CFP Says To Avoid These Retirement-Planning Mistakes In Your 50s

Planning your retirement can be an extensive process filled with research, financial planning, and even different savings strategies. Not only can it be confusing to figure out how, when, and where to save for retirement, but the uncertainty surrounding the future of Social Security can make planning even more complicated. Despite this confusion, Forbes found that just 11% of adults aged 18 to 41 used financial advisers. While many instead rely on social media for financial advice (make sure to avoid these popular but terrible pieces of social media retirement advice, by the way), sometimes it's still best to consult with experts. This can be especially true for those who are already in their 50s and looking at retirement much sooner than younger generations.

This is why we spoke with Joe F. Schmitz Jr., founder and CEO of Peak Retirement Planning and author of "I Hate Taxes," about the biggest retirement mistakes people often make once hitting their 50s. While there can be a lot for younger generations to know about how much to save and by when, people in their 50s face a different kind of retirement management. In fact, turning 50 can serve as an important wake-up call when it comes to saving, planning, and assessing current retirement goals and strategies. By comparing where you are now to where you want to be at retirement age, you can give yourself the chance to update, change, or even start to save more money in order to make sure you hit your retirement goals.

The top mistake Joe Schmitz, CFP, told us that people in their 50s tend to make is "[n]ot having a comprehensive plan for what we call the five pillars of financial planning: tax planning, investment planning, income planning, health care planning, and estate planning." While some might think that simply saving in a 401(k) plan is all it takes to prepare for your retirement years, there are a lot of other factors to consider when making a complete retirement plan.

Among that planning is taking a full account of the expenses that might affect you during your retirement. Beyond housing and utilities, taking stock of any of all potential health care and estate expenses can be significant to accurately determining how much you might need to live comfortably in retirement. On top of this, ensuring you have multiple forms of income (whether that be through investments, rental property, or pensions and retirement funds) can be vital to maintaining your lifestyle in the event of losing any one particular income stream.

"The foundation to retirement is tax planning, [therefore] failure to have a comprehensive tax plan will likely cause holes in the other four pillars," Schmitz said. While most people don't like thinking about their taxes, let alone dealing with them during retirement, ensuring you have a solid tax plan in place can be vital to your retirement finances. There is a lot to know about tax planning (including a lot of tax myths you should avoid), which can make speaking with a financial planner an important decision to consider.

Note that, according to Joe Schmitz, people in their 50s who ended up being the most prepared for retirement had all paid close attention to catch-up contributions, which become available once you reach age 50. These can be especially important for older Americans who are concerned they haven't saved enough for their retirement, as the contributions allow you to make up for lost time in both your 401(k)s and IRAs.

Another mistake people make when planning for retirement? Schmitz told us it's "[n]ot forecasting out what their required minimum distributions (RMDs) will look like, and how that will impact them from a tax perspective in retirement." RMDs (or required minimum distributions) are the minimum amounts of money that you must withdraw from your tax-deferred retirement account(s) each year. Failure to do so can lead to the IRS charging a 50% excise tax on the amount that was not properly distributed.

Schmitz also explained that, beyond any specific strategies you might use in retirement planning, a lot of retirement success is rooted in how seriously you take the planning process. Ensuring you not only have grounded goals for retirement, but that you also take all necessary precautions in your planning can be the keys to having a financially healthy retirement. Said Schmitz, "Retirement is not something that will just happen by default at a certain age; we have to be very intentional about the aforementioned planning items and ensure that we have a plan in place to ensure retirement happens on our schedule." As well, deciding when you want to retire can be a significant factor in how you might choose to retire (we caution against retiring early).