Five Common Retirement Saving Mistakes

Retirement can be a slightly scary prospect these days with people outliving savings, the high cost of health care and the economic slowdown affecting investments.

Retirement is actually a scary prospect these days. People are outliving their savings, underestimating the cost of health care and working longer to make up for not having enough money.

Shortly after the financial crisis, people began to talk about the “retirement crisis.” Social Security is expected to run dry in 2033. On average, baby boomers have only saved slightly more than a third of what they’ll need to live comfortably during retirement.

“Two recessions and a prolonged economic recovery have made a difficult retirement outlook even worse,” Diane Oakley, National Institute on Retirement Security executive director, said in a statement back in June.

And it’s not just the U.S. Roughly half of the world’s future retirees claim that they are not preparing adequately to achieve a comfortable retirement.

Time recently broke down the most common retirement saving mistakes as set out by Four Seasons Financial Education.

1. Relying too much on “rules of thumb”

There are plenty of popular rules of thumb to help guide you, but while they are helpful, they shouldn’t be the final word. These rules are anything but perfect. For instance, the suggestion that retirees withdraw their savings in retirement at a rate of 4% was first suggested 20 years ago.

Each retiree will have different needs and getting stuck obsessing over follow the “rules” might mean missing out on the customization that works best for you.

2. Getting too conservative at retirement

Yet another rule of thumb is that the closer you get to retirement, the less risk your portfolio should have. Typically, this is done by tilting more towards bonds. However, bonds aren’t looking like a good investment right now.

3. Taking Social Security benefits early

Last year an AARP study revealed that while American approaching retirement have a basic understanding about Social Security benefits, they mostly aren’t aware there are different claiming strategies.

Less than a third of respondents knew that waiting until at least age 70 results in the highest possible monthly retirement benefit. In fact 19% thought they could receive the maximum monthly benefits before they even reached their full retirement ages.

4. Failing to use a retirement calculator

They’re free and useful and retirement could last 20 years, 30 years or more. Just like buying tax software does the work for you, using a retirement calculator will remove the guesswork.

5. Cashing out retirement assets early

While you’re saving for retirement, all that money can start to look pretty tempting. According to a survey by Hero Wallet, one-fourth of Americans have admitted to withdrawing money from retirement accounts for non-retirement spending needs. However, doing so means incurring penalties and taxes. According to Time, “the money you saved over five years might require 10 to replace.”