I'm a Professional Retirement Coach: 3 Biggest Mistake Retirees Make

As you approach retirement, do you know what you’ll need to live out your golden years comfortably?

Many people make the mistake of basing their retirement on their current expenses and spending, assuming they can rely on savings like a 401(k) plan to get them through the rest of their lives. However, that doesn’t always make financial sense, according to experts.

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Professional retirement coach Ryan Skinner, president of Apex Retirement Services, told MoneyLion the three biggest mistakes retirees make, plus retirement planning strategies and action steps to live out retirement successfully.

Mistake No. 1: Assuming What Gets You To Retirement Will Get You Through It

A big mistake is assuming what got you to retirement will get you through retirement, according to Skinner.

“Nothing could be further from the truth," he said. “During your working years, the primary focus is often return on investment." However, “You may still have time to ride out the storm and wait for your accounts to recover if the market has a bad year."

But you may not have that luxury later.

"Most retirees cannot simply wait years to access their money — especially while making withdrawals from accounts that may have already declined,” added Skinner.

He recommended dividing your money into three distinct buckets.

Emergency Fund Bucket

An emergency fund should be liquid, safe and sufficient to cover approximately one year of expenses, Skinner said. This will come in handy when unexpected expenses arise, such as medical bills and home repair and replacement costs, such as a new roof or HVAC system.

Long-Term Growth Investment Bucket

The second bucket is for growing long-term investments.

“Retirees may still need market exposure to help their assets keep pace with inflation and support a retirement that could last decades,” Skinner said.

He recommends subtracting your age from 100 to estimate the percentage held in growth-oriented investments. However, he said that’s just the starting point.

“Your income needs, risk tolerance, health, time horizon, and overall financial position should ultimately determine the allocation,” Skinner explained.

Principal Protection and Dependable Income Bucket

The third bucket should protect your principal and provide dependable income.

“This could include properly structured insurance products, fixed-income instruments, rental property, or other strategies designed to provide stability,” explained Skinner.

The goal is to avoid relying on volatile investments for essential income, he said.

“It is not only the year in which the market falls that creates the problem — it is the entire recovery period [and] selling investments while they are down can make it much harder for a portfolio to recover," Skinner added.

Reverse Engineer Your Expenses Based on Your Lifestyle

Begin with your retirement expenses and work backward to determine what your lifestyle will cost to maintain, Skinner said.

“Include housing, Medicare and healthcare, taxes, transportation, travel, and everyday living expenses," he noted. "If your mortgage will be paid off, remove it; if it will remain, include it.”

Mistake No. 2: Forgetting to Adjust Expenses for Inflation

As living costs and inflation rise, factor those increases into retirement planning. For example, the price of a new house was $300,000 in 2016 and $400,700 in 2026, according to the Federal Reserve of St. Louis.

“If you need $5,000 per month today but retirement is still 10 years away, you may need considerably more by the time you retire,” Skinner said. “Once you estimate that future monthly need, subtract your dependable income sources, including Social Security and pensions.”

He continued, “You must then determine how much money needs to be positioned safely to generate that additional income — and whether the plan can account for inflation throughout retirement.”

Possible Ways To Close Your Future Monthly Income Gap

“If you expect to need $7,000 per month and Social Security will provide $5,000, you have a $2,000 monthly income gap,” Skinner explained.

These strategies may help close the gap.

• Downsizing your home: Use your equity to buy a smaller house in cash and reduce housing costs.

• Renting out income property: Rent out a property, spare bedroom or ADU.

• Eliminating high-interest debt before retiring: Pay off credit cards, home equity loans and car loans to reduce monthly expenses.

• Adjusting spending habits: Cook more at home and travel locally to lower expenses.

Mistake No. 3: Relying on a Savings Benchmark

Many retirees think they can rely on a savings benchmark for retirement, but Skinner said that it is not always enough.

“You can’t always rely on a particular savings benchmark; it's about creating dependable income, maintaining liquidity, protecting essential assets, and allowing your growth money enough time to recover when markets become volatile,” he explained. “The goal is not just to retire — it is to remain retired successfully.”

This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.

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