Five in-retirement money mistakes—and how to avoid them

Avoiding costly retirement mistakes
Planning for retirement is one of life’s most crucial undertakings. But many people fail to put equal care into managing their finances once retirement begins. Whether you’re already retired or preparing for it, being aware of common post-retirement financial pitfalls can help you stay on track. Here are some of the biggest mistakes—and how to avoid them.

1. Overspending in retirement
Even wealthy retirees can overspend, often because they’ve grown accustomed to spending freely during their working years. Without income or with reduced income, a lack of budgeting can quickly create problems.
Additionally, the excitement of retirement can lead to excessive spending early on. To avoid this, it’s essential to assess your income needs accurately and revisit them regularly. Make cash flow analysis a key part of your financial plan to ensure long-term sustainability.

2. Avoiding financial conversations with family
Many retirees hesitate to discuss finances with family, which can lead to confusion or even conflict when wealth is eventually transferred. In extreme cases, this silence can erode family relationships and financial legacies.
One solution: Work with your heirs and financial advisors to develop a family mission statement. This can clarify your values and explain how your wealth supports those values, helping everyone understand your decisions.

3. Missteps with social security
Social Security often plays a vital role in retirement income—even for the affluent. Common mistakes include:

• Claiming too early can reduce lifetime benefits.
• Waiting too long might not be wise for those in poor health or with shorter life expectancies.
• Avoiding work due to income limits isn’t always necessary. While early earnings can reduce benefits temporarily, the government recalculates your payments once you reach full retirement age, potentially making up for any losses.
Smart Social Security planning requires a personal, strategic approach.

4. Poor withdrawal strategy

How you draw down retirement funds matters. A one-size-fits-all approach—like the 4% rule—might not suit everyone. Your withdrawal plan should consider your health, life expectancy, income needs, and tax implications of various accounts.
Instead of defaulting to a simple formula or discarding it as too basic, work with professionals to test and tailor different strategies to your specific situation.

5. Treating investing as a hobby
With newfound time, some retirees dive into investing, thinking they can apply their business success to the markets. This confidence can lead to mistakes such as overtrading, investing too aggressively, chasing hot tips, or concentrating assets in risky areas.

Rather than treating investing as a game, surround yourself with trusted financial experts who can help you make informed, balanced decisions.

Conclusion
Retirement should be a time to enjoy the fruits of your labor—not worry about money. But missteps can have lasting consequences, especially with limited time to recover. By avoiding these common mistakes and proactively managing your finances, you can better safeguard your future and fully enjoy your golden years.

Thomas M. Dowling, CFA, CFP®, CIMA® is the Head of Wealth Management at Alliance Global Partners of the Lowcountry on Hilton Head. He can be reached at infohh@allianceg.com or (843) 420-1993.