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Yahoo
4 days ago
- Business
- Yahoo
The No. 1 Reason You Won't Retire Rich Is a 4-Letter Word
Retirement planning often focuses on numbers like how much to save, when to start and which investments to choose. But the biggest obstacle to building wealth is not found in a spreadsheet or buried in a fund fee. It is a simple four-letter word that stops progress before it even begins: Fear. Be Aware: Consider This: GOBankingRates unpacks how fear is keeping you from achieving your wealthy retirement goals. How Fear Can Unravel Your Dreams of Retiring Rich Fear causes hesitation, second-guessing and sometimes total avoidance. Mary Clements Evans, certified financial planner (CFP) and founder of Evans Wealth Strategies, said fear is often the root cause of financial paralysis. In her book 'Emotionally Invested: Outsmart Your Anxiety for Fearless Retirement Planning,' Evans explains how anxiety, self-doubt and avoidance can quietly sabotage years of planning. Fear appears in many forms. The fear of losing money can lead to never investing at all. The fear of making a wrong decision causes people to procrastinate. Some worry so much about outliving their savings that they become overly conservative, missing out on long-term growth. These emotional patterns often work in the background and are easy to overlook, yet they have lasting consequences. Trending Now: Delaying retirement contributions can sharply increase the amount someone must save later. Even a few years' delay can leave people behind. Yet many hesitate — not because of lack of information, but because of fear-driven avoidance, according to Evans. In an article in Healthline, psychologists refer to this dynamic as the Yerkes-Dodson Law, which describes how stress or fear can improve performance up to a point and then rapidly degrade it. When applying the Yerkes-Dodson Law to retirement planning, a moderate amount of fear can motivate initial action; however, too much of it creates paralysis that outweighs any benefit. During times of market volatility, investors often experience heightened emotional reactions that can lead to impulsive decision-making. In response, financial advisors now frequently integrate emotional coaching alongside traditional investment guidance. They guide clients through acknowledging their concerns, reaffirm small wins and reframe fears as manageable challenges. This approach helps sustain behavioral momentum and prevent fear from undermining long-term financial goals. How To Tackle Fear in Retirement Planning In the Inside Personal Growth podcast, Evans said emotional awareness is a powerful tool for addressing fear in retirement planning. The process demands not only financial knowledge but also mental resilience. Recognizing emotional triggers enables people to manage anxiety instead of letting it dictate their decisions. This mindset shift fosters steadier, more disciplined action throughout the planning journey. Digital tools such as robo-advisors can offer cost-efficient investing, but they cannot address emotional barriers like fear or guilt. These require human intervention. Advisors who acknowledge and work through emotional resistance can help clients move from hesitation to disciplined, long-term investing. Fear also interferes with communication. Many families avoid discussing retirement goals, long-term care or inheritance planning. This avoidance delays important decisions and leaves loved ones unsure of how to prepare. Encouraging honest dialogue around money can relieve tension and create shared direction. The good news is fear can be managed. Simple techniques such as visualizing future goals, journaling, using checklists and breaking financial tasks into smaller steps have all been shown to reduce anxiety. According to Evans, the goal is not to eliminate fear but to act anyway with clarity, intention and structure. Evans highlights what most retirement calculators leave out: The human side of money. Her work reflects a growing understanding that confidence, not just capital, plays a central role in building wealth. More From GOBankingRates 6 Big Shakeups Coming to Social Security in 2025 This article originally appeared on The No. 1 Reason You Won't Retire Rich Is a 4-Letter Word
Yahoo
5 days ago
- Business
- Yahoo
I'm a Financial Advisor: 15 Retirement Mistakes That Could Cost You $100K or More
