As a family financial planner, I see clients in all different life stages. Some are just starting their career path and forging the foundations to start a family. Others are a decade or so out from retirement and clearly know how they want to transition into retirement. However, some of my clients are just beginning retirement and had never sought much financial advice during their working years. Many of these retirees share a sentiment of regret with me; They wish they had capitalized on more life opportunities when they were younger because no matter how much we save, the one commodity we cannot buy back is time. 

Retirement Planning Mistakes and Misconceptions

It’s not surprising that many retirees these days have been told their entire lives that saving as much money as possible was the only way to prepare for retirement and a prosperous future. The baby boomers were born into a post-war America and raised by parents who lived through the Great Depression. Spending money on passions, travel, and comforts was not seen as something responsible people did. 

It’s easy to Monday morning quarterback previous generations’ ideologies, but recovering from one of the most impactful events in human history will leave its mark, so, understandably, being fiscally conservative was a natural lesson all the baby boomers learned at a young age. However, we now have retirees in their twilight years suffering from some retirement planning mistakes; let me explain why. 

Leave-on and Live-on Assets

People need to consider two types of financial assets as they plan for their retirement; leave-on and live-on assets. Live-on assets will be the funds you have saved to live the rest of your life comfortably. Leave-on assets are the items or funds you plan to leave to your loved ones or organizations after you pass on. 

The problem that many financial advisors and I often see with retirees in their late years is that they are very conservative with their live-on assets and too generous with their leave-on assets. Now I’m not saying that people shouldn’t be generous with their family when passing on assets; however, the allocation of assets could be used for a time when retirees are still at an active age. 

It’s regrettable for people to learn that they’ve saved too much and could have used those savings to fund wonderful memories with their kids and grandchildren. Wouldn’t you rather see the impact of your generosity by handing that scholarship check and keep in touch with the lives you touched than have it come from a trust foundation? There is certainly room for both!

Sound financial advising isn’t driven by a stringent need to save; it’s meant to help people appropriately enjoy what they’ve earned while they can – and still have financial freedom for the future. Experiences, memories, and the time to create them are truly priceless, and I’ve witnessed too many clients realize this fact very late in life. 

Understanding what you need for live-on assets will give you the confidence to be generous NOW with the leave-on assets. It will also allow you to do some advanced planning to ensure the leave-on assets go exactly where you want – avoiding family fights and unintended/unwanted beneficiaries taking larger than their fair share(IRS and nursing homes).

Where Does Most of Your Leave-On Money Go? 

Most retirees’ leave-on assets are dispersed amongst three different categories.

• IRS – This is the last place most people desire their money to end up, but if not dispersed to family members or charitable organizations, the IRS can end up with people’s remaining retirement funds. In fact, family members must remove IRAs and employer-sponsored retirement plans such as 401ks, 403bs, and 457b plans within ten years of passing.

• Children – It’s great to leave money, property, or valuables to loved ones, but opportunities to create memories and enjoy shared experiences are too often missed or overlooked. 

• Charities – NPOs are often gifted large donations when a retiree passes on and doesn’t have a specific group of family to leave their assets. 

Learn How Inflation Affects a Middle-Class Salary

Retirement Planning Mistakes – Why Hold On So Tightly?

Most people’s retirement spending happens in the first 5-10 years after leaving work when most retirees are still active participants in the economy and lead a transactional lifestyle. After those years, most spending is minimal, calculated, and almost always adds to the same monthly numbers. 

I encourage my clients to enjoy their money and not hold on so tightly for the inactive years – experiences, memories, and familial bonds are formed in the active years, not the inactive ones. 

I was recently sitting with an 86-year-old client, and he hasn’t spent any money on his boat (he sold it eight years ago) or golf membership (he canceled it six years ago and did not plan on returning to Rome since his wife has passed. He wished he had just rented that villa and invited the entire family for their 50th wedding anniversary. Remember, not all retirement expenses inflate quickly, and we must enjoy what we have while we still can.

Each individual will live retirement in their preferred way; I just hope to provide insight and perspective to people looking to make the most out of their retirement years and not live with regrets. 

Please reach out to set up a call to discuss retirement planning options for you or your loved ones.