Top 3 Mistakes Retirees Make With Their Finances

A big part of my job as a financial advisor is to help retirees make the most of their retirement. One of the best ways to maximize retirement is to avoid costly mistakes. Below is a summary of the top mistakes I believe retirees make.

3. Claiming Social Security Benefits Without Careful Consideration

The number one concern of most retirees is outliving their money. Social Security can be an inflation-protected income source during retirement. So maximizing your Social Security can be an effective way to take some pressure off of savings.

Most individuals are eligible to start receiving benefits at 62 but can delay receiving benefits until age 70. The longer one waits to start receiving benefits, the higher their benefits are for life and the bigger their inflation increases will be (when authorized by the government). For the average healthy person, it makes sense to try and delay receiving benefits as long as possible. In addition, with careful planning, married couples, widows, and divorced individuals may be eligible to receive some benefits while still allowing their benefits to accumulate as if they were not yet receiving benefits.

Proper planning can result in tens of thousands more in Social Security benefits! I strongly encourage anybody who is considering claiming Social Security benefits to meet with a financial advisor who is educated in this area. (For related reading, see: Top Tips for Maximizing Social Security.)

2. Having an Unbalanced Investment Portfolio

As those who planned on retiring in 2006-2010 will tell you, market downturns are most damaging in the few years prior to and after retiring. Too much risk in your portfolio combined with a market downturn can be detrimental to your retirement. 

On the other hand, low interest rates are causing less risky investments (cash, CDs and bonds) to under-perform inflation. In my experience, portfolios invested too heavily in these types of investments have had trouble keeping up with increases in the cost of living. Finding a balance within your portfolio based on your preferences, situation and goals is key. (For related reading, see: Achieving Optimal Asset Allocation.)

1. Failing to Plan for Life Events

These events, such as the loss of a spouse or long-term health care expenses are not only emotionally devastating but they can also be financially devastating. In addition, the likelihood of at least one of these events happening during retirement is extremely high.

When one spouse passes away, expenses for the surviving spouse typically see only a slight reduction. At the same time, a reduction in income is very likely. One Social Security benefit will be lost, and the surviving spouse will receive the higher of their Social Security benefit or their spouse's, but not both. The surviving spouse could see a reduction or elimination of pension benefits as well. Furthermore, funeral and final medical expenses can be significant. (For related reading, see: 3 Life Events That Can Ruin Retirement Plans.)

According to AARP, in my home state of Michigan, the average cost of a private room in a nursing home is $99,098 per year. The cost varies by state but most have an average cost that is close to this number. In addition, states that “Someone turning age 65 today has almost a 70% chance of needing some type of long-term care services and supports in their remaining years." Many assume that Medicare will cover a significant portion of these expenses. The truth is Medicare covers very little, if any, long-term care expenses.

There are multiple ways to protect yourself from these life events but two strategies stand out. The first is to save or set aside additional funds that can be used for the expenses associated with these events. The second is to purchase financial products that provide suitable protection for these events.

The Bottom Line

This article was not meant to cause fear or anxiety about retirement. On the contrary, I hope that after you read this article you realize that even the biggest retirement problems can be overcome, sometimes easily, with proper planning. (For related reading, see: Long-Term Care Insurance: What to Consider.)


Brandon E. Carter, CFP®, ChFC®, CIMA®,AEP®, MSFS, Financial Strategies Group, Inc. Brandon E. Carter is a Financial adviser offering investment advisory services through Eagle Strategies LLC, a Registered Investment Adviser. Brandon E. Carter is also a Registered Representative offering Securities through NYLIFE Securities LLC, Member FINRA/SIPC, a Licensed Insurance Agency. 2270 Jolly Oak Rd, Suite 2 ∙ Okemos, Michigan 48864 ∙ T: (800)-804-0420. Financial Strategies Group, Inc. is not owned or operated by Eagle Strategies LLC or its affiliates. SMRU 1717583 EXP 1/4/2019