Retirement planning seems straightforward until you realize how many ways it can go wrong. Financial advisors see the same costly mistakes over and over again — errors that can easily cost retirees six figures or more. Find Out: Read Next: Here are the biggest retirement blunders that could derail your financial future. Pay close attention and save a bundle! The Foundation Killers These mistakes could really mess things up from the start. 1. Living Above Your Means 'If you spend more than you earn, your future retirement savings shrinks,' explained April Taylor, financial coach and founder of Jr. Moguls. This isn't just about fancy cars or expensive vacations. Instead, it's about consistently spending more than you bring in, which makes it impossible to save properly for retirement. Learn More: 2. Delaying Retirement Savings Taylor shared that 'time is your biggest asset — the earlier you start contributing to a retirement plan, the more opportunity you have for your money to grow.' She added that even small, consistent contributions can build into six figures over time. For self-employed individuals, this delay is particularly costly. Gina Stoddard, chief of staff at Broad Financial, said entrepreneurs who stall on starting retirement accounts 'can miss out on nearly $30,000-$150,000 a year depending on their income over the course of their career.' 3. Ignoring Inflation 'Inflation is inevitable, and rising costs must be factored into your retirement plan,' Taylor said. In other words, if your money isn't growing, it's losing value. That can be a real shocker when it's time to retire. The Diversification Disasters With these mistakes, if one thing goes wrong, they could really cost you. 4. Putting All Your Eggs in One Basket Stoddard warned about being 'overly concentrated in Wall Street products and traditional equities.' She explained that 'your savings can possibly undergo a dramatic dip if the stock market descends.' The potential cost of failing to diversify? 'Upwards of $100,000+,' she said. 5. Ignoring Alternative Investments 'Alternative investments are a proven method to achieve diversification, as their value typically works inversely to the public market,' Stoddard noted. She mentioned that self-directed retirement accounts can invest in real estate, precious metals, private businesses, creative pursuits and more. 6. Being Too Conservative Too Soon Retirement can have a 20- to 30-year time horizon, said Bethany Dever, vice president and relationship manager at Rockland Trust. She explained that 'moving too much of your assets to bonds or cash (80%-100%) too early in retirement in the hopes of protecting your nest egg can cause damage to your long-term goals due to underperformance.' Potential cost to a $1 million portfolio: $500,000 to $1.2 million in potential growth. The Tax and Legal Landmines Taxes and other legal matters can get more complicated in retirement, so you'll want to make sure to avoid these mistakes. 7. Forgetting To Update Beneficiaries 'I worked on a case where the ex-spouse received $250,000 from an IRA because the beneficiary designation had not been updated when the divorce occurred,' said Seann Malloy, founder and managing partner at Malloy Law Offices. He added that it's important to periodically revisit and ensure these designations remain 'in harmony' with your estate plan. 8. Underestimating Tax Impact on Withdrawals Malloy explained that clients often don't understand that drawing particularly large sums from tax-deferred plans can push them into higher tax brackets. He gave an example: 'A $100,000 withdrawal could incur $30,000 in taxes if it kicks your income into the 32% bracket.' 9. Violating IRA Rules Stoddard warned about prohibited transactions in self-directed IRAs, which 'could potentially trigger immediate taxation on the full amount within your IRA, plus withdrawal penalties.' She estimated this could result in a loss of about $50,000-$100,000 in taxes. The Social Security and Healthcare Missteps Social Security and healthcare are incredibly important in retirement, so make sure you have those ducks in a row. 10. Claiming Social Security Too Early Dever shared that claiming at age 62 instead of waiting for full retirement age can reduce monthly benefits by up to 30% permanently. She also pointed out that 'for every year you delay claiming Social Security past your FRA, you get an 8% increase to your benefit.' Potential cost: $100,000-$300,000 in lost lifetime benefits. 11. Underestimating Healthcare Costs Taylor warned that 'ailing to plan for healthcare in retirement can quickly drain your savings. Dever cited a Fidelity study showing that 'a 65-year-old couple retiring today will need $330,000 for healthcare expenses in retirement.' Potential cost: $300,000 The Withdrawal Catastrophes Retiring doesn't include just taking out your money whenever you want. There are good and bad ways to do that. 12. Cashing Out 401(k) Early Cashing out of your 401(k) early can be a costly mistake. 'Not only will you incur penalties and taxes now, but you'll also impact your future retirement by reducing the time your investments have to grow,' Taylor said. 13. Missing Required Minimum Distributions Both Stoddard and Dever emphasized the costly penalties for missing RMDs. 'If you miss the deadline to withdraw your RMDs, you could be fined with a 25% penalty of the missed allotted withdrawal amount,' Stoddard explained. This could range anywhere from $10,000-$50,000. 