Pitfalls for retirement savings, investments

By Tim Hawkins/Consulting

My name is Tim Hawkins, founder and CEO of Hawkins Wealth Management. My firm specializes in retirement and retirement distribution planning. Starting with this issue, once a month I’ll be providing tips for sound retirement planning.

Many of us aren’t addressing the financial realities of retirement. Here are some of the worst mistakes being made today.

Underestimating life expectancy

Twenty-five years ago, insurance companies estimated life expectancy at 83 years. Despite the research illustrating demographic shifts towards increased lifespan, many investors still underestimate — often severely — just how long they could live. This oversight plays havoc with retirement planning and finances. Many financial planners, including myself, now develop retirement plans based on life expectancy of 95 years.

Although people acknowledge they will likely live longer than their parents, the implications of longevity haven’t been an integral part of their financial planning.

Considering long-term care need

The question you must ask yourself is, “Could your nest egg cover the potential cost of long-term care?” Premature long-term care can be steep and difficult to cover. However, the notion of spending a few thousand dollars a year for long-term care insurance, versus the possibility of hundreds of thousands of dollars in the future, is smart money management.

Making large loans to family

You’re retired or on track for a comfortable retirement. A family member asks you for a large loan for a house, college, to start a business.

Many times, you’re not in a position to be as generous as you would like. Big withdrawals from your nest egg early in your retirement can seriously crimp your spending in later years.

Underestimating expenses

Don’t think you’ll be spending a lot less money when you retire — forget all the old rules. Today, many retirees are healthy, they travel more, and they’re fixing up their houses.
Maybe their spending slows in later years, but not at first. If you don’t have a handle on current cash flow and expenses, you can’t get started on retirement planning. Our goal is to help you identify your passions, the costs that are associated with them, and then plan so living your passions becomes a reality.

Focusing on your nest egg

The lesson here is while the need to grow your nest egg is crucial, you cannot focus only on finances and neglect the most important part of later life. How are you going to spend your time and fill your days?

Many of us don’t prepare well to retire. Some invest money fairly consistently along the way, but don’t prepare their life for smooth and fulfilling transitions. I urge you to consider the decisions you’re currently making related to retirement and challenge yourself to consider changes that can increase your financial security, and quality of life, in your later years.