The Top 5 Common Retirement Mistakes

Retirement should be a time of relaxation and enjoyment, but without careful planning, it can quickly turn into a financial nightmare. At Iowa Retirement Benefits & Solutions, we’ve helped countless clients navigate the complexities of retirement planning. Recently, our advisors put our heads together to identify five common (and costly) mistakes that can derail even the best retirement plans. In no particular order, here’s what you need to know to avoid them.

1. Managing Social Security and Medicare Inefficiently

Social Security and Medicare are critical components of your retirement plan, but they’re often mismanaged or approached as a one size fits all solution. Claiming Social Security too early or too late, failing to consider spousal benefits, and not coordinating Medicare enrollment can all lead to significant financial losses. The right strategy can maximize your benefits and ensure you don’t leave money on the table.

Tip: There are 81 different filing strategies for a married couple. Work with a financial advisor to create a personalized strategy that analyzes the different Social Security strategies available to your specific situation and overall retirement goals.

2. Not Taking Advantage of 59 1/2 In-Service Rollovers While Still Working

If you’re still working past age 59 1/2, you have a unique opportunity to roll over a portion of your retirement savings into an IRA without leaving your job or paying additional fees or taxes. This can give you more investment options, better control over your retirement assets, and the ability to plan more effectively for the future. Unfortunately, many people don’t realize this option exists or fail to take advantage of it.

Tip: Get with an advisor to consider an in-service rollover to diversify your investments and potentially reduce your tax burden in retirement. This can be a game changer in retirement!

3. Falling for The Retirement Deception

We call this mistake “The Retirement Deception.” It’s the misguided belief that you can keep the same investment strategies you used during your working years without any adjustments. We also challenge the notion that a simple, one-size-fits-all approach to retirement planning works for everyone. In truth, retirement is complex, and what works for one person may not be suitable for another. Relying on generic advice or outdated strategies can result in inadequate income, unforeseen expenses, and a retirement that doesn’t live up to your expectations.

Tip: Seek tailored advice that considers your unique financial situation, goals, and risk tolerance. A customized retirement plan is essential for long-term success- especially if you’re planning to take income out of your investment accounts!

4. Using Incorrect Retirement Assets to Address Income Shortfalls

Not all retirement assets are created equal. Using the wrong assets to cover income shortfalls can lead to unnecessary taxes, penalties, or even depleting your savings too quickly. Whether it’s withdrawing from tax-deferred accounts too early or selling off investments in a downturn, the wrong move can be costly.

Tip: Come up with a strategy with your advisor that accounts for which accounts to draw from and when. This approach can help you minimize taxes and ensure your savings last throughout retirement.

5. Paying More Than Your Fair Share in Taxes During Retirement

Taxes don’t stop in retirement, and without proper planning, you could end up paying more than necessary. Mismanaging withdrawals, overlooking tax-efficient strategies, or failing to plan for required minimum distributions (RMDs) can significantly increase your tax bill, eating into your retirement income.

Tip: Work with your tax professional and financial advisor to implement strategies that reduce your tax liability. This may include Roth conversions, tax-efficient withdrawals, and timing your RMDs correctly.

Retirement planning is a lifelong process that requires careful attention to detail and a proactive approach. At Iowa Retirement Benefits & Solutions, we’re here to help you avoid these costly mistakes and guide you toward a retirement that meets your expectations. If you’re concerned about any of these pitfalls or want to ensure your retirement plan is on the right track, don’t hesitate to reach out to us for a consultation. Your future self will thank you!

Investment advisory services are offered through Fusion Capital Management, an SEC registered investment advisor. The firm only transacts business in states where it is properly registered or is excluded or exempted from registration requirements. SEC registration is not an endorsement of the firm by the commission and does not mean that the advisor has attained a specific level of skill or ability. All investment strategies have the potential for profit or loss.