Date: June 22, 2020

3 Common Retirement Planning Mistakes

An American Institute of Certified Public Accountants survey of more than 1,000 adults found the following:

  • 49 percent are not confident about how they will finance their retirements
  • 29 percent said they’re not sure they’d reach their retirement goals
  • 20 percent said they don’t think they will ever reach their retirement goals

Even if you’re successful and cash flow is not a worry now, things may feel different when you stop receiving that paycheck or you sell your business, and you have to live on what you’ve set aside and invested.

As a financial advisor for more than 30 years, and a frequent commentator on CNBC and other business news channels, I’ve seen far too many people face financial uncertainty. At Heritage Capital, we work closely with all of our clients to help them get on track so they can feel confident again.

We all make mistakes, but why not learn from others’ mistakes so you don’t have to feel the pain? Especially when it comes to retirement planning. Once you are in retirement, mistakes are expensive and can come at a greater cost, since you won’t likely have the ability to make back losses easily. When losses occur, they can be devastating. Remember, retirement is one of the few things in life you don’t get a “do over” on.

I consider it part of my job to help my clients avoid mistakes. Not everyone has access to premier retirement planning services, so below are 3 of the most common mistakes you’ll want to avoid. Don’t hesitate to contact me with any questions.


Retirement planning is too important to put off. Contact Heritage Capital and get the conversation started.


Mistake #1: Emotional Investment Decisions

It’s hard to forget big stock market crashes like the Dotcom Bubble and the 2008 financial crisis. And we’re all currently experiencing the current crash brought on by the Coronavirus pandemic. These events set many retirement plans back years. When we hear it may happen again, it’s easy to make emotional decisions. At those times, it’s natural to feel fear as you watch your account balances drop rapidly. When it comes to your money, however, making decisions based on that fear can be dangerous. With retirement, that danger is magnified.

If you sell stock or other equity positions when the market drops without a sound, time-tested plan, you are literally locking in losses before there is any chance of recovery. In essence, you end up withdrawing money from the market at the worst possible time.

That means we need to fight our natural human instincts when it comes to investing decisions.

We naturally feel safest with the crowd, so we tend to chase performance of yesterday’s winners. But this can be devastating if we’re not doing the things we need to do, like rebalancing, playing defense at the appropriate times and reviewing our risk tolerance. We also tend to panic and sell at the wrong time.

When we go through these periods of declining prices, we tend to stop buying stocks and other equities. But in reality, these are the times when risk is usually less, and we can make up ground by buying during bear markets.

Sadly, many DIY investors underperform the market indexes, even when they buy index funds, since they typically panic and sell into the teeth of the downturns.

At Heritage Capital, I work closely with our clients to educate them about these behavioral tendencies. When you work with a financial advisor who has studied the markets and understands how to avoid the emotional mistakes that we’re all prone to, you have a better chance of keeping what you’ve earned and being in a better position for retirement.

Mistake #2: Filing for Social Security Without Examining Your Options

Another common retirement planning mistake is automatically filing for Social Security benefits when you retire. Many people do this without thinking, but there are several things you should consider first.

For example, have you really thought about when you should start drawing benefits? Do you have a planned strategy in place that can help you collect more each month? By simply waiting to file for Social Security benefits until you are age 70, you can increase your Social Security payments by 8 percent for each year that you wait. And that doesn’t even include the annual Cost Of Living Adjustments (COLAs). If you can hold off, this can be a smart strategy. Getting 8 percent per year plus COLA without risk is a rare opportunity that, in most instances, should not be passed up.

And that’s just one strategy.

Don’t make the mistake of automatically filing at age 62 because you can. Instead, find the strategy that makes the most sense for your situation. And run the various analysis and “what if” scenarios. The payoff can be significant. If you have questions, contact us.

Mistake #3: Not Taking Advantage of Catch-Up Contributions

Another common mistake we see people make is not taking advantage of “catch-up contributions” on retirement accounts.

This is new information for a lot of people, but the catch-up contribution provision was created by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) so older individuals would be able to set aside enough savings for retirement. Later, it was made permanent.

Basically, this provision allows you to set more aside each year in your retirement plan, starting at age 50. This applies to most retirement accounts, including IRAs, 401(k)s, 403(b)s, 457s and Thrift Savings Plans.

An additional catch-up contribution is allowed for Health Savings Plans.

The Takeaway

Retirement planning can be complicated. There’s a lot to remember. And there’s, unfortunately, a lot of ways to leave money on the table. That’s why many people put it off. And put it off. And put it off. Which is another common mistake – you don’t want to wait until it’s time to retire to see if you can actually afford to do so.

For a lot of people, it pays to work with a financial advisor. A financial advisor can provide objective advice while guiding you to find retirement planning strategies that work for you. A financial advisor should also review your plan to make sure you don’t miss something significant and help you avoid expensive mistakes.

Simply put, working with a financial advisor can be the difference between an expensive mistake and premier retirement planning.


Paul Schatz, President, Heritage Capital