I'm Stephanie Sammons, a CERTIFIED FINANCIAL PLANNER™ and the Founder of Sammons Wealth Management. I help successful women professionals who are in midlife plan for their ideal retirement. Learn more about planning, saving, and investing for your ideal retirement at Sammons Wealth Management.
7 Midlife Money Mistakes that can derail your retirement

When you’re younger, you have a lot more time to make up for your financial mistakes. Once you get into your 40s, 50s, and 60s, it becomes more critical to avoid those mistakes as you age and move toward the retirement phase of your life.

Now retirement can mean different things to different people, and I share more information about the new retirement reality for women in midlife on Episode 9 of the Midlife Money Gal Podcast. I believe more in a work optional retirement lifestyle that is filled with a combination of reinvention, re-education, recreation and relaxation!

I’m also an advocate for balancing your wealth between your life now your future self later. There is always a trade-off here. You want to be engaged and fully living your life today but it’s also important to plan and prepare for your life as you age. It’s a balance.

When you get to that point in life where you may no longer be generating the kind of earnings you can generate today from your work, your savings nest egg and other income resources will need to support you.

Avoiding the midlife money mistakes below can better prepare you for financial sustainability throughout your lifetime. And the good news is, you still have time to correct any mistakes you may be making!

7 Midlife Money Mistakes:

Mistake #1 – Overspending

Overspending is a trap you can fall into when you are in your peak earning years. You are flush with cash, you have all of your basic needs met, and you can probably afford most of the material things and experiences that you’re interested in.

The problem is, you most likely will not remain at this earnings level for the rest of your life. This is a season of life. If you get into the habit of overspending during midlife, it may not be sustainable down the road.

Most midlifers underestimate how much money they’re going to need to generate their same level of income today throughout retirement.

Listen to the podcast episode to hear my tips for adopting a smart spending strategy. I want you to enjoy the things that make you happy today, but it’s a good idea to start getting into the habit of smarter spending. Just because you are earning more doesn’t mean you have to spend more!

Mistake #2 – Under-saving

On the other side of spending is saving, and midlifers aren’t saving enough either. While you are generating that higher income now during your peak earning years, it’s also the best time to be socking away money into savings.

I recommend when you are over 40 that you should strive to save 20% of your income each year at a minimum. Also, if you receive bonuses through your work, consider saving at least half of your bonus for your future and spend the other half on something that brings you joy today.

If you receive an inheritance, I suggest saving as much of it as possible as it can truly put you ahead of the curve with your retirement nest egg.

The goal is to have a balanced approach. Sure, it’s okay to splurge from time to time if you can afford to do so. Just be disciplined with your savings and take care of your future self first!

Mistake #3 – Paying Too Much in Taxes

In order to minimize your taxes, prioritize where your savings dollars are going. For example, do you have a company match within your 401k at work? Take advantage of that ‘free’ money first and foremost.

Also, consider maximizing your contributions to tax-deductible retirement plans like 401ks or other small business retirement plans if you’re a business owner. Determine if you are eligible to take advantage of tax-free accounts such as an HSA (Health Savings Account) or Roth IRA as well.

Once you have the tax-deductible and tax-free account bases covered, you can save any leftover dollars into a taxable account.

Each of these types of accounts can grow over time into a healthy retirement nest egg while also minimizing your tax impact today and tomorrow.

Mistake #4 – Relying on Social Security and Medicare

Social Security and Medicare are supplemental benefits, they are not full benefits. Do not make the mistake of relying on these benefits to cover the bulk of your income and healthcare needs later in life.

Both of these plans are under scrutiny today and I do believe that change is inevitable. Health care costs per couple are estimated to be $250,000 in retirement, and that doesn’t include long-term care or dental costs.

These government benefits will help some if they are still around in full force when you become eligible, but it is mostly going to be your responsibility to fund your retirement lifestyle and healthcare expenses.

Mistake #5 – Investing too Conservatively or Aggressively

Investing too conservatively or aggressively can cause problems for your retirement nest egg down the road. Each is an extreme that carries risk.

