September 18, 2013

Do You Make These 7 Retirement Mistakes?



A satisfying retirement doesn't just happen. When I stopped working in 2001 I assumed a lot of things that turned out not to be true. My early years were a work in progress with a lot of on-the-job training. Over time, the pieces began to fall into place. The last six years have been the most creative and joyful period of my life. But, some incorrect assumptions made the transition rougher than it had to be.

Here are  seven "assumptions" that can derail or delay your happy retirement lifestyle:


1) Assume everything will work out the way you want.  Your left a job, you didn't leave planet earth. No one gets through any stage of life without a few curve balls here and there. Some of us actually take a fastball to the head. Being flexible is a necessity.

2) Assume your planning is solid and will need little or no adjustments. Much like the assumption above, for me retirement has proven to be a time of constant adjustments. My goals, interests, and financial situation are not static. Neither is my 5 or 10 year plan. And, that is OK.

3) Assume your wife or husband has the same goals as you for retirement. Assuming anything in a long term relationship is risky, but thinking that you and your spouse or partner want exactly the same things from retirement without discussing it first is not likely to be your best decision. Save a lot of grief by talking through what you both want before you are home full time.

4) Assume your employer will not change any of your retirement benefits. Read the paper and the Internet. It is safer to assume your employer will look for ways to reduce his commitment to your pension and health care. He isn't evil, he just can't afford to fulfill promises made years ago. The world has changed too much.

5) Assume you (and any one else you are responsible for) will never have a serious health problem. Just because you have been healthy so far is absolutely no guarantee of the future. Flip a coin and have heads turn up four times in a row. Assuming that tails is "due" is wrong. Past behavior or conditions do not always predict the future, especially with an aging human body.

6) Assume that when you retire a budget is no longer needed. A budget got you to retirement. A budget will get you through retirement. In fact, when your income is more likely to be fixed, you have less margin for error than when a regular paycheck was part of your world.

7) Assume you can spend heavily in the early years and then cut back as you age. In a world that was completely predictable, this might work. But, what happens when you are faced with a large health care bill several years down the road? What happens when your income drops because your investments are not producing at the same level? What happens if you are wrong and expenses don't drop enough to make up for your lavish years? Front-loading your retirement with a more lavish lifestyle comes with substantial risk.


Of course, there are more than just the seven deadly sins of retirement assumptions I have listed. In your experience so far, what mistake has been most costly to you? What would you do over again if you could?

14 comments:

  1. It is number 7 that may be problematic for us because of the cost for medical insurance.

    Another mistake I see is that people assume their expenses will go down dramatically in retirement due to the costs of working. Neither of our careers required an expensive wardrobe. My husband's company cafeteria averaged $20 a week for his lunches. We might save 2 gas fill-ups a month.

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    1. Like you, my expenses for work-related expenses didn't fall all that much. Since I worked out of a home office or was traveling with all expenses paid for, laundry/dry cleaning was the only expense that has dropped to virtually zero. Oh, and the need to buy new sports coats, good slacks, or dress shirts ended, too.

      #7 is really for those folks who decide to travel around the world, take three other cruises every year, and make up for all the time when they couldn't indulge themselves. Medical costs are something that I wouldn't ever classify as a "mistake" or assumption. There is really no choice in that area.

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  2. When we retire we will lose ALL the overhead of running a business! Commuting costs/gas,car maintenance and traffic aggravation, business wardrobe, malpractice and personal liability insurances , high accountant fees, expensive vacations to
    "de- stress" (when we're relaxed we are pretty happy just going to the local mountains,! ) lunches and dinners out due to time pressures and exhaustion (when we are on vacation we LOVE to cook and eat at home !)

    All the points you mention are ones Ken and I are discussing.. it seems maybe I want to work part time while he retires, at least at the start so I give him room to explore what it is like to NOT WORK. I got my realtor icense and may want to work part time at that in the coming years..

    Health: Ken and I want time to exercise more , hike more, do yoga and explore Tai-Chi.When we pair these interests with LESS STRESS, we feel we will become healthier in retirement, although we have to plan ahead for age and whatever that will bring.. with OBAMACARE, if we make less money we will be eligible for better benefits? We'll see in about 15 days!!!

    We are both realizing there are no absolutes.. you have to plan as best you can, allow for Plan B,Plan C, up to Plan XYZ!!!!
    Then,just take the plunge!!

    Thanks Bob, as usual, for a thoughtful post!





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    1. I fully expect all the web sites that are supposed to have all the health insurance exchange information on October 1st will be either not ready, incomplete, or overwhelmed with traffic. I don't plan on even attempting to look until November.

      It will be fun to hear about what happens when you and Ken do take the plunge. I know there has been a lot of thinking and planning, re-thinking and re-planning to get you this far. But, you are in the home stretch.

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  3. I'm guilty of making two of your assumptions. I wanted to make a third -- assuming your spouse has the same goals as you for retirement -- but she wouldn't let me!

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    1. At least you've kept your excellent sense of humor.

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  4. I will take these under advisement and make the needed changes.

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  5. Love #1. Am currently dealing with a "knuckleball" to the head (or maybe I'm the knucklehead, since I notice that much of the time, like many folks, I'm my own worse enemy, lol) I'm also the one learning to budget as a retiree & would HIGHLY recommend for anyone that they learn to do that as early as possible. It's another skill that practice makes better,if not perfect.

    Haven't reached Plan XYZ yet, but bet I will!

    pam

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    1. Retirement is definitely a process, not a simple trip from point A to point B.

      Living within a budget is the single most important thing you can do before and after retirement. I believe it is the only way to make it all happen.

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  6. You mean these assumptions aren't all true?! Gosh, I've made all of them except the spouse one (since I'm single). Fortunately, I have learned many of these lessons before too much damage was done. The hardest one for me still is not having enough time to do everything I want to do. I assumed that retirement somehow would expand time to more than 24 hours a day.

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    1. For many pre-retirees these assumptions are true. Most of us learn that certain assumptions can be dangerous to our retirement health and well-being if not adjusted for reality!

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    2. Oh, Galen, BLESS YOUR HEART!!!! That was my exact assumption & the biggest adjustment I've had to make (well, maybe besides the whole budget thing, but I knew that was coming, lol) I honestly thought I was the only person ever to believe that. Thank you!

      Reality is wonderful & I am so glad I've found the blogs. It's a great way to remind me of that fact.

      pam

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  7. Hi Bob! This is an insightful post about retirement planning. We would like to inform you that we have featured this article in LTC Option’s Weekly Digest. You can read the whole compilation here http://www.ltcoptions.com/weekly-digest-top-6-blog-posts-on-long-term-care-and-more/

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    1. Thank you, Holly, for the nice comment and the inclusion in the Digest. Feel free to use any post.

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