6 Common Financial Mistakes Made by Retirees

Expert Julia Valentine explains six common mistakes that retirees make with their finances and ways to make their financial planning better. These include taking advice from friends and family over professionals, not actually having a financial plan and failing to educate oneself about financial scams.

Tuesday, 28 Feb 2012, 10:44 AM EST
My Fox Detroit

(WJBK) - Conside these 6 mistakes retirees commonly make with their finances, offered by retirement lifestyle expert Julia Valentine, author of Joy Compass: How to Make Your Retirement the Treasure of Your Life :

1. Take financial advice from friends and family over that of professionals. Even the most well-intentioned and insightful advice does not replace that of an investing expert, accountant or other retirement finance authority to aide with critical decision making that will impact the entirety of your life, for the rest of your life.

2. Underestimating inflation. If your nest egg is not earning enough to stay ahead of inflation and taxes, your retirement lifestyle is likely to get scrambled well ahead of its time. It's key to establish the appropriate blend of risk and return necessary to maintain short-term purchasing power in working toward your long-term goals.

3. Withdrawing too much money early on in retirement and running out of resources later on in life. Surveys show that the typical American is not knowledgeable about health care costs, life expectancy, income needs, and other risks.

4. Lacking a financial plan that includes estate planning, budget, etc. for both the short and long term to avoid problems and capitalize on all financial opportunities. According to the National Association of Unclaimed Property Administrators, state treasurers currently hold $32.9 billion in unclaimed bank accounts and other assets. According to the U.S. Department of Labor, $850M in 401(k) asses go unclaimed each year.

5. Failing to adjust the asset allocation of investment vehicles in your portfolio with time (i.e., "stage of retirement" relative to life expectancy), and having an inappropriate mix of investments for one's lifestyle goals, timeframes and risk tolerance.

6. Failing to educate oneself about financial scams - 1 out of 5 Americans over 65 has been a victim of a financial scam, according to the Washington-based non-profit Investor Protection Trust. More than 7.3m seniors are taken advantage of financially through inappropriate investments, high fees or fraud, at a cost of more than $2.6 billion a year. Four in five cases are not reported, according to the MetLife Mature Market Institute Study, March 2009.

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