If you’re invested too conservatively, your investment portfolio won’t outpace inflation which can erode the purchasing power of your dollars.

On the other hand, if you’re invested too aggressively you may end up with occasional losses in your portfolio that take years just get back to even.

Instead, you want to avoid the extremes and aim for consistent, level returns in your portfolio when you are in midlife. There is no reason to swing for the fences and take more risk than necessary to achieve your long-term financial and lifestyle goals.

Saving more is also a great way to forcefully impact your future financial lifestyle! (see #2)

Mistake #6 – Taking on too Many Family Financial Obligations

Family is important, and I’ll be the first one to say that taking care of family is something that I value. Whether it is our parents, siblings, or even the kids who may come back and live with us after college, there are just times when family members need our help financially.

What I want you to be cautious about here is giving too much of your own wealth away when it may not be necessary. You don’t want to get to a point where your situation then requires a family member to take care of you financially!

The best thing you can do here is evaluate all of your options, give in other ways that don’t involve money, and set limits if necessary. Make sure you don’t get caught in the trap of enabling family members with money.

Mistake #7 – Falling for Get Rich Quick Schemes

If I had a dollar for every get rich quick scheme I’ve come across in my 20+ years as a financial advisor, I’d be rich! Ha ha.

I’m not talking about investing in yourself or your own business here. What I’m referring to is those fly-by-night ideas that you hear about from friends and in laws, or even in the media.

By the time you hear about these get rich quick ideas, it’s almost always too late. These kinds of scams also greatly impact the elderly, so make sure your parents don’t fall prey to them!

Take care of your wealth. The best way to grow your wealth is to protect it. Before you invest in anything, do your research and thoroughly kick the tires. And remember, if it sounds too good to be true, it is.

I hope these tips can help you avoid the common midlife money mistakes.

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(00:00): What are the biggest money mistakes you can make in midlife that can derail your retirement. That's what we're going to talk about today.

(00:13): Welcome to the midlife money gal podcast. This is the show for independent women professionals who want to learn more about navigating midlife and money. I'm your host, Stephanie, Sammons an experienced certified financial planner, and midlifer just like you welcome back to episode

(00:38): Code 11 of the midlife money gal. I'm Stephanie, and thank you so much for joining me again today. I want to talk to you about the major midlife money, mistakes that can derail your retirement. Now I'm an advocate of balancing your wealth between your life today, your life now, and your future self. I always want you to be thinking about and caring about your future self so that you don't spend everything on today. And there's a trade off with this kind of balanced thinking, but here's the truth. We don't know how long we're going to live and it's best if we plan and prepare for longevity so that we can have a nest egg that can sustain us and take care of us during retirement and beyond. So keep that in mind as I go through these major midlife money, mistakes that can derail your retirement mistake.

(01:47): Number one is overspending. Overspending can come in a couple of different forms. It can come in trying to keep up with the Joneses to keep up with your, your peers or your neighbors. And also in becoming more aware of where your money is going, how are you spending your money? Do you ever look up and at the end of a month, wonder where all the money went or maybe you had an, uh, high credit card bill or your bank account was pretty low for the month, but you can't really remember or recall where you spent the money. That's what I mean by becoming more aware of where your money is going. So overspending in midlife can be a really dangerous trap to fall into, especially because it's typically our peak earning years. It's when we make the most money, when our incomes are at the highest level, and you can kind of get used to a little bit of a luxury lifestyle, or maybe a major luxury lifestyle, where you can afford to buy the things you want and do the things that you enjoy.

(03:05): But it's important to keep in mind that this may not be sustainable. Many of us underestimate how much of a nest egg is required to produce the same income that you're earning today, that you're so accustomed to during retirement. And there can be a big disconnect here. If you don't understand how much money you're going to need to keep this same income level going throughout your retirement. So a tip for curbing any overspending today is try to adopt a smart spending strategy. And I'm going to spend more time on this in a future episode, but for now, what I mean by a smart spending strategy is just go through your expenses and see where you can plug any leaks or holes that might be there. For example, maybe you've signed up for lots of different subscription services, maybe apps on your phone or streaming services or music services.