14. Withdrawing Too Much Too Soon Dever referenced the 4% rule, explaining that 'having a more than 4% distribution rate early on can cause a depletion of assets later in retirement.' Potential cost: Running out of money five to 10 years early. The Strategy Mistakes A retirement without a strategy is not the retirement you want. 15. Not Using a Financial Planner Heath Harris, founder of Compound Advisory, spoke about one of his clients who sold an HVAC business without tax planning. It was a mistake. 'Between federal capital gains, NIIT and state taxes, he paid close to $3 million straight to the IRS,' he said. With proper planning, Harris estimated they 'could've saved him about $1.7 million.' The moral of the story? It might be smart to seek expert help from, well, an expert. (This is especially true when dealing with large sums of money.) More From GOBankingRates 7 Things You'll Be Happy You Downsized in Retirement This article originally appeared on I'm a Financial Advisor: 15 Retirement Mistakes That Could Cost You $100K or More Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
5 days ago
- Business
- Yahoo
I'm a Financial Advisor: 15 Retirement Mistakes That Could Cost You $100K or More
Retirement planning seems straightforward until you realize how many ways it can go wrong. Financial advisors see the same costly mistakes over and over again — errors that can easily cost retirees six figures or more. Find Out: Read Next: Here are the biggest retirement blunders that could derail your financial future. Pay close attention and save a bundle! The Foundation Killers These mistakes could really mess things up from the start. 1. Living Above Your Means 'If you spend more than you earn, your future retirement savings shrinks,' explained April Taylor, financial coach and founder of Jr. Moguls. This isn't just about fancy cars or expensive vacations. Instead, it's about consistently spending more than you bring in, which makes it impossible to save properly for retirement. Learn More: 2. Delaying Retirement Savings Taylor shared that 'time is your biggest asset — the earlier you start contributing to a retirement plan, the more opportunity you have for your money to grow.' She added that even small, consistent contributions can build into six figures over time. For self-employed individuals, this delay is particularly costly. Gina Stoddard, chief of staff at Broad Financial, said entrepreneurs who stall on starting retirement accounts 'can miss out on nearly $30,000-$150,000 a year depending on their income over the course of their career.' 3. Ignoring Inflation 'Inflation is inevitable, and rising costs must be factored into your retirement plan,' Taylor said. In other words, if your money isn't growing, it's losing value. That can be a real shocker when it's time to retire. The Diversification Disasters With these mistakes, if one thing goes wrong, they could really cost you. 4. Putting All Your Eggs in One Basket Stoddard warned about being 'overly concentrated in Wall Street products and traditional equities.' She explained that 'your savings can possibly undergo a dramatic dip if the stock market descends.' The potential cost of failing to diversify? 'Upwards of $100,000+,' she said. 5. Ignoring Alternative Investments 'Alternative investments are a proven method to achieve diversification, as their value typically works inversely to the public market,' Stoddard noted. She mentioned that self-directed retirement accounts can invest in real estate, precious metals, private businesses, creative pursuits and more. 6. Being Too Conservative Too Soon Retirement can have a 20- to 30-year time horizon, said Bethany Dever, vice president and relationship manager at Rockland Trust. She explained that 'moving too much of your assets to bonds or cash (80%-100%) too early in retirement in the hopes of protecting your nest egg can cause damage to your long-term goals due to underperformance.' Potential cost to a $1 million portfolio: $500,000 to $1.2 million in potential growth. The Tax and Legal Landmines Taxes and other legal matters can get more complicated in retirement, so you'll want to make sure to avoid these mistakes. 7. Forgetting To Update Beneficiaries 'I worked on a case where the ex-spouse received $250,000 from an IRA because the beneficiary designation had not been updated when the divorce occurred,' said Seann Malloy, founder and managing partner at Malloy Law Offices. He added that it's important to periodically revisit and ensure these designations remain 'in harmony' with your estate plan. 8. Underestimating Tax Impact on Withdrawals Malloy explained that clients often don't understand that drawing particularly large sums from tax-deferred plans can push them into higher tax brackets. He gave an example: 'A $100,000 withdrawal could incur $30,000 in taxes if it kicks your income into the 32% bracket.' 