When you are just starting in your career, retirement can seem so far away, something you won't have to worry about for years to come. As you get closer to retirement age, you might want to go back in time and shake your younger self for not focusing on retirement planning sooner.

Although retirement regrets can happen to anyone, young or older, rich and not-so-rich, there are also plenty of things you can do to pave the way for a healthy and happy retirement. It starts with knowing what mistakes to avoid in retirement. Preparing for retirement can also involve following a checklist, so that you stay on track, no matter where you are in your career.

18 Retirement Mistakes to Avoid in Retirement Planning

A comfortable retirement isn't something that happens by chance. It involves careful planning on your part, often with the support of a financial advisor. Understanding your goals for your retirement years can help you get started with the planning process. So can understanding the mistakes people often make when it comes to retirement and knowing what you can do to avoid or correct them.

If you are still in the process of preparing and planning for retirement, here are some retirement blunders to avoid.

1. Not Having a Plan

In the U.S., people aren't particularly confident when it comes to their retirement plans. As of 2018, around two-fifths of people believed that their retirement savings weren't on track. About one-quarter of people stated that they had no retirement savings or retirement plan at all.

In some cases, people don't have a retirement plan or savings because they don't have access to an account through their employers. Around 56 percent of households have access to a retirement plan, either a defined-benefit plan such as a pension plan or a defined-contribution plan such as a 401(k), through their current or previous employer.

Even if your current employer doesn't offer a benefits plan or you own your own business and don't have access to an employer's plan, it is still possible to save for retirement. You can start with an individual retirement account (IRA) or, if you are a business owner, consider options such as a Simple 401(k) or a simplified employee pension individual retirement arrangement (SEP IRA).

2. Not Having a Retirement Goal Number

When you're working towards any goal, it can help to have a concrete target to guide you and help you see if you are making appropriate progress or if you need to change course or try something new. Regarding your retirement, your target can be how much you want to have saved by the time you retire.

No one set number will work for each person or household. Some recommendations say to have at least 70 percent of your pre-retirement annual income saved per year of retirement. Other suggestions say to set aside at least $1 million.

But if you plan on living large in retirement, you might need to allow for at least your full annual income each year. You also want to consider any medical issues or end-of-life concerns that can come up and make retirement living more expensive.

As you begin to plan for retirement, it can be helpful to sit down with an advisor and discuss your goals and dreams for your retirement years. Your advisor can help you choose a savings rate and a target that makes sense for you now and in the future. You can revisit your target amount and how much you are saving in later years, as your goals and desires might change with time.

3. Not Taking Advantage of Tax-Advantaged Retirement Accounts

If you have a 401(k) plan or a similar defined-contribution plan through your employer, contributing to it now doesn't just help you plan for the future, but it can also mean a lower tax bill. The contributions you make to a 401(k) or similar employer-sponsored plan are tax deductible and reduce the amount of your taxable income.

Even if you don't have an employer-sponsored plan available, you might still be able to take advantage of tax-advantaged retirement accounts. If neither you nor your spouse have an employer-sponsored retirement plan, you can deduct the full amount of the contribution you make to a traditional IRA from your income for the year. If you or your spouse do have access to an employer-sponsored plan, you can't deduct your contributions if your income is above $123,000 in 2019.

Another option worth considering is a Roth IRA. As long as your income is less than $137,000 if you are single or $203,000 if you are married and filing a joint return, you can contribute to a Roth IRA. The contributions you make to a Roth IRA aren't deductible when you make them. Instead, you make after-tax contributions to the account. However, when it is time to withdraw from the IRA, you don't pay tax on the original contributions or any earnings in the account.

A financial advisor can help you decide which tax-advantaged retirement accounts make the most sense for you and your retirement goals.

4. Tapping Into Your Retirement Accounts Early

There are a few ways you can tap into the money in your retirement accounts before you get to retirement. Often, accessing the money you've earmarked for retirement early can cost you considerably when you retire.

Some 401(k) plans offer participants the option of borrowing from the account then repaying the amount they borrowed, plus interest. The maximum amount you can borrow is $50,000 or half of what you have vested in the account if that's less than $50,000. Usually, the repayment term is for no more than five years.

You might think that it's okay to borrow from yourself since you are repaying the 401(k) loan with interest. The reality is that when you take a portion of your savings out of the account, you miss out on the chance for that money to earn interest and dividends as you repay the loan. There is also the risk that you will change jobs while in repayment. If that happens, you usually need to pay back the full amount borrowed right away.

