Five Common Ways People Lose Their Retirement Savings

Friday, May 26, 2017 | Leave a comment

When you’ve saved your whole life, you want to protect your assets at all costs. Regardless of whether you are nearing retirement or already there, you desire to preserve what you have diligently worked for. But did you know that there are certain behaviors that could cause you to lose your retirement savings? Here are some ways you could run into retirement trouble:

1. Ignoring Your Long-Term Strategy

Have you ever taken the time to create an investment philosophy based on your goals, personality, and risk level? If you have, do you stay true to your strategy or do you let your emotions take over when the markets go wild? The reality is that markets fluctuate every day. If you try to beat the market and get swayed by the headlines, not only will you cause yourself unnecessary stress, but acting on your emotions could cause damage to your savings.

A 2015 Dalbar study shows how playing the market leads to underperformance. Buying high and selling low due to panic lowers your overall return and may jeopardize your retirement. What should you focus on instead? Maintaining a long-term perspective and a disciplined approach and refusing to ride the market roller coaster.

2. Misjudging Your Retirement Needs

You may be pretty proud of yourself for amassing a nest egg. But even if you have a million dollars saved, it may not be enough. If you plan to retire at 62, your retirement savings will need to carry you through 30 years or more. Not to mention, you will encounter additional expenses such as healthcare costs, home maintenance, and taxes. The best way to avoid financial stress in retirement is to set up contingency funds to cover the unexpected, and work with your financial advisor to map out various retirement scenarios to see what your savings can handle. Then, find ways to maximize your savings to give yourself a cushion.

3. Failing to Take Required Minimum Distributions

If you are 70½, you must begin taking required minimum distributions (RMDs) from your traditional IRA and employer-sponsored retirement accounts. It doesn’t matter if you need the money when you reach this age, you must still adhere to the RMD rules. What happens if you don’t follow through? The IRS will charge you an excess accumulation penalty of 50%! That can significantly harm your retirement savings amount. As an example, if you are required to withdraw $5,000 and don’t, you will owe a whopping $2,500. That’s an unnecessary and avoidable loss. Depending on how much you have in an emergency fund, you may even be forced to use your retirement savings to pay the penalty, further damaging your future financials.

4. Engaging In Risky Behavior

When you started saving for retirement, you were probably in a much different stage of life. As the years have gone by, have you taken the time to reevaluate what level of market risk you are comfortable with? While you can’t eliminate risk from your portfolio entirely, you can ensure that your investments are in line with your risk tolerance.

At this point in your life, you need to focus on finding balance between the appropriate mix of exposure to market volatility and the security of knowing your money will be waiting for you when you retire. This balance is unique to each individual, so don’t copy the strategy those around you have taken. If your portfolio leans too far to either side, it could mean the difference between a successful retirement and running out of money.

5. Taking Advice From The Wrong Sources

When you don’t partner with a trusted financial professional, you put your money in a dangerous spot. At this point in your life, you need to work with an advisor who will help you create a written income plan and work through various retirement scenarios, not just help your money grow.

An advisor can help you stick to a long-term strategy, keep emotions at bay, and provide you with guidance and advice that you can’t put a price on. At D. Bryant Retirement Strategies, we have developed specific strategies to help protect your hard-earned life savings. We work with you to establish a concrete income strategy that is designed to provide you with a predictable income stream. Let us help you retire on time and with peace of mind. Call us at (402) 932-2141 or email contact@dbretirement.com and take the first step in protecting your retirement savings.

About Darrell

Darrell Bryant, CFS®, CAS® is Omaha’s Retirement Strategist. As the founder of D. Bryant Retirement Strategies, he specializes in helping individuals and couples nearing retirement do so successfully. Along with more than 30 years of experience, he received the Certified Fund Specialist (CFS®) designation and a Certified Annuity Specialist (CAS®) designation from the Institute of Business & Finance. Passionate about helping as many people as possible in his community, he hosts Retirement Strategies Radio, heard Saturday mornings at 8 a.m on 1110 KFAB. He has also written articles on financial planning that have been featured on Fortune.com, FoxBusiness.com, Money.com, and in the Midland Business Journal. To learn more, visit his blog, his website, or connect with him on LinkedIn.

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