9. Violating IRA Rules Stoddard warned about prohibited transactions in self-directed IRAs, which 'could potentially trigger immediate taxation on the full amount within your IRA, plus withdrawal penalties.' She estimated this could result in a loss of about $50,000-$100,000 in taxes. The Social Security and Healthcare Missteps Social Security and healthcare are incredibly important in retirement, so make sure you have those ducks in a row. 10. Claiming Social Security Too Early Dever shared that claiming at age 62 instead of waiting for full retirement age can reduce monthly benefits by up to 30% permanently. She also pointed out that 'for every year you delay claiming Social Security past your FRA, you get an 8% increase to your benefit.' Potential cost: $100,000-$300,000 in lost lifetime benefits. 11. Underestimating Healthcare Costs Taylor warned that 'ailing to plan for healthcare in retirement can quickly drain your savings. Dever cited a Fidelity study showing that 'a 65-year-old couple retiring today will need $330,000 for healthcare expenses in retirement.' Potential cost: $300,000 The Withdrawal Catastrophes Retiring doesn't include just taking out your money whenever you want. There are good and bad ways to do that. 12. Cashing Out 401(k) Early Cashing out of your 401(k) early can be a costly mistake. 'Not only will you incur penalties and taxes now, but you'll also impact your future retirement by reducing the time your investments have to grow,' Taylor said. 13. Missing Required Minimum Distributions Both Stoddard and Dever emphasized the costly penalties for missing RMDs. 'If you miss the deadline to withdraw your RMDs, you could be fined with a 25% penalty of the missed allotted withdrawal amount,' Stoddard explained. This could range anywhere from $10,000-$50,000. 14. Withdrawing Too Much Too Soon Dever referenced the 4% rule, explaining that 'having a more than 4% distribution rate early on can cause a depletion of assets later in retirement.' Potential cost: Running out of money five to 10 years early. The Strategy Mistakes A retirement without a strategy is not the retirement you want. 15. Not Using a Financial Planner Heath Harris, founder of Compound Advisory, spoke about one of his clients who sold an HVAC business without tax planning. It was a mistake. 'Between federal capital gains, NIIT and state taxes, he paid close to $3 million straight to the IRS,' he said. With proper planning, Harris estimated they 'could've saved him about $1.7 million.' The moral of the story? It might be smart to seek expert help from, well, an expert. (This is especially true when dealing with large sums of money.) More From GOBankingRates 5 Cities You Need To Consider If You're Retiring in 2025 This article originally appeared on I'm a Financial Advisor: 15 Retirement Mistakes That Could Cost You $100K or More Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
20-07-2025
- Business
- Yahoo
The No. 1 Cost Threatening Your Retirement Savings
Insurance costs have skyrocketed since the pandemic — and show few signs of slowing down. That makes it hard to plan for costs in retirement, as the goalposts keep moving. For You: Trending Now: Keep an eye on these three insurance costs in particular as you plan your retirement nest egg. Supplemental Medicare Coverage Yes, retirees become eligible for Medicare coverage at 65. However, it doesn't cover everything. 'The average American spends nearly $200,000 on healthcare expenses during their golden years,' noted Whitney Stidom, vice president of consumer enablement at eHealth Insurance. In fact, a 2025 study by the Employee Benefit Research Institute found that some couples need up to $428,000 to have a 90% chance of covering their healthcare costs in retirement. A new survey from eHealth found 76% of people underestimate (or don't know) the average cost of healthcare in retirement. 'Enrolling in Medicare Advantage is often affordable, and will limit maximum out-of-pocket costs for the year,' said Stidom. 'Plus, most Advantage plans come with prescription drug coverage. Some Medicare Advantage plans come with special benefits like discounted gym memberships, coverage for over-the-counter drugs and more.' To help prepare in advance for unpredictable healthcare and supplemental Medicare coverage costs, consider opening a health savings account (HSA). They offer the best tax benefits of any tax-advantaged account, as you can deduct the contributions, they compound tax-free, and you pay no taxes on withdrawals. I'm a Financial Expert: Long-Term Care Insurance Medicare doesn't cover long-term care — but it gets expensive, and fast. The '2025 Trends in Retirement Planning' study by the Journal of Financial Planning found that 40.7% of retirees carry long-term care insurance, and 44.9% pay for a rider on other insurance products. Unlike working people, retirees can't increase their income to offset rising costs. When insurance rates go up, retirees have to cut spending elsewhere to stay afloat — which can quickly downgrade their quality of life. Homeowners Insurance The last few years have not been kind to homeowners insurance clients. 