Avoiding The Most Common Retirement-Planning Mistakes with Mark Biller

Jun 20, 2024

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It’s said that we learn from mistakes, not success…but do you want to experience that with your retirement savings?

No question, saving and investing for retirement is something you want to get right the first time. Mark Biller joins us today to help you avoid some of the most common retirement planning mistakes.

Mark Biller is Executive Editor and Senior Portfolio Manager at Sound Mind Investing, an underwriter of Faith & Finance.

Underestimating the Impact of Inflation

One of the most common retirement-planning mistakes is underestimating the impact of inflation. Many fail to grasp the destructive power of inflation’s compounding effect over time. For example, with a 3% annual inflation rate, a lifestyle costing $75,000 today will require $135,000 in twenty years. Understanding this helps retirees plan for sufficient income to maintain their standard of living.

Investing Too Conservatively

Another common mistake is investing too conservatively. While fixed-income instruments like CDs and bonds are important, they often do not keep pace with inflation. Retirees need to ensure their portfolios continue to grow by maintaining some exposure to stocks and equities to stay ahead of inflation.

Overestimating Investment Income

A realistic retirement plan should be conservative about projected returns. Withdrawing too much money too soon from retirement accounts can create problems later, especially with increased life expectancy. The general guideline is to withdraw no more than 4% annually from your portfolio, but this can vary based on individual circumstances.

Underestimating Lifespan

Many people underestimate their lifespan when planning for retirement. Statistics show that a 65-year-old man has a 60% chance of living to age 85, and a 65-year-old woman has over a 50% chance of living into her 90s. Planning for at least two decades of retirement is essential to ensure financial stability.

Forgetting to Account for Healthcare Costs

Healthcare costs are a significant consideration in retirement planning. While Medicare covers many expenses for those 65 and older, it doesn't cover everything. Supplemental insurance plans, out-of-pocket expenses, and potential long-term care costs must be factored into retirement plans. Building a Health Savings Account (HSA) during working years can help fund later-life health costs.

Utilizing Resources and Professional Guidance

Due to the many variables in retirement planning, avoidance of these common mistakes isn't always easy. Resources like MoneyGuide, a financial planning tool used by many advisors, can help by running "what if" scenarios. Additionally, seeking guidance from a financial professional, such as a Stewardship Advisor at SMI Private Client or a Certified Kingdom Advisor® (CKA), can provide valuable insights and help secure one's financial future.

While retirement planning is complex and unpredictable, diligent preparation and utilizing available resources can significantly enhance financial security. Learning from others' mistakes can help you better navigate your path to a comfortable retirement.

Read the article “Avoiding The Most Common Retirement-Planning Mistakes” from Sound Mind Investing to learn more.

On Today’s Program, Rob Answers Listener Questions:

Do I tithe 10% of each paycheck I receive from my three jobs? Or do I tithe 10% of my weekly income regardless of how many paychecks I receive?
My 401k is down over 51% from three years ago. Is there anything I can do to help it recover?

Resources Mentioned:

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