What is the most reported retirement planning mistake? (2024)

FAQs

What is the most reported retirement planning mistake? ›

According to professionals, the most common retirement planning mistakes are time-related, like outliving savings or not understanding how inflation can affect a portfolio over time.

The Bottom Line

The worst retirement mistakes are probably not planning to retire at all, failing to take full advantage of retirement savings plans, mismanaging Social Security, making poor investment decisions and neglecting the non-financial side of retirement.

Answer: Underestimating the impact of inflation. Underestimating how long you will live.

One of the biggest regrets in retirement is actually retiring too early. While it may seem like the ultimate holiday, retiring prematurely can lead to serious financial challenges. It's important to ensure that you have a retirement plan in place and feel prepared for any scenario before making this decision.

Overspending, investing too conservatively and veering away from your plan — these are some of the most common traps you can fall into on the way to retirement.

According to U.S. Census Bureau Data, the average retirement age for women in 2016 was 63, compared to 65 for men. Other sources, like Forbes, quote the average retirement age at 65 for men and 62 for women as of 2021, which means women are retiring even earlier than men as time goes on.

Embrace the 30X thumb rule: Save 30X your annual expenses for retirement. For example, with annual expenses of ₹25,00,000 and a retirement in 20 years, aiming for a ₹7.5 Cr portfolio is recommended.

Depending on the year you were born, postponing taking Social Security until age 66 or 67 will allow you to receive full benefits. Based on 2021 data, men retire at an average age of 64.7 years, while women remain at work until age 62.1. Retirees at the age of 65 qualify for Medicare benefits.

The average retirement age in U.S. is 64 years old, with the average retirement age across all states spanning from 61 to 67 years old. The Social Security Act sets the minimum age to retire at 65 to receive full retirement benefits, although the minimum retirement age will continue to rise.

Which retirees are happiest? ›

“In similar research that we conducted a decade ago, we also found a strong relationship between happiness and planning, as retirees who expressed the highest levels of satisfaction were also those who took concrete steps to put their emotional and financial lives in order at least five years before retirement.

The average retirement savings for all families is $333,940, according to the 2022 Survey of Consumer Finances. The median retirement savings for all families is $87,000.

Even for people who chose to retire, saying goodbye to their career doesn't always bring happiness. Some feel anxious and saddened by the loss of routine and direction in their lives. Almost 1 in 3 retirees say they feel depressed – a rate higher than that of the adult population overall.

The 3% rule in retirement says you can withdraw 3% of your retirement savings a year and avoid running out of money. Historically, retirement planners recommended withdrawing 4% per year (the 4% rule). However, 3% is now considered a better target due to inflation, lower portfolio yields, and longer lifespans.

The 4% rule limits annual withdrawals from your retirement accounts to 4% of the total balance in your first year of retirement. That means if you retire with $1 million saved, you'd take out $40,000. According to the rule, this amount is safe enough that you won't risk running out of money during a 30-year retirement.

Don't touch your retirement savings

If you withdraw your retirement savings now, you'll lose principal and interest and you may lose tax benefits or have to pay withdrawal penalties. If you change jobs, leave your savings invested in your current retirement plan, or roll them over to an IRA or your new employer's plan.

Financially, the biggest change most people experience when they retire is the lack of a regular paycheck. Turning your retirement savings into regular cash flow for your household is often challenging.

You may grieve the loss of your old life, feel stressed about how you're going to fill your days, or worried about the toll that being at home all day is taking on your relationship with your spouse or partner. Some new retirees even experience mental health issues such as clinical depression or anxiety.

1. Twenty-six percent of retirees have regrets. Not surprisingly, retirees' biggest regret is financial, with 78% saying they're sorry they didn't save enough money or prioritize their finances.