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GOBankingRates’ editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services – our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines<\/a> and our products and services review methodology<\/a>.<\/p>\n 20 Years<\/strong> Trusted by<\/strong> Retirement planning<\/a> seems straightforward until you realize how many ways it can go wrong. Financial advisors see the same costly mistakes over and over again \u2014 errors that can easily cost retirees six figures or more.<\/p>\n Here are the biggest retirement blunders that could derail your financial future. Pay close attention and save a bundle<\/a>!<\/p>\n The Foundation Killers<\/p>\n These mistakes could really mess things up from the start.<\/p>\n 1. Living Above Your Means<\/p>\n \u201cIf you spend more than you earn, your future retirement savings shrinks,\u201d explained April Taylor, financial coach and founder of Jr. Moguls<\/a>. <\/p>\n<\/p>\n This isn\u2019t just about fancy cars or expensive vacations. Instead, it\u2019s about consistently spending more than you bring in, which makes it impossible to save properly for retirement<\/a>.<\/p>\n 2. Delaying Retirement Savings<\/p>\n Taylor shared that \u201ctime is your biggest asset \u2014 the earlier you start contributing to a retirement plan, the more opportunity you have for your money to grow.\u201d She added that even small, consistent contributions can build into six figures over time.<\/p>\n For self-employed individuals, this delay is particularly costly. Gina Stoddard, chief of staff at Broad Financial<\/a>, said entrepreneurs who stall on starting retirement accounts \u201ccan miss out on nearly $30,000-$150,000 a year depending on their income over the course of their career.\u201d<\/p>\n 3. Ignoring Inflation<\/p>\n \u201cInflation is inevitable, and rising costs must be factored into your retirement plan,\u201d Taylor said. In other words, if your money isn\u2019t growing, it\u2019s losing value. That can be a real shocker when it\u2019s time to retire. <\/p>\n The Diversification Disasters<\/p>\n With these mistakes, if one thing goes wrong, they could really cost you.<\/p>\n 4. Putting All Your Eggs in One Basket<\/p>\n Stoddard warned about being \u201coverly concentrated in Wall Street products and traditional equities.\u201d She explained that \u201cyour savings can possibly undergo a dramatic dip if the stock market descends.\u201d The potential cost of failing to diversify? \u201cUpwards of $100,000+,\u201d she said.<\/p>\n 5. Ignoring Alternative Investments<\/p>\n \u201cAlternative investments are a proven method to achieve diversification, as their value typically works inversely to the public market,\u201d Stoddard noted. She mentioned that self-directed retirement accounts can invest in real estate<\/a>, precious metals, private businesses, creative pursuits and more.<\/p>\n<\/p>\n 6. Being Too Conservative Too Soon<\/p>\n Retirement can have a 20- to 30-year time horizon, said Bethany Dever, vice president and relationship manager at Rockland Trust<\/a>. She explained that \u201cmoving too much of your assets to bonds or cash (80%-100%) too early in retirement in the hopes of protecting your nest egg can cause damage to your long-term goals due to underperformance.\u201d<\/p>\n Potential cost to a $1 million portfolio:<\/strong> $500,000 to $1.2 million in potential growth.<\/p>\n The Tax and Legal Landmines<\/p>\n Taxes and other legal matters can get more complicated in retirement, so you\u2019ll want to make sure to avoid these mistakes.<\/p>\n 7. Forgetting To Update Beneficiaries<\/p>\n \u201cI worked on a case where the ex-spouse received $250,000 from an IRA because the beneficiary designation had not been updated when the divorce occurred,\u201d said Seann Malloy, founder and managing partner at Malloy Law Offices<\/a>. <\/p>\n He added that it\u2019s important to periodically revisit and ensure these designations remain \u201cin harmony\u201d<\/a> with your estate plan.<\/p>\n 8. Underestimating Tax Impact on Withdrawals<\/p>\n Malloy explained that clients often don\u2019t understand that drawing particularly large sums from tax-deferred plans can push them into higher tax brackets. He gave an example: \u201cA $100,000 withdrawal could incur $30,000 in taxes if it kicks your income into the 32% bracket.\u201d<\/p>\n 9. Violating IRA Rules<\/p>\n Stoddard warned about prohibited transactions in self-directed IRAs, which \u201ccould potentially trigger immediate taxation on the full amount within your IRA, plus withdrawal penalties.\u201d She estimated this could result in a loss of about $50,000-$100,000 in taxes.<\/p>\n The Social Security and Healthcare Missteps<\/p>\n Social Security and healthcare are incredibly important in retirement, so make sure you have those ducks in a row.<\/p>\n<\/p>\n 10. Claiming Social Security Too Early<\/p>\n![\"\"](\"https:\/\/cdn.gobankingrates.com\/wp-content\/uploads\/2023\/11\/icon-20.svg?webp=1&quality=75\"){kind=icon}
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