The Importance of Retirement Planning, Pitfalls to Avoid & Top Tips to Follow

Written by Rick Pendykoski

Retirement planning is a crucial aspect of personal finance, and one that should be at the top of your list. Let’s look at why it’s important, what mistakes you should avoid and some expert tips on doing it the right way.

Why is Retirement Planning So Important?

Today’s workers want to be financially secure, as well as completely independent and free to follow their passions or interests after they retire. Without a proper plan and a sizeable nest egg, however, it becomes impossible to maintain the standard of living they’re used to.

Many people have no choice but to continue working after retirement, simply because they don’t have enough savings or income sources to keep them financially comfortable.

Today, it may seem that retirement is so far that you can afford to think about it later in life, but it’s always closer than you think. Proper retirement planning is especially important in today’s scenario, where inflation, low interest rates and market downfalls may also be working against you!

Retirement planning(imbreyandassociates)

Top 5 Retirement Planning Pitfalls to Avoid

Here are 5 of the most common mistakes people make, and why you should avoid them:

  1. Not Defining Your Financial Goals

This is the biggest mistake you could make, since you can’t get to a certain place without knowing what it is! The majority of people haven’t clearly defined their financial objectives for retirement, written them down, or started planning how to achieve them. When you commit to your goals by putting them down in writing, you can calculate how much you need to save and start taking action to make them a reality.

  1. Saving Too Little or Starting Too Late

It’s much harder to reach your retirement goals and maximize your tax benefits when you’re putting small sums of money in an IRA or other retirement plan every now and then. After all, the most important element of effective retirement planning is time. When you start saving and investing for your retired years early in life, and saving as much as possible, your money can grow into a large nest egg sooner.

  1. Expecting Pension/Social Security to Cover You

It’s no longer enough to rely on your employer’s pension plan or social security benefits, since many of these plans are under-funded already. There’s no guarantee that your employer or the government will be able to provide what you need, especially with longer life expectancy rates. Age often brings unexpected health-related expenses, and you don’t want to be left stranded or dependent on someone else.

  1. Spending Retirement Income Too Fast

Many retirees take out too much money from their nest egg every year, which depletes their savings as well as the potential growth for that money. Since people are living longer, it’s quite likely that either you or your spouse will need retirement income for 30 years or more, and you may also want to leave something to your kids. After you retire, the rate at which you withdraw your savings will determine how long they last.

  1. Investing Too Conservatively or Aggressively

This is another common mistake, where people worry about putting their savings at risk and end up with too little income in retirement, or place all their hopes on high-risk investments only to lose everything they saved. It’s important to diversify your portfolio, balancing the low returns from safe investments with potentially larger gains from riskier ones. Consult a financial advisor for guidance on allocating assets effectively.

Expert Tips for Retirement Planning in 2017

If you want to be financially comfortable later on in life, put these tips into action now:

  • Educate Yourself – The ‘fiduciary rule’ going into effect in 2018 requires brokers and financial advisors to put your interests ahead of their own commissions and earnings. Knowledge is power, so learn everything you can about the latest tax rules, contribution limits, growth benefits and investment options available.
  • Diversify Investments – With a self directed IRA, you can choose exactly where your retirement savings will be invested. Seek expert advice on building a balanced investment portfolio that leverages gains against risk, for maximum long-term benefits.
  • Avoid Debt – Debt is the biggest threat to your retirement security, so work on paying off existing loans, starting with the most expensive ones first. Stay away from future debt by making frugal lifestyle choices and avoiding unnecessary expenses.
  • Save More – Increase your savings every month/year and automate them if possible, so it becomes a habit. If you want to leverage tax benefits while saving for retirement, contribute as much as possible to IRAs and other tax-smart plans.
  • Manage Risk – Other than planning retirement income, set up an emergency fund and invest in insurance coverage that protects you against potential risk. Anything could happen between now and the time you retire, so take the right steps to protect your savings.
  • Plan Your Estate – Protect your loved ones in case of your untimely death with an estate plan that includes insurance. Other than defining asset distribution and providing for dependents, proper estate planning can also boost your retirement income.

