3 common retirement planning mistakes

May 09, 2024

Allworth co-founder Scott Hanson reveals three retirement planning mistakes that he sees folks making way too often.

When you hear the word “retirement,” what pops into your head?

Some people envision a ledger showing the amount of money they’ve saved. Others imagine sipping ice-cold champagne and flying first-class to Rome. And still for others, the word “retirement” elicits an emotion that is equal parts excitement and dread.

In a world with few absolute certainties, the one thing you can do to make retirement your own is to plan. Because planning helps protect you from the unexpected.

Here are three of the most common retirement mistakes that thorough planning will help you avoid.

1. Hastily relocating to a fantasy vacation spot

I don’t want to rain on your parade, because relocating to your favorite vacation locale can still be a dream come true.

But beware of overlooking seemingly trivial things because they can be the difference between success and frustration.

Case in point: Have you ever tried to open a bank account in another country? Even with a $1 million (or more) balance, it’s not simple. In countries throughout Europe, you often need a local address before you can open the account, and yet you may need a local bank account before you can rent a place to live.

And don’t forget healthcare. Get coverage before you leave the States, and take note, they don’t recognize Medicare in Rome (or anywhere outside the U.S., for that matter).

Yes, money opens doors, but it alone doesn’t cut through the red tape that trips up and delays, sometimes for years, successful moves. So, plan early and in detail.

Also, remember that large transfers of U.S. dollars into a foreign currency are not something you should undertake on your own. Exchange rates rise and fall by the second, and that means that the foreign currency value of a $50,000 transfer could fluctuate substantially if the rates suddenly tip the wrong way.

There are agencies and expert immigration attorneys that specialize in relocations abroad for retirees of means. After you choose a destination that you know well, discuss your plans at length with your advisor.

2. Supporting your adult children

I know.

And if you’ve accrued several million, this may not apply to you (though even then, it might). But if your total retirement savings is more modest, the money you are spending to enable your adult children to earn a master’s or to host a destination wedding could well cost you dearly down the road.

I’m all for college, nice celebrations, and making memories. You only go around once.

But the mystique of a degree from a “prestigious” university is not what it once was, and, along with prolonged health emergencies, the primary reason you’re likely to run out of money during retirement is simply because you haven’t saved enough.

Better to have it and not need it than to need it and not have it.

With that in mind, it’s probably better for everyone if you build a nice legacy to leave to your children than to spend it now and then need to move in with them later.

3. Investing too conservatively

Depending on your individual situation, your investment risk exposure should likely change the closer you get to retirement.

But third among the biggest retirement planning mistakes I see people make is that, due to a lack of perspective, they invest too conservatively.

Sometimes for years.

Case in point: Since 1926, the S&P 500 has averaged just over a 10% return per year. ¹

Yes, it goes up and down. Yes, without someone to coach you about behavioral finance and help you maintain perspective during rough markets, my experience has been that people are more likely to make bad financial decisions.

Which is why you need to build a plan for the long term and stick to it.

And, of course, bonds and CDs and other vehicles have a place in most diversified portfolios. But remember, the stock market isn’t just for pre-retirees, because your money needs to continue to grow so it can fund a long retirement. The reality is you could be retired for 30 – even 40 – years! Your savings needs to keep working for you.

So, take note: Retirement should not automatically represent the end of your stock portfolio.

Do you have a question related to money, investing, or finance that you’d like answered? Submit it to our Money Matters podcast and our team will contact you. My co-host Pat McClain and I would love to help you out.

^[1]^{S&P 500 Returns since 1926 (officialdata.org)}

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⁶ 2021 Value of an Advisor Study / Russel Investments

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⁹NBRI Best in Class Ethics 2023. The Best in Class level is bestowed upon clients performing at or above 90 percentile of the NBRI ClearPath Benchmarking Database.

^✢ Scott Hanson, Investment Advisor 2005, 25 most influential people in the financial services industry. The ranking reflects 25 people who Investment Advisor magazine believes have had or will have the greatest influence on the financial services industry.

^✼Pat McClain, InvestmentNews 2014, Invest in Others Community Service Award, presented to an advisor who has made an outstanding impact on a community through managerial contributions to a non-profit organization.

^†Financial Times, FT 300 Top Registered Investment Advisers, June 2019. The ranking reflects six areas of consideration including the company's years in existence, industry certifications of key employees, AUM, asset growth, SEC compliance record and online accessibility and calculates a numeric score for each company.

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