In other cases, you can withdraw from your retirement account early and pay a 10 percent early withdrawal penalty, plus income tax on the amount if you are taking money from a 401(k), IRA or similarly tax-advantaged fund. Early withdrawals can be costly because of the penalty tax and because you miss out on the chance for your money to grow over the long term.

If you need access to quick cash, there are often less expensive ways to get it. You might be able to take out a home equity loan or a low-interest personal loan to help you get through a financial hardship.

5. Delaying Saving for Later

Have you heard the fable of the ant and grasshopper? During the summer, the ants worked hard to store up enough food for the winter. Meanwhile, the grasshopper spent the summer partying and playing music. When winter came, the ants were ready and had plenty to eat. The grasshopper, on the other hand, ended up hungry.

The moral of the story is that it's a good idea to start saving and preparing for the future as soon as possible.

On the other hand, it's also important to remember that, even if you didn't get a jump start on retirement planning and saving, it's not too late. Once you realize the importance of preparing for retirement, the sooner you begin doing so, the better.

6. Assuming You Can Get by on Social Security

If you have been paying Social Security taxes for years, it is natural to believe that some of your contributions should help to support you during retirement. Among elderly Social Security recipients, nearly 70 percent of single people and almost half of all married couples receive at least half of their income from Social Security.

But the amount people receive from Social Security is usually not enough for them to maintain their standard of living. In June 2018, the average retired person received $1,413 from Social Security, which is less than $17,000 annually.

Social Security can be a good supplement for retirement savings and income, but it shouldn't be the sole source of your income during your retirement years.

7. Ignoring Your Employer's Match

Some employers not only provide defined-contribution plans, but they also offer to match the contributions their employees make to those plans, usually up to a certain percentage of their income. If your employer offers a match, it's a good idea to take them up on it. At the very least, contribute enough to your plan to claim the match.

8. Spending Your Pay Increases

If your current salary is enough for you to live comfortably, it can be worthwhile to make the most of any pay raises you get throughout your career and to put that money into retirement rather than finding ways to spend it. 

If you get in the habit of living on less, you'll also be better prepared for retirement, as you will already know what you can comfortably live on and what you can do without.

9. Underestimating How Long You'll Spend in Retirement

It can be difficult to predict how long your retirement will last. Based on just birthdates and gender, the average 65-year-old woman can expect to live to age 86.7, and the average 65-year-old man is likely to make it to age 84.3. That means the average person who retires at age 65 might have to have savings to last or produce income for another 20 years or so.

It's better to err on the side of caution and over-estimate your retirement needs, rather than underestimate them. If you over-estimate and have money left over when you do pass away, it can go to your family or to a cause you support. If you underestimate, you might find yourself struggling to get by at a time when you need financial security the most.

10. Underestimating How Much Retirement Will Cost

The tricky thing about general retirement guidelines, such as save 70 percent of your annual salary or have $1 million stored away, is that they don't take into account any curveballs or surprises life might throw your way during retirement.

You might get sick during retirement, which can increase your cost of living, or you might become injured or ill and need to stop working earlier than you planned. It's a good idea to consider medical costs when you are preparing for retirement. You might want to create a separate planning category for medical expenses during your retirement years.

For example, you can set up a health savings account (HSA), depending on the type of insurance plan you have, and use that to save for medical expenses later in life. It can also be worth looking at long-term care insurance plans and costs to get a good idea of what you might need to spend if you do end up needing extended medical care.

11. Not Naming a Beneficiary on Your Accounts

When you set up a retirement account, you have the option of naming a beneficiary. The beneficiary becomes the owner of the account in the event of your death. While it might seem as if naming your beneficiaries is something to leave to your will or something to let your relatives figure out after your death, it's a good idea to make sure you have everything sorted in advance.

If there's a disagreement between your will and the beneficiary named on the account, it can create confusion after your death and keep the people you want to receive the money from getting it in a timely fashion. If you don't name a beneficiary at all, you might be forfeiting any say in who gets the account after your death.

12. Not Re-Evaluating Your Accounts From Time to Time

Your retirement plan isn't a "set it and forget it" item. It can be worthwhile to check in on it from time to time and to connect with your financial advisor to see if it's still on track to help you reach your goals. Evaluating the performance of particular stocks and funds over the years can help you decide if they are still worthwhile investments.

