Ask a Retirement Plan Advisor: Avoid These 7 Retirement Mistakes

By Teresa Conley | January 15, 2017

We often speak with clients who are nervous about retirement; given the uncertain future of Social Security, increasing life expectancies, and unstable pensions, it's easy to see why many people are concerned.

Teresa Conley is a CFP, Certified Financial Planner and a 401(k) Financial Advisor with Premier Financial Group in Eureka Humboldt CountyA recent study by the Transamerica Center for Retirement Studies revealed some troubling statistics about the state of retirement readiness in the U.S. Only 39 percent of people surveyed felt that their nest egg was strong enough, and more than half of workers say they won't be able to retire at age 65. 

Fortunately, there are steps you can take now to ensure your financial security in retirement. Here are 7 mistakes that can derail your retirement. 

1. Prioritizing Paying Off Debt in Your Comprehensive Financial Plan

Many investment professionals advocate paying off non-mortgage debt first, rather than focusing on saving. While every individual has a different financial situation, consider that:

  • The bulk of your retirement comes from compounded returns, and that takes time to grow; delaying savings simply reduces the time you have to build compounded returns
  • Interest rates are low; negotiate with your lenders for better rates and save while you pay down debt

2. Saving for Education, Rather than Focusing on Retirement

Of course you want your children to have a bright future -- it's only natural to want to put money aside for their education. But neglecting your own financial future to help them simply doesn't make any sense. Consider that education loans have low interest rates, and your child has years left to pay off those low-interest student loans.

Teresa Conley is a CFP, Certified Financial Planner and a 401(k) Financial Advisor with Premier Financial Group in Eureka Humboldt County3. Not Including Stocks in Your Wealth Management Strategies

Spooked by the stock market? It's understandable -- but you're missing out. In the short term, the market is always going to have ups and downs. Over the long haul, however, it makes more sense to allocate portfolio assets toward stocks. Historically, bull cycles tend to last longer than bear cycles and produce gains that offset bear cycle losses. 

4. Paying High Investment Management Fees and Expenses

Do you know how much your mutual funds are really costing you? Take a look at your expense ratio: You shouldn't be paying much more than 0.25 percent in fees and expenses for a low-cost index fund.  And while you're at it - look out for funds that have a front or back-end load. 

5. Equity Lines of Credit: Not Sound Wealth Management

While a 30-year line of credit may sound great now, using your home as an ATM isn't a good idea. Taking out a second mortgage comes with high long-term costs, so avoid the temptation to borrow. And unlike the seemingly "free money" home equity era of the early 90's we all know now that home value retention is not a given.

6. Trading in Your Car Every Year

Yes, that new car smell is amazing... but is it worth risking your retirement security? Hanging on to your car Teresa Conley is a CFP Certified Financial Planner and Financial Advisor with Premier Financial Group in Eureka Humboldt Countyfor a few more years -- especially after it's paid off -- dramatically reduces cost of ownership over the long-term. That's more money you can add to your nest egg.

7. Not Taking Advantage of Your 401(k)

If your employer offers a 401(k), enroll immediately. Contribute as much as you can afford every month and take full advantage of their matching policy. Even if you have to start out small, it'll grow and compound over time. 

Avoiding these common pitfalls will help you grow your savings... and hang on to your nest egg.


Posted in Financial Planning, Retirement Planning