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The Biggest Financial Mistakes We See Pre-Retirees Make

Biggest Mistakes

By Oscar Casas, CFP®, CRPC®, MPAS®, ABFP℠ 

The years leading up to retirement are crucial for building the wealth to support your desired retirement life. As you get closer to retirement age, it’s important to review your finances to stay on track to meet your goals. As you check your finances, keep an eye out for these four common financial mistakes that could be jeopardizing your retirement income. 

1. Not Prioritizing Cash Flow

One of the biggest mistakes we see pre-retirees make is putting other priorities ahead of their cash flow. Many people focus on building savings or paying off debts instead of building a steady cash flow in retirement. While Social Security, retirement savings, and investments may generate income, that doesn’t mean you should neglect your cash flow. 

Cash flow is the money you have coming in regularly compared to the expenses that subtract from that income. By focusing on accumulating savings to support your retirement, you’re depending on a dwindling reserve rather than a constant stream of income. 

As you get older, you may be required to take a larger portion from your retirement accounts. Without adequate cash flow to cover your living expenses, you could potentially outlive your savings. 

2. Lack of Income Streams

One of the ways you can increase your cash flow in retirement is to develop multiple streams of income. Relying on just one or two income streams (like Social Security and pension income) could be risky for retirees if one or both are reduced or come to an end for any reason.

Avoid this mistake by considering additional income streams, such as rental income, annuities, or investments that generate passive income. Diversifying your income streams may reduce your reliance on any one source of income; this may also enhance your cash flow. 

3. Investing Beyond Your Risk Tolerance

When planning for retirement, it may be tempting to try to increase your returns by investing outside of your risk comfort zone. Although the prospect of earning more money is appealing, the level of risk attached to it could lead to significant losses that are difficult to recover from. 

Before choosing which assets to invest in, it’s important to know what your risk comfort level is and understand what risks are involved in your investments. To avoid investing beyond your risk tolerance, work with a financial advisor who can assess your comfort level. They’ll build a diversified portfolio that aligns with your goals as well as with your risk tolerance. 

4. Not Working With a Financial Advisor

The last big mistake is not calling in the professionals. According to a 2022 Goldman Sachs survey, 42% of pre-retirees believe their retirement savings are behind schedule. The same survey also found that only 31% of pre-retirees leveraged a financial advisor. 

When you don’t work with an experienced financial advisor who understands the distribution phase of retirement, you might be doing yourself a disservice. These financial professionals can help you navigate your cash flow concerns, assess your risk tolerance, choose investments that align with your goals, and more. Working with a financial advisor to create a personalized retirement plan offers you the help you need to get on track for retirement. 

Avoid the Financial Mistakes of Retirement Planning

As you get closer to retirement, it’s important to avoid compromising the wealth you’ve built by being proactive in your planning. Prioritizing cash flow, creating multiple income streams, and investing within your risk tolerance all become easier to follow when you work with a financial advisor. Work with CERTIFIED FINANCIAL PLANNER™ professionals who can create a custom plan that guides you toward your ideal retirement. We at Tranquility Path Investment Advisors are here to help. Reach out today by scheduling an introductory meeting or calling us at (908) 759-6322. 

About Oscar

Oscar Casas is the chief executive officer at Tranquility Path Investment Advisors, an independent Registered Investment Advisor firm dedicated to putting their clients first, always. Oscar has over a decade of experience helping clients plan for a confident retirement. He is known for being an empathetic and compassionate listener and for prioritizing his clients’ needs and goals above all else. He acts as a coach, advising his pre-retiree and retiree clients through all the ups and downs on their financial journey. He loves that he has the opportunity to make a difference in people’s lives and take some of the stress off their shoulders. 

Oscar has a bachelor’s degree in finance, a master’s degree in personal financial planning, and is a CERTIFIED FINANCIAL PLANNER™, Chartered Retirement Planning Counselor℠, Master Planner Advanced StudiesSM and Accredited Behavioral Finance Professional℠ professional.  When he’s not working, you can find him enjoying the outdoors with his three children. He is an avid tennis player who also loves golf, the beach, snowboarding, traveling, and volunteering with the Scouts.

About the Author

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