(04:14): I guess that's a streaming service also, but we are just inundated with subscriptions these days. And you would be amazed at how much money you can save. If you just plug some of those holes, you may even be duplicating across your family. I know that this has happened with me and my spouse. We have figured out where we're double paying for some things, because each of us signed up for Netflix, for example, at a different time, which is ridiculous. So that's something that can be cut. So come through your expenses and see where you might be pouring money out there. There's a leaky hole in your bucket that isn't really necessary to be spending on another tip to curve. Overspending is, you know, let yourself have some of those special items that you splurge on those luxury items, the cars, the watches, these sorts of material things, or maybe even just an amazing once in a lifetime trip, but try not to go crazy, try and figure out how maybe you can space some of these purchases out if they are important to you.

(05:28): Instead of having everything come in in one year, for example, the more money that you can defer towards your retirement today, the better off you're going to be during retirement in making sure that you don't run out of money and the chances are you're going to need that extra money in retirement. So enjoy the luxuries and the things that make you happy, but just be careful and understand that the income you're earning today may not be the income that you will have in retirement. So it's good to start getting yourself prepared for that, especially when you're over 50 in midlife. Number two, mistake is the opposite of overspending. Really it's under saving. You're not saving enough. And when you're over 50, I believe you need to be saving as much of your income as possible. Um, I like the number 20% or more of your income.

(06:34): You may be able to get away with less than that when you're younger, but if you can get into the habit of taking 20% to where you never see it, and you just sock it away, that's going to grow and grow and accumulate for you and build your retirement nest egg. So some ways to accelerate your undersaving or pick up your savings rate is if you let's say you get a bonus at work, maybe you can take part of that bonus or all of that bonus and sock it away for retirement. Uh, since I am an advocate for, for balancing what you spend today and what you save, why not split it 50 50, save half of your bonus for today and use it for something that that's enjoyable to you and save half of it for your future. Same thing. If you inherit money from your parents or from another relative, save that money towards your own retirement, that can really help you get ahead and close up that savings gap for you.

(07:46): Mistake number three, paying too much in taxes. One of the best ways to minimize your tax impact is to prioritize how you save, prioritize your savings dollars into the most appropriate accounts. For example, a match from your company, 401k plan, that's free money that you can be taking advantage of. And that is really at the top of my list for how to prioritize your retirement savings. And are you maxing out your company, retirement plans or your business, if you own a business, your small business retirement plan, and also taking advantage of any catch-up opportunities. If you're over 50, you get to put away a little bit more money in order to catch yourself up with your retirement savings. Also consider HSA health savings accounts, which are not only tax deductible, but money inside of an HSA account grows tax deferred, and you can pull it out tax free.

(08:58): If you use the money for healthcare expenses, whether you use that money today or in retirement, Roth, IRAs, another tax-free saving opportunity that you might be eligible for if your income is within certain limits. And then also simply saving money into a taxable account, which means you've already paid taxes on the money and you've taken advantage of these other retirement savings vehicles. And you've got a little bit leftover to get yourself to that 20% savings Mark. And you can start a taxable savings account and put dollars away. There. It is smart to structure, a combination of tax-free tax deferred and taxable savings assets that grow over time. That once you reach retirement, you can draw down from these different buckets and better manage your tax situation in retirement. Mistake, number four, relying on social security and Medicare to cover the bulk of your retirement expenses.

(10:08): These are supplemental benefits. They are not full benefits. It's really important to understand that social security and Medicare are not going to take care of everything in retirement. Social security right now is kind of uncertain. I do not think it will disappear by any means, but there may be some cuts to social security that are coming. Um, I would recommend visiting ssa.gov and create your own account. It's called a, my social security account. If you haven't done this already, and you can get a pretty good idea of what your benefits will be at full retirement age. And also if you decide to delay retirement until age 70, you can see the difference in those benefits. And it's quite a bit different, significantly higher. If you do delay social security until age 70, that may not always be feasible. As far as Medicare, I mentioned on a previous episode that it's estimated for a couple that healthcare expenses in retirement will cost about $250,000.