If you haven’t already started putting money away for the golden years, it’s definitely time to start. Otherwise, you may find yourself facing a life of dependence and insecurity instead of the comfort and freedom you’d want to enjoy after retirement.

Rick Pendykoski is the owner of Self Directed Retirement Plans LLC, a retirement planning firm based in Goodyear, AZ. He regularly writes for blogs at MoneyForLunch, Biggerpocket, SocialMediaToday, NuWireInvestor & his own blog for Self Directed Retirement Plans. If you need help and guidance with traditional or alternative investments, email him at or visit

The Aging Sandwich Generation: Where to Find the Finances You Need to Retire

Written by Olivia Bailey

Finding yourself in a situation where you need to take care of your parents while looking after your own family at the same time can be a real body blow to your finances. Without careful planning and some good fortune the consequences to your future can be worrisome. You might feel you need to put your retirement plans on hold while under such budgetary strain, but there are ways to balance the books and keep your goals on track.

Here are some suggestions to organize your finances to cope with immediate financial pressures and plan for current and future expenses. Consider this an overview of some of the financial challenges you might face and some tips on ways to find the cash you need now and in the future.

Plan ahead to stay ahead

The odds are in your favor you will live to an older age than previous generations, which is great news in one respect, but presents a financial challenge when you try to plan your finances to have enough money to live out your golden years in comfort.

Add in the additional complication of looking after one or both of your parents who are over 65 along with the financial support you need to provide for your children and you can see why this scenario makes saving for your own retirement seem like a bridge too far for your finances.

There is no question that you want to provide support for your parents and children when they need it. The trick is to organize your finances so your own future prosperity and comfort is not thrown into question.

When it’s time to pool your resources

If you find you need to provide for your elderly parents, both emotionally and financially, the subject is not open to debate for most of us who assume that degree of responsibility without a second thought.

The financial consequences of such commitment can be significant. Your own financial situation can quickly deteriorate unless you find a way to pool your resources to reach a solution that provides the help they need and makes the most of the money available in the family pot.

Attitudes towards money have changed in recent generations but elders often have an ingrained reluctance to discuss their finances even with their children. However, it makes a lot of sense to try and overcome this barrier by addressing key issues like estate planning, medical insurance, current income and expenses, and any other relevant finances to gain an accurate insight into their financial position and future financial security.

Perhaps you can find a way to persuade them to downsize from their existing property, for example, to something more suitable and cheaper. This could help ease their own financial burdens and in turn relieve the pressure on you.

Explain to your elderly parents the value of an in-depth look at their finances. A thorough review could be beneficial and may result in a greater annual income than they currently enjoy, which would reduce the burden on your finances at the same time.

It is always a good idea to explore all the possibilities and options as part of the potential solution that could help everyone. It could even lead to a situation where you pool your resources and combine your finances to provide a way forward that works for everyone.

Getting them through college

College is a major financial event for parents. If you are struggling to find money to meet all those college expenses, there are some options to assist with your efforts. You can find a college near home where they can go so they don’t have to move out and you won’t have board and living expenses.

Don’t forget to check what financial aid you might be entitled to or whether your child might be able to get a scholarship.

It is a challenge to get young adults through college without racking up huge debts. But if you can plan and prepare and somehow stay on top of things you will have negotiated one major financial hurdle without putting too much of a dent in your retirement plans.

Lower your monthly commitments

If you are paying off several credit card debts each month as well as loan repayments, it might be worth looking at consolidation as a way of making your debts more manageable. It could make sense to find out before you apply whether this solution could work for you.

Sit down and work out your current monthly budget to see where your money is going each month. Find where you can cut back on some outgoings that could then go towards your retirement plans.

Putting your feet up might seem a distant dream at certain times when your finances are under so much pressure, but you can and will find a way to see it through and enjoy your own retirement at some point.

Olivia Bailey writes about a range of personal finance matters in her online articles. When not typing up a new article she’s busy with everyday family life, raising 3 kids and keeping home for a hubby.