'Currently the average homeowner is paying $2,802 for home insurance,' explained Susan Meyer, insurance analyst at The Zebra. 'In 2024, the average was $1,602 for the same coverage — a 74% increase in only a year.' Granted, most homeowners aren't actually paying 74% more for their policies after just one year. Many have downgraded coverage or increased their deductible just to afford policies at the new rates. Homeowners insurance may play a larger role in where Americans choose to retire in the coming years. Already, three of the four states with the oldest populations (Maine, West Virginia, Vermont and Florida) have below-average homeowners insurance premiums. Meyer noted that the exception, Florida, has an average premium of $3,333 given the high frequency of storm damage. Similarly, climate scientist Max Dugan-Knight at Deep Sky Research pointed to fire-prone areas in California, Oregon and Texas where private insurers have stopped issuing coverage altogether. 'State-backed FAIR plans and federal flood insurance program end up billing taxpayers rather than addressing the root problem that some homes are uninsurable,' he said. 'That forces all taxpayers to subsidize the few who live in the highest risk areas.' As you plan your retirement, consider factoring in insurance risk. Some higher-risk areas may become impractical to insure in the years to come. More From GOBankingRates 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025 Here's the Minimum Salary Required To Be Considered Upper Class in 2025 7 Things You'll Be Happy You Downsized in Retirement This article originally appeared on The No. 1 Cost Threatening Your Retirement Savings Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
20-07-2025
- Business
- Yahoo
The Next Step: Is this young lawyer on track to retire?
Retirement planning can feel overwhelming, but what if taking just one step could improve your outlook? That's the idea behind The Next Step, Financial Planning's newest series. We're inviting Americans from all walks of life to participate. By sharing basic details about their savings, income and retirement goals, participants provide a snapshot of their current financial situations. We then anonymize this information and present it to professional financial advisors, asking: What single step could make the biggest difference in this person's retirement readiness? Each edition of The Next Step will spotlight an individual's story and feature actionable advice from advisors on how they can take their next step toward a more secure retirement. For the inaugural edition, Financial Planning heard from a 26-year-old lawyer living in New York City. Here's a snapshot of their current finances and how they compare to an average U.S. adult in their same age bracket. The saver makes just under $84,000 annually, roughly 43% more than the median full-time worker in their age range. Currently, 14% of their income goes toward retirement savings. After taxes and withholdings, they receive $4,858 in monthly income, more than enough to cover their average monthly expenses of $2,095. Even after attending law school, the saver has no debt. That puts them well ahead of the median debt figure for someone in their age bracket. Adults less than 35 years old report a median debt figure of just under $43,000. The saver has $5,000 stowed away for retirement, roughly 74% less than the median adult in their age range. About 60% of that is in pretax retirement accounts, while the other 40% is in nonqualified accounts. Based on their current income and contribution rate, they save just under $1,000 every month toward retirement. READ MORE: As Social Security claims surge, young investors brace for its absence The saver said they want to retire at 67, with plans to spend slightly more than they currently do. Based on their desired retirement age, FP projected how much money they can expect to have at 67, given a $5,000 starting base and a monthly contribution of $978. In the calculation, FP assumes an average inflation-adjusted return of 7%. General savings guidelines suggested by Fidelity Investments recommend having savings equaling one year of your annual salary by age 30, with the goal of having 10 times your annual salary saved by age 67. The saver also said they do not have a spouse with whom they share a retirement strategy. Based on the information they shared. Financial Planning asked advisors: "What single step could make the biggest difference in this person's retirement readiness?" Here's what they said: Prime time for Roth contributions Filip Telibasa, founder of Benzina Wealth If I could give just one piece of advice, it would be to start prioritizing Roth contributions now. At 26, their current tax rate is likely the lowest it will ever be, and they have decades ahead for growth. Every