Retirement planning mistakes

Here’s how to dodge the bullet.

By Mike Brady, Michael Brady & Co. Wealth Management

While many Americans have spent years planning for retirement, a great many of them have made a basic discovery once they reach that plateau: There are some issues that simple math and time will not necessarily resolve.

If you are at or near retirement, here are several common mistakes that you can plan now to avoid:

• Underestimating your life expectancy. A generation ago, it was probably safe to assume that men would live to approximately age 70, and women to perhaps 75. But advancements in medical science have pushed those ages up at least 15 to 20 years. Realistic financial planning projections now should probably assume that at least one spouse will live to age 90 or beyond.

• Thinking that you will be able to retire when you want. Many older workers plan on working into their 70s—until illness, disability or mere fatigue forces them to reconsider. If you plan on working past the normal retirement age, do not count on the extra money earned to pay for essential expenses.

• Neglecting to adequately factor in healthcare costs. Failure to do this can be disastrous, especially if long-term care treatment is needed. And do not count on the government to pick up the bill for you, either. Make certain your health coverage is adequate and that you have a plan to cover other elder care needs.

• Settling for low returns. Do not let your fear of risking principal leave you with a guarantee of running out of money prematurely. Sensible asset allocation will substantially lower the risks of investing, including the chance that your money will not grow enough to meet your needs.

• Not taking retirement distributions within the allowable time frame. Avoiding costly withdrawal penalties whenever possible is just common sense. Do everything you can to avoid paying both the 10 percent early withdrawal penalty before age 59½, and the 50 percent excise tax for failure to begin taking mandatory minimum distributions by April 1 after attaining 70½.

• Failure to monitor or control your distribution rate. Your financial advisor should be able to run some basic calculations based on the size and allocation of your portfolio that show a safe rate of withdrawal. A general rule of thumb is somewhere between three and six percent per year, depending on your portfolio’s allocation between equity and fixed-income investments.

• Refusing to get a fresh perspective. No matter how effective your advisor or plan is, getting a second opinion will never hurt. Different advisors have different areas of expertise, such as taxes or mutual funds. Therefore, having a different set of eyes review your situation may provide insights that you would otherwise miss.

Michael Brady is a fee-only, full-time fiduciary and certified financial planner. To set up an appointment, call 440-235-2100, email or visit