As you get nearer to retirement age, your advisor might recommend changing your plan or strategy somewhat to help you maximize income and reduce risk.

13. Cashing out Your 401(k) When You Switch Employers

When you change jobs, the retirement plan from your previous employer will typically reach out to you and let you know what your options are for the account. Depending on the policies of the company and how long you were with an employer, you might be able to leave the plan alone, cash it out or roll it over to a plan at your new employer or into an IRA.

The cash-out option might seem like the easiest option. It's also the most expensive, as it usually results in a penalty tax and income tax on the amount you cash out. If you don't want to leave the old employer's plan where it is, your best option is to roll it over into the 401(k) plan at your new job or an IRA. You'll avoid both the penalty and income taxes if you do a direct rollover.

14. Assuming You'll Never Need or Want to Retire

You love your job. You're in good health. You can't foresee a day when you're going to give it all up and start relaxing on your porch in a hammock.

Even if you can't see yourself retiring, it's still a good idea to make plans for it. There's no way to predict the future, and it's always better to be prepared than not.

Even if you do end up working for the rest of your life, having retirement savings will give you plenty of financial freedom and flexibility. You'll be able to dictate what your money does for you, rather than worrying about what you need to do for money.

15. Putting All of Your Eggs in One Retirement Basket

If your company gives you the option of buying its stock, either as part of your retirement plan or as a separate benefit, it can be worth doing so. But you don't want your portfolio to be only company stock.

It's a good idea to have a balanced, diversified portfolio.

When your portfolio is balanced, if one company or industry takes a hit, your entire retirement balance won't plummet. A financial advisor can help you put together a portfolio that's well-rounded and gives you peace of mind.

16. Being Too Conservative or Too Aggressive With Your Investments

Some people like to play it safe and keep their money out of the stock market. Others take an "anything goes" approach and might be more willing to invest heavily in stocks. Either tactic can affect your overall income during retirement.

If you are too conservative, you risk not getting a high enough return on investment. If you are too aggressive, there's the chance that you'll lose money from your accounts. A financial advisor can help you understand how to balance your investment accounts and how to make decisions that are within your comfort zone while still maximizing your potential return.

17. Saving Too Much for Retirement Too Early

Although it's good advice to start saving for retirement when you're young, it's important not to go overboard. It is possible to over-save.

How can you know if you're saving too much for retirement, too soon? If your savings plan is making it difficult for you to achieve other financial goals, such as paying down your student debt or saving up a down payment on a house, you might be saving too much. Creating a list of financial goals and a timeline for achieving them can help you see where you should focus your savings efforts for the time being.

18. Choosing Debt Repayment Over Retirement Saving

If you are under the age of 30, it's likely that you have student loan debt. The median debt amount for people with a bachelor's degree is $25,000. The median debt is $45,000 for people who have earned a post-graduate degree.

When you have debt, it's understandable that you'd want to pay it off quickly. But it's not always a good idea to put off saving for retirement to do so. If you spend five years focusing only on debt repayment, that's five years that your money doesn't have to grow.

A financial advisor can work with you to put together a plan that allows you to pay down your debts while still making plans and saving for the future.

What Not to Do When You Retire: 6 Mistakes to Avoid After Retirement

Planning for retirement is just the beginning. Once you reach retirement age and have either left the workforce or significantly cut down on how much you work, you can take steps to maximize your retirement income and make your savings last. Here are a few retirement mistakes Boomers should avoid:

1. Not Making a Tax-Advantaged Plan for Retirement Distributions

When it comes time to begin taking distributions from your retirement accounts, what order should you take them in and how should you set things up to maximize your tax advantages? While you don't want to sacrifice your return on investment in exchange for tax-free living, it can be helpful to do what you can to minimize your tax burden during your retirement years.

At this point, it can be beneficial to work with your financial advisor and a tax planner to decide where to begin taking distributions first and which assets you can leave alone until later.

2. Moving Somewhere Exotic and New Immediately

If you've long dreamed of relocating to a warmer location during retirement, it might be a good idea to test the waters first before you make a permanent leap. From selling your home and finding a new one to packing up your belongings and hiring movers, the process of moving is expensive and time-consuming.

