Partner Content

What are the five mistakes to avoid in retirement?

A lifetime’s worth of retirement savings can look like an enormous source of assets, but your retirement may last 30 years or more.

You’ve spent a lifetime planning for your retirement goals, contributing to your 401(k) and perhaps investing additional assets. Now, you’re finally on the verge of retiring. However, you may be surprised to find that retirement planning doesn’t stop once you retire.

To keep all of your life and retirement goals on track, here are several pitfalls to avoid, as you embark on this new, exciting chapter in your life.

1. You Apply for Social Security Benefits Too Early.

You can apply for benefits at age 62, but the benefit you receive will be up to 30 percent less than it would be if you waited until what the Social Security Administration deems “full retirement age” (FRA).

Electing to receive benefits before your FRA can reduce your benefits if you decide to keep working. For every $2 you earn above a specific threshold, which is $17,640 in 2019, you lose $1 in benefits. Unless you really need the money, consider waiting to apply. And if you can afford it, put off applying until age 70 when your benefit will be about 32 percent higher than it would be at FRA.1

2. You Fail to Take a More Conservative Investment Approach.

When you were younger, you could invest more aggressively because you had time to recoup any losses you might have incurred. As you approach retirement, however, the game changes. You’re going to need the assets you’ve accumulated for day-to-day expenses and no longer have the luxury of time. Especially during the early years of retirement, it’s important to employ a strategy that considers capital preservation.

3. You Spend the Way You Used To.

Hand in hand with a more conservative investment approach is a more conservative budget. You don’t necessarily have to compromise the retirement lifestyle you envisioned for yourself, but you do have to maintain a realistic view of your finances.

Since you’re no longer earning a steady paycheck, your income may not be as high as it once was. A lifetime’s worth of retirement savings can look like an enormous source of assets, but your retirement may last 30 years or more. It’s a good idea to work with your Financial Advisor to take inventory of expenses, identify all sources of income and develop a strategy for maintaining your retirement lifestyle for as long as you live.

4. You Miscalculate Your Required Minimum Distributions.

Generally, once you reach age 70½, you must take annual distributions from your 401(k), IRA or other qualified retirement plans. However, there is flexibility as to when you must take a distribution. The account holder can take it during the year they reach age 70½, or can delay it until April 1 of the following year, known as the required beginning date. This means that if you opt to delay your first distribution until April 1 of the following year, you will be required to take two distributions during that year—the first year’s and second year’s required distribution.

These so-called required minimum distributions (RMD) are generally taxable at your individual tax rate, and if you fail to take them, you are subject to a substantial tax penalty.

5. You Don’t take HealthCare Expenses into Account.

A 2018 survey by Nationwide Retirement Institute found that 56 percent of retirees are very or somewhat concerned about not having enough money to cover unplanned medical expenses in retirement. And 40 percent of retirees are only somewhat, or not at all, confident in their plan to pay for healthcare costs beyond what Medicare covers.2

These results aren’t unexpected, given healthcare cost trends. Consider this: The average couple will need $285,000 in today’s dollars for medical expenses in retirement, excluding long-term care.3 What’s more, an estimated 70 percent of individuals over 65 will require extended care at some point in their lives. And, one in seven people over 65 will need long-term care for more than five years.4 Because of statistics like these, recognizing the potential need for long-term care is another important issue to consider in terms of asset erosion.

One option for retirees is a longterm-care insurance policy to help protect the assets you’ve accumulated and allow you to provide your loved ones with a meaningful legacy. It may also provide more options for your care and relieve loved ones from full-time caregiver responsibilities.

Start the Conversation.

How you plan your finances in retirement is just as important as your journey to save for retirement. It’s crucial to understand the available options to protect the assets you’ve spent a lifetime accumulating. Talk with a Financial Advisor today and start the conversation on ways to plan for an optimal retirement.

Read More from GGM Wealth Management Group at Morgan Stanley


“Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice and are not “fiduciaries” (under the Internal Revenue Code or otherwise) with respect to the services or activities described herein except as otherwise provided in writing by Morgan Stanley and/or as described at Individuals are encouraged to consult their tax and legal advisors regarding any potential tax and related consequences of any investments made under such account.

The GGM Wealth Management Group is an advisory team with the Wealth Management division of Morgan Stanley in New York, NY. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Smith Barney LLC, Member SIPC ( Morgan Stanley Financial Advisors engage Worth to feature this article. They may only transact business in states where they are registered or excluded or exempted from registration Transacting business, follow-up and individualized responses involving either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made to persons in states where they are not registered or excluded or exempt from registration.”

1. (2019)

2. Nationwide Retirement Institute Health Care and Long-term Care Consumer Survey (May 2018)

3. Source: How to plan for rising health-care costs:

4. (2018)

Wealth Management

Disclaimer: Worth magazine is a financial publisher and does not recommend or endorse investment, legal, insurance or tax advisors. The listing of any firm in the 2019 Worth® Leading AdvisorsTM Program does not constitute a recommendation or endorsement by Worth magazine of any such firm and is not based upon Worth magazine’s experience with, or prior dealings with, any advisor. The information presented for each advisor, including but not limited to any related profile, statistical data, presentation, report, commentary, recommendation or strategy, has been provided by such advisor without review or independent verification by Worth magazine. Any such information is the sole responsibility of the advisor. Worth magazine makes no representation or warranty as to the accuracy or completeness of such information, assumes no liability for any inaccuracies or omissions therein and disclaims responsibility for the suitability of any particular investment recommendation or strategy for any person. Nothing contained in Worth magazine constitutes or should be construed as any form of investment, legal, insurance or tax advice or as a recommendation to buy, sell, hold or trade any securities, financial instruments or assets. Readers are advised to consult their legal, financial, insurance and tax advisors prior to making any investment or pursuing any investment strategy. Past, model or hypothetical performance is not indicative of future results.

back to top