Jbara and Rogers Financial Management Group at Morgan Stanley

Avoid these 5 mistakes when planning for retirement

Mark J. Rogers, CIMA, Executive Director, Institutional Consulting Director for Morgan Stanley
Embark on a new chapter of your life by avoiding these five common retirement planning pitfalls.

After a lifetime of planning and saving, you’re finally on the verge of retirement. However, retirement planning doesn’t stop just because you’re beginning to draw income from your investments.

As you embark on this exciting new chapter of your life, keep your retirement goals on track by avoiding these common pitfalls:

1. Not considering the risks related to choosing a lump sum or an annuity pension distribution

Making the right choice between an annuity or lump sum pension will likely affect your financial future.

A lump sum distribution may allow you to use the capital to generate an income and pass on what is left as an inheritance. However, it will be your responsibility to manage the money so you do not outlive your retirement funds.

An annuity pension distribution allows you to receive a steady income for the rest of your life and, in some cases, an income for your spouse. However, an annuitized pension will provide less financial flexibility and may not provide access to enough money for medical costs if you are in poor health.

2. Claiming social security too early

It may be tempting to apply for social security benefits when you’re first eligible at age 62. But, doing so may be costly. Choosing to receive your benefits before your full retirement age (which varies depending on the year you were born, but is around 66 for most people nearing retirement) could reduce your monthly benefit by 25% or more. And if you continue working, for every $2 you earn above a specific threshold — $17,040 in 2018, $17,640 in 2019 — your benefit is withheld by $1 until you reach full retirement age.1

Conversely, every year you wait to claim benefits beyond full retirement age, the benefit you receive increases by 8% annually until age 70.2 So, unless you really need the money, you may want to consider waiting to apply.

3. Taking on too much risk

When time is on your side, you may be able to afford to take on riskier investments for greater growth. However, as you begin retirement, the assets you’ve accumulated to meet your day-to-day expenses become harder to recoup if you suffer an investment loss. So, it’s important to make sure you’re not taking on too much risk. However, as retirement can last a very long time, you may want to consider maintaining some exposure to stocks, especially in the early years of your retirement.

4. Spending too much

The assets you have accumulated over a lifetime may seem like an enormous financial resource you can tap into whenever you like. However, those investments may need to last 30 years or more. Create a list of all your likely expenses, compare it against your income sources, and develop a spending strategy to help you maintain your retirement lifestyle for as long as possible.

5. Ignoring health care expenses

Overlooking health care costs is another area where retirees can face unwelcome surprises. A 2017 survey by the Nationwide Retirement Institute found that health issues often happened sooner than retirees expected and interfered with their ability to afford to do the things they want to do.3 A couple with high prescription drug expenses throughout retirement could need roughly $350,000 in savings to have a 90% chance of having enough money saved to cover their health care costs, according to the Employee Benefit Research Institute.4

Long-term care insurance can help protect and preserve assets meant for your loved ones, while relieving them of full-time caregiving responsibilities by providing more options for your care.

Determining retirement feasibility starts with a cash flow schedule that helps simulate your income, living expenses and investment returns throughout retirement. Call Mark Rogers at 800-819-0949 for your LifeView cash flow analysis before you finalize your retirement decision.


1 Social Security Administration Fact Sheet, “2019 Security Changes.” Retrieved from: https://www.ssa.gov/news/press/factsheets/colafacts2019.pdf

2 Social Security Administration Benefits Planner: Retirement, Increase for Delayed Retirement section. Retrieved from: https://www.ssa.gov/planners/retire/delayret.html

3 Nationwide Retirement Institute, “The Nationwide Retirement Institute Consumer Social Security PR Study 2017,” August 2017. Retrieved from: https://nationwidefinancial.com/media/pdf/NFM-16829AO.pdf?_ga=2.11555895.207418086.1524007905-449381559.1524007905

4 Employee Benefits Research Institute, “Savings Medicare Beneficiaries Need for Health Expenses: Some Couples Could Need as Much as $350,000” January 2017. Retrieved from: https://www.ebri.org/publications/notes/index.cfm?fa=notesDisp&content_id=5527


Article by Morgan Stanley and provided courtesy of a Morgan Stanley Financial Advisor.

Mark J. Rogers is an Institutional Consulting Director in Farmington Hills, MI at Morgan Stanley Smith Barney LLC (“Morgan Stanley”). He can be reached by email at Mark.J.Rogers@morganstanley.com or by telephone at 800-819-0949. His website is https://advisor.morganstanley.com/jbara-and-rogers-financial-management-group

This article has been prepared for informational purposes only. The information and data in the article have been obtained from sources outside of Morgan Stanley. Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of the information or data from sources outside of Morgan Stanley. It does not provide individually tailored investment advice and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this article may not be appropriate for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

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Mark J. Rogers may only transact business, follow-up with individualized responses, or render personalized investment advice for compensation, in states where he is registered or excluded or exempted from registration, https://advisor.morganstanley.com/jbara-and-rogers-financial-management-group

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