It's a good idea to make sure moving to Florida or California from the Mid-Atlantic or Northeast is something you want to do before you do it. One option is to try out a short-term rental in the area where you're considering relocating. During that time, you can rent out your property back home. If you like it, you can make the leap, sell your home and buy in the new area. If you don't, you can come back home again easily.

3. Tapping Into Social Security Too Early

If Social Security is part of your retirement plan, know when to begin taking payments to maximize the amount you receive. Social Security benefits can start between the ages of 62 and 70. If you can wait until full retirement age, you will receive the full amount of your benefits each month. If you begin taking benefits early, the amount is reduced by up to 30 percent.

Other factors might determine when and whether you claim your Social Security benefits, such as your income. If you're not sure how to approach Social Security or whether it should be part of your retirement plan, your financial advisor can provide guidance.

4. Being Too Supportive of Adult Children

Plenty of Boomers find themselves with boomerang children — adult children who have come back home after graduating from college or still depend on their parents for support. Although it's natural to want to help out your children, no matter how old they are, it's important not to support them so much that your quality of life during retirement suffers.

If you can afford to help your kids out with education or a down payment on their first home, then by all means, do so. But don't feel that you need to continue to financially contribute to their lives, especially if they have jobs and incomes of their own.

5. Spending Like There's No Tomorrow

As you get nearer to retirement, it's a good idea to look closely at what you have saved so you can create a budget for how you'll use that money during your retirement years. It's relatively easy to spend more than you anticipated during your first years of retirement if you haven't carefully mapped out a plan for your assets.

6. Not Having an Estate Plan

If you haven't already created a will, named a power of attorney or found someone to act in your stead if you become incapacitated, the beginning of retirement is the time to do so. It's also the time to revisit any existing wills and plans, especially if your circumstances have changed due to divorce, the death of a spouse or changes in your financial situation.

Creating an estate plan now ensures that your loved ones will know what your wishes are after your death. It can also help them avoid paying hefty estate taxes, depending on who you name as your beneficiaries.

How to Prepare for Retirement: A Retirement Planning Checklist

One way to avoid retirement regrets is to start preparing for retirement as soon as possible and to have a plan in place throughout your working life. A retirement planning checklist can help guide you from the day you begin working until you finally say goodbye to the workforce.

Even if you're not new to the working world, you can still use the checklist to get started saving for retirement and to make adjustments to your plan along the way.

1. Envision Your Retirement

The first thing to do to plan for retirement is to think about what it will mean for you. Do you plan on relaxing and spending more time with your family? Or do you and your partner hope to travel the world or try new things?

It's also useful to think about how much time you have between now and retirement. If you're 25, it might be 40 or 45 years before you're ready to leave the workforce. If you're 50, it might be 15 years.

Knowing how long you expect to keep working and the lifestyle you want in retirement will help you set a target amount and decide how much to save annually.

2. Open a Retirement Account

While you can save for retirement in a regular saving or investment account, it's often a better move to take advantage of a plan through your employer, an IRA or a self-employed retirement plan option, such as a Simple 401(k) or SEP IRA. In some cases, you might be able to open multiple accounts.

For example, you might be able to contribute to a plan sponsored by your employer and to either a traditional or Roth IRA, depending on your income. Doing so lets you maximize the tax-advantaged contributions you can make to retirement throughout the year.

3. Set a Savings Goal

Knowing what you want retirement to look like and how far away it is can help you establish a savings goal. You can go about setting your goal a few different ways. You can focus on saving a percentage of your income, such as 10 or 15 percent of your annual salary. You can also decide to save a specific amount monthly, such as $1,000. Keep in mind that the 401(k) contribution limit is $19,000 and the IRA contribution limit is $6,000 for 2019.

It's important to set a goal you are comfortable with, based on your age and retirement goals. A financial advisor can help you examine your current budget, income, expenses and net worth to determine what a good savings rate for retirement might be.

4. Put Together an Investment Strategy

About three-fifths of people with self-directed retirement accounts don't feel comfortable managing those accounts on their own. There's good news, though. You don't have to put together a strategy for your investments or figure out the best places to invest your money on your own. When you find a financial advisor you can trust, you listen to their advice and make investments based on their recommendations.

A financial advisor who acts as a fiduciary is legally required to act in your best interests. That means they will make recommendations to you based on what is best for you and what will help you achieve your goals.

