The Three Biggest Mistakes People Make When Planning for Retirement

Not knowing what your "number" is — The most important consideration for those planning for retirement is to understand what the cash flow need is. Without this information, you will never really know when you have achieved your retirement number (the nest egg you will need in order to generate the income needed for retirement). And without this number, you will never know how much risk to take with your money.

Too often this means that you might have taken on more risk than you needed to, which meant you may have lost more money than you should have in the down markets.

Jeannette is 62 and wants to retire within 3 years. She has accumulated $1Million in her portfolio. The good news is that she has actually hit her "number." Thebad news is that she doesn't know it. She ended up losing more than 30% of the portfolio in the market downturn which means she now cannot retire when she wished to. If she knew her "number," then she could have recognized that she had reached her retirement goal, and could have reallocated her portfolio in an effort to preserve her number. Instead she lost more money than she should have and will have to defer her retirement for several years.

Not having a Retirement RoadMap - As you approach that time when you are seriously considering retiring, usually within 5-7 years of retirement, there may be a number of considerations to deal with. How do you pay for the kids' college without bankrupting my retirement? Am I saving enough? Will I have enough income to retire? Where will the monthly income come from?

Joe is 62 and within 5 years of retirement, Mary is 5 years younger. They have 2 kids in college and are paying for college out of the investment portfolio. Their portfolio was down 25% since its height and they were feeling a tremendous amount of stress trying to pull all of this together. They feared that if they continued without direction that they would not be able to retire.

By putting together their customized Retirement Roadmap, they found a better way to pay for college and reallocated their portfolio to be more in line with their retirement goals. 

Not working with a retirement distribution specialist - One of the most frequently asked questions from those about to retire is "When I retire, how do I get the income I need?" 

There are two distinct phases of financial planning. The first is the accumulation stage. Typically, people who work with a broker work with them during the accumulation stage. The goal during this stage is to accumulate as much of a retirement nest egg as is possible. However, when one starts to transition into retirement, you now enter the distribution stage. This stage focuses on positioning the portfolio so that you can now generate the income you need in the most tax efficient manner for retirement now, and later. 

You may have a primary care physician, but when you need a doctor to deal with an irregular heartbeat, you need a specialist to help you get the proper treatment.This holds true with financial planning as well. Using a generalist during your working years is fine, however, when you get closer to retirement you should go to a specialist who has helped others retire successfully.