Most people get at least some aspect of retirement wrong. The key mistakes are made with some frequency. Your retirement will improve if you focus on avoiding common mistakes. Christine Benz of Morningstar recently wrote a post on five key retirement mistakes to avoid. These are summaries of themes we’ve addressed in Retirement Watch many times over the years. For longtime readers the post is a refresher. For others it’s a guideline of actions to avoid in your planning.
2. Not Being Realistic About Income Needs During Retirement
In a related vein, retirees who are stress-testing their projected withdrawal rates might not be taking a realistic view about how much they need for their lifestyle. You often read about all the money you’ll save when you’re no longer working–on dry-cleaning, commuting, lunches out, and egads, not having to save so much for retirement anymore. Given that cavalcade of savings, it’s not surprising that so many retirees fall back on the conventional wisdom that they’ll only need to replace 80% of their income during their working years when they actually retire.
In reality, that 80% rule is at best a rule of thumb; some retirees spend actually spend more than they did while they were working, while others spend much less. (Health-care costs are one of the biggest wild cards.) This fascinating Discuss forum thread, initiated by Morningstar’s John Rekenthaler in August 2009 and was still going strong nine months later, showcases a range of user perspectives on this important issue. Retirement specialist Mark Miller also discussed the 80% rule in this video.