Retirement Planning Mistakes That Only Show Up After You Stop Working

"The harder mistakes to catch are the ones that look fine on paper but fall apart the moment you stop working. These are unquestionably the planning failures that will only reveal themselves after the paycheck ends and you're living off the portfolio. Recent data from Nationwide's Retirement Institute shows that 55% of people who retired in the last five years regret how they saved, and only 40% said they were on track with their original budget."

"Sequence-of-returns risk is the silent killer, and most retirees don't understand it until it's too late. The concept here is simple in that the order of investment returns matters far more in retirement than it did during your working years. A market crash in year three of retirement does more damage than a crash in year 20, because you're forced to sell assets at depressed prices to fund withdrawals, locking in losses that can never recover."

"According to Morningstar research, if your portfolio drops at least 15% in the first year of retirement and you withdraw at least 3.3% of the balance, you are six times more likely to deplete your portfolio within 30 years than someone who experiences positive returns in year one. The mistake here isn't retiring in a bad market, it's assuming that average returns over 30 years will protect you regardless of when they occur."

Many retirees make obvious mistakes such as not saving enough, claiming Social Security too early, or investing too conservatively and running out of growth. Harder-to-detect mistakes look fine on paper but fail once paychecks stop. Nationwide's Retirement Institute found 55% of people who retired in the last five years regret how they saved, and only 40% said they were on track with their original budget. The core problem is plans that do not survive contact with reality. Sequence-of-returns risk makes the timing of market returns critical in retirement, with early losses forcing withdrawals at depressed prices and locking in permanent losses. Assuming long-term average returns will protect retirees regardless of timing is risky.

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