dollar contributed to a Roth account buys many years of compounding that will eventually be withdrawn tax-free. Currently, 60% of savings are in pretax accounts and 40% in nonqualified, which means there's most likely no Roth exposure. Shifting contributions to a Roth 401(k) or Roth IRA locks in today's lower tax rate while preserving future flexibility. As income and tax brackets rise over time, they can always pivot back to pretax contributions. The goal is to diversify across all three tax buckets — pretax, after-tax, and nonqualified. This way, they can strategically draw from each in retirement based on their tax situation. READ MORE: For Gen Z, retirement feels out of reach. Can advisors bring it closer? We can't predict future tax policy, but we know their taxes are likely at their lowest today. That makes Roth contributions the smart move while they're young. Heather Hofstetter, client service associate/paraplanner at Angeles Investment Advisors Given the client's age, my first question would be, "What does your emergency savings look like?" My second question is, does the employer match retirement contributions (and if so, how much?). If this client is not already saving enough to receive the full match, my first recommendation would be to increase their savings until they do. If they are already getting the whole match, then I recommend adding savings to a Roth IRA. If they could make the full $7,000 annual contribution, it would go a long way toward providing both income and tax efficiency in retirement, but even a smaller amount done consistently would benefit from the long-term compounding and give them flexibility and options later. (If they were fortunate enough to have a 529 that wasn't exhausted to pay for higher education, the 529 owner might be able to help them seed this account from the excess 529 funds!) Make a roadmap and follow it Judson Meinhart, director of financial planning at Modera Wealth Management If I were going to advise this person to do one thing that can help them, it would be to set a 10-year goal to start working toward. READ MORE: Confronted with college costs, parents reach for their 401(k)s Those early days of saving and investing can be intimidating (investment gains on a $5,000 balance are small, and contributions make up most of the account growth). It might feel like you're not making any progress in those early years, and it can be tempting to give up. Having a roadmap and an achievable 10-year target can help keep things in perspective. The goal doesn't have to be elaborate. A spreadsheet with projected contributions and investment growth can be a simple, yet effective, method to keep you motivated to save. Build a nest egg early Ben Loughery, founder of Lock Wealth Management The only thing I really see is if we could get them to 20% savings … or even meeting in the middle at 17 or 18%, especially before lifestyle creep, possible family with kids in the future, etc. That way, we have time on our side, building the nest egg early. When those bigger expenses do come up around mid-life life, we don't need to worry about playing catch-up as much. Prepare for the unexpected Samuel Molina, founder of The Academy of Financial Education The next step this person can take is to purchase whole life, disability, and long-term insurance to protect their wealth. If they are not insured, a disabling event can become very costly and drain their accounts. READ MORE: How to advise clients on Biden's SAVE plan before it disappears The whole life insurance policy would be to protect against down markets. If the person only has money in investment accounts and we experience a recession, near or during their retirement, they can use the cash value to weather the storm as their investment portfolio rebounds. Take a breath and treat yourself C Garrett Moore, founder of Moore Financial Management My advice for this individual would be: don't forget to enjoy life, too. In short, they're doing great financially. They have an excellent income for their age, they are living well below their means with zero debt, they are saving a fantastic amount, and they are being smart about their tax allocation. So long as they have their investments buttoned up alongside a decent cash cushion, they are in really, really good shape. If they haven't already, they need to take a breath, pat themselves on their back, and treat themselves to something they would like. I always recommend experiences that create memories you'll never forget. Ready to contribute? Financial advisors who are interested in contributing to future editions of The Next Step can submit their names and emails below, and Financial Planning will contact them when there is another opportunity to participate. Fehler beim Abrufen der Daten Melden Sie sich an, um Ihr Portfolio aufzurufen. Fehler beim Abrufen der Daten Fehler beim Abrufen der Daten Fehler beim Abrufen der Daten Fehler beim Abrufen der Daten
