Financial Advisors Outline Common Retirement Planning Mistakes
Americans spend years saving for retirement without giving much thought to how those savings will eventually support them. Making the right decisions along the way will have a lasting impact on income, taxes, and financial stability later in life.
Greenway Financial Advisors LLC recently published an educational article addressing the most common issues that individuals and families face when preparing for retirement. The financial experts provide advice on planning gaps that tend to appear over time, often without people realizing the long-term consequences.
Procrastinating and Misjudging Expenses
Many people assume they will have time to “catch up” and begin planning later in their careers. Higher contributions later in life can help, but they rarely replace the benefit of decades of steady saving and letting compound growth do the heavy lifting.
The firm has also seen how frequently retirement income needs are underestimated, particularly when people expect expenses to drop in retirement. In reality, that’s not always the case. Healthcare costs, insurance, travel, and leisure activities can add up quickly.
Taking the time to project spending needs and revisit those projections can help reduce this risk.
Overlooking Inflation and Taxes
Even modest increases in the cost of living can have a significant impact over a long retirement. A 2% to 3% inflation rate can reduce purchasing power by nearly a third over two decades. Without realistic estimates, retirees may find that their savings do not stretch as far as expected. Medical expenses are often a particular concern, as they tend to rise faster than general inflation.
Taxes add another layer of complexity. Different types of retirement accounts are taxed in different ways, and withdrawals can affect overall income, tax brackets, and even healthcare premiums. The article explains that failing to coordinate withdrawals across taxable, tax-deferred, and Roth accounts can result in higher taxes than expected.
Social Security Claiming Decisions
The timing of Social Security benefits is another area where mistakes are common. While benefits can be claimed as early as age 62, doing so will permanently reduce monthly payments. Waiting until full retirement age (or later) increases benefits, but making this choice must take health, income needs, and other resources into consideration.
The article explains that Social Security decisions are most effective when viewed as part of a broader income strategy rather than a standalone choice. Because benefits are adjusted for cost of living, they often serve as a stable source of income later in retirement when other assets may be under pressure.
Relying on Too Few Income Sources
Overrelying on a single income source can leave retirees vulnerable to unexpected changes. Retirement income often works best when it comes from a combination of sources, including investment portfolios, pensions, real estate, or even part-time work.
“Retirement is dynamic,” the firm notes. To avoid uncertainty in the long run, planning should be closely tied to spending needs and planned withdrawals. This approach can provide flexibility and peace of mind when markets change.
A Broader View of Retirement Planning
Retirement planning requires ongoing attention to income needs, taxes, and inflation, as part of a strategy tailored to each family’s circumstances. Missteps often happen when decisions are made in isolation, without considering how one choice may affect another. Evolving from a "savings-only" mindset can be the difference between simple wealth accumulation and sustainable retirement income.
About Greenway Financial Advisors LLC
Greenway Financial Advisors LLC is a fee-only, fiduciary financial planning firm serving individuals and families in Massachusetts and across the United States. The firm focuses on retirement planning, tax strategy, and investment management, with an emphasis on thoughtful, long-term decision-making.
