Most of your working life, you dream of the day when you’ll be able to wave goodbye to the stress and the hassles and walk out into the sunset.

Well, guess what? Retirement can be stressful too. What if you make a mistake in managing your portfolio? What if you run out of money? For many of you, once you’ve tasted freedom, the last thing you’ll want to do is rejoin the workforce.

Your best bet is to understand where people veer off on the wrong course so that you can avoid doing that yourself.

Retirement Pitfall #1: Spending Too Much
Finding the “right” spending rate is tricky. Spend too much and you’ll deplete your nest egg too soon. Spend too little and you’ll not only cramp your style during retirement, but you’ll leave more than you intended to your heirs.

While you can find retirement planning calculators online, my advice is to work with a fiduciary advisor especially if your situation is a bit more complicated. A professional can help with the tax nuances that may affect how you withdraw the money and advise on techniques like tax bracket planning before traditional IRA minimum distributions are required. These savings can be significant.

Retirement Pitfall #2: Making Costly Tax Mistakes
Watch out for land mines! If you take out money from your retirement accounts too soon (before age 59 ½), you’ll pay a 10% early distribution penalty. If you take out money too late (now after 72), you’ll face a 50% penalty on what you should have taken out but didn’t.

Understand when you can take advantage of lower, long-term capital gains rates instead of ordinary income tax rates. One classic example involves company stock at retirement. If you have company stock in a retirement plan, you may be able to take advantage of “net unrealized appreciation” where you pull out the stock before you rollover the rest of the plan. The rules are tricky, so get some advice with this if it applies to you.

Retirement Pitfall #3: Failing to Integrate Your Cash Flow Plan with Your Investment Plan
Investments and retirement planning go hand in hand. You can’t do one without the other. So to create a successful retirement plan you must think about how your cash flow needs will affect your investment strategy.

For example, most retirees keep a pool of liquid assets that they can tap for expenses. If you let this pool get too low, you can jeopardize your monthly withdrawals. You need a plan to keep refilling this pool. That may be directing income and dividends to the cash pool. Or it may be rebalancing periodically and refilling the pool.

Retirement Pitfall #4: Taking Too Much or Too Little Portfolio Risk
Lots of retires aren’t sure how to change the amount of risk they are taking with their portfolios in retirement. If you are too aggressive and take a major hit to your portfolio early in retirement, it’s tough to recover when you can’t regenerate income as you have in your working years.

On the other hand, if you take too little risk, you’re cheating yourself out of opportunities to grow your nest egg and enjoy what you’ve worked so hard for throughout your life.

Retirement Pitfall #5: Not Understanding Fixed Income Investments
It’s tough to know how to rebalance your portfolio as you approach retirement without understanding the fixed income world. If you’re used to seeing big gains from your stock investments, bond returns may seem a bit disappointing (or boring) by contrast.

But bonds are important to your portfolio because not only do they generate income, they provide stability. Think about the next time the stock market drops 20% or more. Those bonds are looking more attractive, aren’t they?

Retirement Pitfall #6: Choosing the Wrong Retirement Plan Distribution Options
Getting out of a plan is just as important as getting in—maybe more so. When it’s time to retire, find out exactly what your distribution choices are. Typically you’ll have options like a lump sum to roll over to a traditional IRA, a pension over one life or two, or installments over a period of years.

If you are within five years of retirement and expect a pension, have the company run projections for you. Then you can see exactly what to expect whether you retire at age 55, 65 or some other age.

Weigh the pros and cons of choosing to invest a lump sum on your own through an IRA rollover versus taking a lifetime stream of income through an annuity. If you work with a professional, they can run your retirement projections both ways to show you the difference.

Retirement Pitfall #7: Failing to Plan Your Sequence of Withdrawals
Most retirees have multiple pools of assets to draw from—IRAs, taxable accounts, company retirement plans, perhaps stock options, non-qualified plans and/or annuities. The order in which you deplete these assets matters.

To find the right depletion plan for your situation you need to consider embedded capital gains in taxable accounts, the step-up in basis you receive at death on some taxable accounts, changes in ordinary income tax rates either due to government regulation or your changing income streams, and timing constraints such as having a limited period of time to exercise company stock options. Running a retirement projection that considers these tax effects is critical. It is also helpful to run annual multi-year tax projections to see if you should take capital gains or consider a Roth IRA conversion.

Retirement Pitfall #8: Failure to Plan for Medical Expenses
Many expenses go down or stay the same in retirement—with one notable exception: health care. With increasing costs of elder care–be it assisted living, home health care or nursing home fees—you can quickly deplete your nestegg by not adequately planning.

You also need to plan for purchasing private health care insurance if you retire before you are eligible for Medicare at age 65. This can easily run $10,000 a year, so you don’t want to miss adding this expense to your retirement cash flow projections. This expense usually grows faster than baseline inflation, so adjust your growth rates accordingly.

This can be the #1 reason people delay retirement. COBRA may continue your company health benefits by eighteen months, but that may not be enough if you can’t get quality health insurance before being Medicare eligible.

Retirement Pitfall #9: Incomplete or Out-of-Date Estate Plan
Nobody likes to contemplate death. So try thinking about estate planning as giving your loved ones a great gift. Careful planning allows for your assets to go where you want them to go—without family squabbling.

While you’re going through the steps of planning your retirement, talk to an estate attorney who can update your documents. This may be especially important in light of the SECURE Act. You may want to change the beneficiary of your traditional IRA accounts to something other than a conduit trust. If your documents are more than ten years old, they may not cover critical HIPAA language in your powers of attorney.

Retirement Pitfall #10: Not Letting Your Spouse (or Kids) In On The Plan
Many times one spouse is more involved in the family finances than the other. But that can be asking for trouble as you head down the retirement pathway.

As a couple, you need to decide how you want to approach retirement. By that I mean you need to address and come to an agreement about issues like where to live, how much to travel, or how much to allocate for hobbies like golf or entertaining.

Both spouses also need to know how the money is invested, who to call if there is a financial problem and what to expect from the retirement nest egg. I see lots of couples who start working with an advisor shortly after retirement to make sure there is a smooth transition for the more non-financial spouse when the day comes they must manage on their own. A Mind Map, a one-page overview of your financial life, can be especially helpful to get everyone on the same page. Adult kids too.

So now you know what NOT to do. Once you have a game plan to address these issues, you can feel more confident in navigating one of life’s biggest transitions.

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Disclosures
The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.