5. Make Plans for Other Financial Goals

You don't want to forsake all other financial goals in pursuit of retirement planning. It's best if you find a way to work retirement saving and planning into your other major financial goals and plans. Along the way, have a strategy for paying down debt, buying a house and saving for your children's college. A financial advisor can help you fit the pieces of your financial life together.

6. Revisit Your Plans Regularly

Life is unpredictable, which means that your retirement needs, wants and plans are likely to change. It's worth checking in on your accounts and plans every so often to make sure they are still performing the way you and your advisor anticipated and still align with your overall goals.

It's also worth making adjustments now and then to your goals. Perhaps as you get nearer to retirement, you get bitten by the adventure bug and decide you'd rather travel than stay close to home.

On a more serious note, you might get divorced or lose your partner and need to make plans for the future as a single person rather than as half of a couple.

7. Consider Sources of Income in Retirement

As you get closer to retirement, it can be worth considering the sources of income you'll have during that time. If you have a 401(k), you'll have distributions from that account. You might also have Social Security benefits. It can be worthwhile to think of other income sources, too.

For example, do you plan on buying property and renting it out? Do you have a pension from a former employer that you can access in retirement? A financial advisor can help you evaluate your income sources and create a plan to make the most of them.

8. Evaluate Your Needs as Retirement Gets Nearer

In the last few years before you retire, it's a good idea to take a long, close look at your accounts and start mapping out a plan for the years to come. If you aren't sure that you are adequately prepared to retire by your target date, what can you do to get more prepared? The years right before retirement are also an excellent time to consider your strategy for taking distributions during retirement.

How to Choose a Financial Advisor for Retirement

You don't have to navigate the waters of retirement planning on your own. A financial advisor can help you put together plans for the future that take your current resources and goals under consideration. Here are a few questions to ask to help you find a fiduciary financial advisor for retirement.

1. What Services Do You Offer?

First things first — it's essential the financial advisor offers the type of services you are looking for. Some focus on wealth management and retirement planning while others take a more holistic approach and will work with you to help you reach a variety of financial goals.

2. What Types of Clients Do You Typically Work With?

Some financial advisors have asset minimums and will only work with clients who have net worths above a certain amount or who have liquid assets above a specific amount.

3. How Do You Get Paid?

One way to sort financial advisors is by how they charge for their services. Generally, a person calling themselves a financial advisor might use one of three different payment structures:

• Commission-based: Commission-based advisors or brokers earn income based on what investments they sell. When it comes to providing financial advice to clients, this payment structure can create a conflict of interest, as the broker might recommend an investment that will boost their bottom line but that might not be in the best interests of their client.
• Fee-based: A fee-based advisor charges a fee for their services and collects a commission based on investments they recommend. Again, there can be a conflict of interest with this type of structure, as the advisor might recommend products that boost their profits but don't benefit their clients.
• Fee-only: Fee-only advisors charge a flat fee or hourly fee for their services. They don't earn a commission when a client invests in a particular fund or stock, meaning there is usually no conflict of interest.

4. How Do You Choose or Recommend Investments?

Financial advisors and brokers can recommend investments using one of two standards — suitability or fiduciary.

Under the suitability rule, the broker needs to make recommendations to clients based on the belief that those recommendations are suitable to the client. A broker who follows the suitability rule does not need to put the needs and interest of the client above their own needs and interest.

Under the fiduciary standard, an advisor needs to act in the best interests of the client at all times. Fiduciary financial advisors can't accept commissions on trades, nor can they put their needs above those of the client.

Why Choose a Fiduciary Retirement Plan Advisor?

It's in your best interests to choose a financial advisor for retirement who you can trust. One way to do that is to look for a fiduciary. Under the Investment Advisors Act of 1940, a fiduciary needs to follow five rules:

1. They need to put the client's interests first.
2. They need to act with the utmost good faith.
3. They must provide full and fair disclosure of all material facts.
4. They can not mislead clients.
5. They must expose all conflicts of interest.

When you work with a fiduciary advisor, you have the reassurance that any advice or recommendations they make to you are being made with your genuine best interests at heart. That knowledge can be very reassuring, especially as you make plans for your financial future.

Let FMA Advisory Help You With Your Retirement Plan

It is never too early or too late to begin planning for retirement and to start checking off items from your retirement checklist. FMA Advisory will work with you to put together a plan that meets your needs and helps you achieve your retirement goals. Give us a call or use our online contact form to set up your free consultation today.