggest retirement planning mistakes today’s investors make.

Following are the top errors these pros see. Avoiding these blunders will go a long way toward building a secure retirement.

10. Being too aggressive in investments

Financial professionals who cited this retirement planning mistake: 21%

To invest properly, you must walk a tightrope: A little risk is necessary to get to the other side, but being too aggressive can cause you to tumble to the floor below.

Some people want to make the big score fast. For most investors, that strategy doesn’t end well.

9. Underestimating real estate costs

Financial professionals who cited this retirement planning mistake: 23%

Quick quiz: What is likely to be your biggest expense in retirement?

Many people guess the answer is “health care costs.” But according to the U.S. Bureau of Labor Statistics:

“Housing is the greatest expense in dollar amount and as a share of total expenditures for households with a reference person 55 and older.”

Failing to account for the true scope of these costs is a major mistake too many retirees make.

8. Relying too much on public benefits

Financial professionals who cited this retirement planning mistake: 33%

Some people are under the mistaken impression that Social Security will single-handedly rescue their retirement. But as the Social Security Administration itself says, the public benefits program “was never meant to be the only source of income for people when they retire.”

However, if you are determined to lean heavily on this retirement benefit, check out “8 Tips to Retire Comfortably on Social Security Alone.”

7. Failing to understand income sources

Financial professionals who cited this retirement planning mistake: 35%

If you don’t know where your money is coming from, you are going to have a hard time budgeting for a month, let alone an entire retirement.

So, be sure to educate yourself about the sources of income that will support your golden years. Even better, stop by our Solutions Center and find a financial adviser who can help you craft a better retirement plan.

6. Forgetting to factor in health care costs

Financial professionals who cited this retirement planning mistake: 39%

There is some debate about how much health care will cost you in retirement. Fidelity says a couple who retired in 2022 can expect to spend more than $300,000 on medical expenses over their retirement. Others say that estimate is far too high.

However, there is little doubt that many retirees will need to dig deep into their wallets to pay for health care at some point.

5. Setting unrealistic return expectations

Financial professionals who cited this retirement planning mistake: 40%

When you invest, it’s fine to hope for the best. But expecting great returns with a sense of rock-solid certainty is a mistake.

The stock market historically has returned in the ballpark of 10% annually. But there is no guarantee that future returns will be that high. And too many people bank on even bigger returns in hopes of supersizing their nest egg.

4. Being too conservative in investments

Financial professionals who cited this retirement planning mistake: 41%

The other side of taking too much risk is being far too cautious.

With any luck, your retirement will last at least a couple of decades. You will likely need to take some financial risks — typically in the form of investments in stocks — if your nest egg is going to generate enough income to provide for your needs year after year.

3. Overestimating investment income

Financial professionals who cited this retirement planning mistake: 42%

You might think saving $1 million will put you on the glide path to a luxurious retirement. However, many financial advisers recommend withdrawing just 4% of your investments annually during retirement. Some suggest withdrawing even less.

If you spend 4% of $1 million, that’s just $40,000 a year. Sure, you can live off $1 million in retirement — but only if you are realistic about the lifestyle that type of money really provides.

2. Underestimating how long you will live

Financial professionals who cited this retirement planning mistake: 46%

Retirees are living longer than ever. That means your nest egg has to last longer, especially if you develop expensive medical conditions — or have to pay to live in senior living or a nursing home.

1. Underestimating the impact of inflation

Financial professionals who cited this retirement planning mistake: 49%

After many decades of low inflation, prices suddenly have surged over the past couple of years. Perhaps inflation will subside in the next year or so. Or maybe we are looking at many years of rising prices.

If inflation remains embedded in the economy, the money you have saved for retirement will lose its value quickly. So, although no one knows for sure what will happen to prices in coming years, it’s a mistake to simply assume all will be well.

If you are looking for ways to tame rising prices, check out “10 Sure-Fire Ways to Beat Inflation.”