15 Retirement Planning Mistakes to Avoid at All Costs

The better you plan for retirement, the more likely you'll be to enjoy your senior years to the fullest. That's why it's imperative that you steer clear of these glaring mistakes.

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Americans are living longer these days, which means that if you leave the workforce in your mid or late 60s, you might still need a good 20 to 30 years of income. Don't assume that a mere 10 to 15 years' worth will be enough, especially if you're in good health as your senior years approach.

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Many people figure that once they retire, they'll get by on a lot less money. In reality, seniors commonly need a good 70% to 80% of their former income to maintain a comfortable lifestyle. If you plan on much less, you may wind up having to live more frugally than you want to.

Social Security will only replace about 40% of your current wages if you're an average earner. And that's probably not enough income to manage with during retirement. As such, plan on socking funds away in an IRA or 401(k).

The longer you wait to contribute to a retirement savings plan, the less time you'll give that money to grow. It pays to fund your IRA or 401(k) as soon as you start collecting a steady paycheck.

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Investing your IRA or 401(k) too conservatively could mean limiting the amount of retirement wealth you grow. Plan to invest your savings heavily in stocks while retirement is still far away. You can then shift toward safer investments like bonds as that milestone nears.

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A 401(k) can be a great savings tool. But there are other savings plans it pays to explore. IRAs, for example, let you buy and hold individual stocks for retirement, while 401(k)s generally don't, so you may want to branch out.

If you're eligible for a health savings account, it pays to participate. Many people regard these accounts as near-term sources of cash. In reality, HSA funds never expire, so you can carry that money all the way into retirement and use it to cover your senior healthcare expenses.

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Investing in stocks for retirement is a good bet, but it also pays to look at real estate for added diversity. That doesn't mean you have to go out and buy properties as an investment. Instead, you can buy REITs, or real estate investment trusts, which can pay generous dividends.

Many seniors are shocked to see what their tax bills amount to. Be sure to account for taxes on your retirement income in the course of your planning -- and consider housing some savings in a Roth IRA or 401(k) to avoid taxes on your withdrawals.

Carrying debt into retirement could mean being burdened by extra monthly bills at a time when you can't afford them. If you're in debt as retirement nears, make every effort to shed it. That could mean consolidating your debt for a more efficient payoff process, or working a second job temporarily to knock that debt out.

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You may be tempted to refinance your mortgage to take advantage of today's low rates. But be careful. Refinancing could mean resetting the clock on your mortgage, leaving you with a later payoff date. And that could mean not having your home paid off by the time your retirement begins.

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Many seniors wind up needing long-term care, and it's not an expense Medicare will cover. A good bet is therefore to apply for long-term care insurance during your 50s so you'll have a means of defraying those costs later on.

It's not always easy to go from working full time to having free, unstructured days. Think about some of the things you might do to occupy your time in retirement, and make sure you have enough money socked away to make those plans feasible.

You may be surprised at the number of key services Medicare won't pay for, or the expenses you'll face under it. It helps to read up on Medicare so you can budget for healthcare expenses appropriately.

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You might expect to retire in your late 60s or even beyond. But don't assume that's a given. Health issues or layoffs might force you out of work sooner, so don't bank too heavily on playing catchup with your retirement savings at the end of your career. Instead, fund your savings consistently.

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After a lifetime of hard work, you deserve to enjoy every minute of retirement. Avoid these mistakes in the course of your planning so you can make the most of your senior years without stress.

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