4 Ways to Ruin Your Retirement Plan

David Ning

Saving for retirement is a journey that can easily span a few decades. And there are so many uncontrollable variables that it's impossible to come up with the perfect plan. You need to decide how much to save in order to sustain your lifestyle in retirement and choose the right asset allocation and investments, even though you don't know how long you will live or how those investments will perform. However, there are some mistakes that almost always make you worse off in retirement. Here are four retirement planning errors to avoid:

Determining the highest safe withdrawal rate. It's difficult to come up with a withdrawal rate that is safe enough to last a lifetime. The reality is that no one will ever be able to come up with an optimal number when there are decades of retirement to pay for. You need to make assumptions about future investment growth, inflation and how long you will live, which are nearly impossible to predict, so any calculation will be inaccurate. That's not to say that the studies about safe withdrawal rates aren't useful. Withdrawing 4 percent each year is still a reasonable amount to plan for, but the only reliable withdrawal strategy is to stay flexible in an ever-changing investment landscape.

Thinking financial planning is all you need to do. Having enough money is only one component of a successful retirement. While money can buy conveniences and solve problems, it isn't the only thing you need to retire well. Friends, family and good health are much more important than seeing a ton of digits whenever you look at a bank statement. After all, how will you ever be able to spend the millions if you are sick and tired all the time? And what's the point of living a lavish lifestyle if you don't have friends to spend time with? Thinking about money is time well spent, but some effort cultivating the relationships that matter and taking steps to stay healthy is not just nice, but necessary. You don't want to be always sitting at home spending time alone in old age.

Comparing what you've accumulated to others. Someone is always going to be richer, better looking, more articulate and nicer than you. If you build your identity on being the best at something, then you are bound to be disappointed one day. It can be difficult to avoid trying to keep up with your neighbors, and it's best to avoid comparing yourself to someone else. The next time you see a neighbor enjoying luxuries you cannot afford, try to appreciate the success he or she is having. Not only will this make you happier, but the person might even like you enough to ask you to come along.

Going after every opportunity to boost gains. It's easy to consume yourself with trying to maximize every dollar, but being unnecessarily frugal can damage relationships with those around you. Learn to share some of the resources you have with others, and your life will be transformed for the better. You can be happy with much less than you have right now anyway. Just think back to the days when you were young and broke. You were happy then, and some people consider those the best days of their life. Try your best to build a solid nest egg, but don't neglect other parts of your life in the process.

Retirement planning is important, so take ample time to figure out a roadmap to get there. But don't dwell on every little detail as if there will always be a perfect strategy. Make the best plan you can with reasonable assumptions, and then stay flexible in retirement and make adjustments when necessary.

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