Episode 3 – The Biggest Retirement Mistakes You Don’t Want to Make

Episode 3 - The Biggest Retirement Mistakes You Don’t Want to Make by Astra Financial

Saving for retirement is a lifelong process and it’s important for your future that you plan how you’ll save properly. But it’s easy to get tripped up by making common financial mistakes like not starting early enough or not seeking out advice from a professional financial advisor (they’re not just for rich people, I promise!).

In this post, I’m telling you about the top five pre-retirement mistakes that I see people make – so you can avoid them and keep your retirement planning on track. Retirement is meant to be a time of enjoyment and less stress. The last thing you want is to have money worries on the brain when you’re settling into a wonderful new phase of your life.

Show Notes: 

Hello, and welcome back to another round of our Heart of Money talks. I’m so glad you’re joining this week because I’m sharing with you five pre-retirement mistakes that you need to know about so you can avoid them. This is the heads up and the chance to learn from other people’s previous mistakes.

Let’s dive right in and start with the first number one biggest retirement mistake. You do not want to make a drum roll please. 

Number one – not starting to save early enough. Life is crazy busy and there never feels like the right time to sit down and organize your finances and making sure you’re investing enough for retirement. Months go by…maybe years. And you realize that you never started that investment plan that you were talking about.

Number one mistake – not starting. Sometimes there is another story we tell ourselves that delays our savings habits. That story is, “I don’t make enough money right now, so why bother?” Or, “I don’t have a financial planner and only rich people have financial planners.”

This is not true. Everyone needs and deserves financial advice. I hope that isn’t stopping people from just getting started. Imagine if you started investing when you were 25 years old and you saved $300 a month until you were 60. You would have over $400,000 based on a 6% average return over those years, that adds up. So, start now and avoid this mistake. 

On to the second biggest retirement mistake. You don’t want to make number two, not crunching the numbers. Guesses usually won’t work here and there has to be a quantifying and qualifying of how much is coming in and how much will be going out.

The most common statement I hear is, “I don’t know if my money will last my lifetime.” That’s because some people will just take a guess and hope for the best in retirement. We can actually find out that answer. We start with how much you spend. We need to know the ins and outs, and this is where a financial professional is needed.

The training, experience and tax knowledge that a professional has, can take the guesswork out. It also saves you time worrying or in some cases, procrastinating. Let someone show you all the scenarios, tax savings and help you answer if you have enough and if it lasts your lifetime. Those are the biggest questions.

A professional can save you a ton in taxes just by knowing what bucket to take out of and when. 

On to the third biggest retirement mistake I see. So, number three – retiring too early. Do you know someone who’s retired and then came back to work after a bit? Most often I’m told they’ve gone back to work because they realized they couldn’t afford to retire.

This is a common mistake. If you decide to go back to work after retirement, I would think that it should be because you want to, for the social aspect, the enjoyment, not because you feel like you have to pay the bills.

That sounds exhausting and a little bit stressful. Don’t get me wrong here going back to work part-time might help with extra spending money or travel, especially once COVID is over. But part two of life should be enjoyable and a little less stress. Using the too early theme, another common mistake I’ve seen is taking Canadian Pension Plan (CPP) too early CPP.

CPP is reduced for each year that you take it early between age 60 and age 65. This is something that needs to be thought about and a few numbers crunched before you jump into a lifetime of a reduced CPP payment. The CPP is like an annuity – it’s paid no matter what each month for however long you live, and there it is indexed for inflation.

So, this is a fantastic piece of the retirement puzzle, and it might not be a good thing to take it early. These are things that you need to know. 

Okay. On to mistake, number four, that I see – not planning for health benefits in retirement. When a person retires from a job that has health benefits, the employer might have a health plan provider that can be continued after in retirement for a fee. Often it’s expensive, and sometimes people will decline this coverage because of the cost.

I understand some of those health plans from the employer when they carry them over are very expensive. If you shop around though, there are other plans that are more reasonably priced, like Blue Cross Medical Services.

Sometimes if you’re a part of an association, they have affordable plans and they include travel insurance in them.

Most of these conversion plans give you 30 days from the last day of your employment to convert over to a new health benefits plan. But this is where sometimes people hoop themselves by not doing this shopping around for new plan within that 30-day window, then they leave themselves without coverage.

It can get expensive to pay for prescriptions and dental, or if massage or chiro are important to you. Always keep in mind health coverage and finding a plan in that 30-day window after retirement. 

Okay on to the last mistake that I’ve seen. This one is harder and not always a math problem that I have the answer to, but I have to share it with you. So, number five – moving away in retirement to just come back again.

Okay. So how does this happen? The years leading up to retirement, we might get excited with dreaming and planning and then finally pulling the pin at work and moving to one of our favourite destinations.

I live in the Prairies and the winters here are freezing cold. Trust me from December until March I’m dreaming of hot locations. I’m thinking like, yes, that’s it sell everything and move away. We all dream of going away somewhere with a better climate here in the Prairies or selling everything to move to your dream home far away.

I’ve seen this happen, then a few things happen in that there’s loneliness can set in being away from family, not finding a sense of community or strong friend group. These things make retirement less enjoyable. When this happens, we want to come back to our community and our circle.

Okay. Not a big deal.

You can come back, but the cost can be expensive. For example, here’s a case – selling the house here in the Prairies and moving across to the East coast, they purchased a beautiful acreage, which they sold their house here, and bought that acreage with the same amount. They stayed a few years and decided they were unhappy and they wanted to come back and be close to family.

Well, in that two years, their acreage was now worth a little less in the current economy and the cross-country move cost a fortune. They couldn’t afford the same neighbourhood or size of house when they returned.

So, this can be a mistake. Good news. They’re happy now and fortunate enough that they still have enough to live on, and they’ve come to terms with a smaller, affordable house now, here, back in our province. But there are considerations when deciding to move away.

It’s the family and community aspect.

Sometimes it makes sense to rent away for a while before making the big step of a complete relocation. So, this is the fifth mistake that I’d wanted to share with you is that sometimes you sell everything, you move away just to come back to where your heart is. Now full disclosure here, moving can also be a step into the perfect retirement.

Lots of people have moved in retirement for better weather and to be closer to friends and family. They’re happy, but it needs to be a good discussion and planning beforehand.

That’s it. That’s all I’ve got for you today, but these are some five amazing key takeaways. If you’re planning for retirement, whether it’s two years, five years or 10 years down the road, these retirement mistakes I just shared with you today can be flipped around and used to be your retirement planning wins.

So, send me a note with any questions or comments I’d love to hear from you. Till next time. I’m Zena.