(11:23): That does not include longterm care expenses, which could easily be 75 to a hundred thousand dollars a year for your final two years of life. Not everybody will need longterm care, but many of us will. So it's something to think about that cost not being covered by Medicare also in that figure of 250,000, a dental expenses, and some other out of pocket are not figured into that calculation. The 250,000 health care cost estimate really is just covering Medicare premiums and supplemental payments. For example, my 70 or 75 year old parents are paying around 16 to $18,000 a year for their Medicare premiums and their Medicare supplement. And they're healthy. So that is where the 250,000 per couple number comes from it's. What do you have to pay out of pocket during retirement to protect yourself and cover yourself with regard to your healthcare expenses? So these are all costs that have to be considered and social security will help.

(12:43): Some Medicare will help some, but both of these are subject to, to change in the near future. The stake number five is investing too conservatively or too aggressively at either end of the spectrum. You could be taking more risk than you realize cash and CDs are not going to earn enough to keep pace with this monster that we call inflation where costs are rising year after year after year to the tune of 3% a year on average, that's the longterm average for inflation. Now on the other end of the spectrum, if you are invested too aggressively, then you could be putting your retirement nest egg at risk as well. What you want to do is avoid the extremes and go for singles and doubles instead of try to hit home runs. When you're trying to hit home runs, then you're going to have a bunch of strikeouts along the way, the way the math works on this is the more leveled out and consistent your investment returns are year after year, the more dollars in your pocket at the end of the day.

(14:08): And it really is just the math. You want to be consistent with your investment returns versus these extreme wild swings up and down with the markets and the way you accomplish that is by having an appropriate stock bonds, cash mix in your portfolio, being globally diversified across the world. The U S isn't the only place where economies are growing. It's not the only place to be invested, and you want to make sure that your investment portfolio is mapped to your risk, comfort level so that you can sleep comfortably at night and not be terribly worried about it, but always have a longterm perspective when you're investing and have enough cash for your short term needs. And that's one way that you can kind of leave the longterm piece of it alone and invest more for the growth that you need to sustain yourself throughout your retirement.

(15:18): But again, you really just want to avoid the extremes of being too conservative or too aggressive that can lead to problems. Once you get to retirement, also keep an eye out for high investment fees and expenses. These are most of the time hidden. They are internal expenses to each and every investment that you own within an account, and they can really eat into your nest egg over time, the stage number six, taking on too many family financial obligations. Now I know what you're thinking. You have to take care of your family, and I could not agree with you more. Sometimes it is just completely unavoidable, but you can go overboard in these situations. And that's what I want you to be careful about. It's all about balance. If you give too much of your wealth away to your family, what's going to happen when you don't have enough wealth to take care of yourself, your family's going to need to take care of you.

(16:35): So make sure that your own financial sustainability is in place before, or you start going down this path. And when I say family, I mean parents, aunts, uncles, siblings, and even your kids when your kids graduate from college and they come live at home and they stay at home for too long, because you're paying all the bills. These kinds of things can really eat into your retirement nest egg, especially when you are in your fifties and sixties. So you just want to be careful and really evaluate all, all of the options when it comes to taking care of parents and elderly aunts and uncles and siblings things, and even your own children, I am absolutely for taking care of your family. And I plan to do the same, but what I'm saying is to be prudent about it and really evaluate all of your options there. Okay. Finally, mistake number seven. And again, we're talking about the major midlife money, mistakes that can derail your retirement. The state number seven is falling for get rich quick schemes. Boy, you would not believe the stories I've heard over my 20 plus years in this business from investing in oil Wells, which is a big thing down here in Texas angel investments, stock tips from your neighbor or your brother-in-law investing in remote islands or vacation homes or timeshares. A Bitcoin has been one of the latest and greatest that I've heard about.

(18:34): And I know it can be tempting to get pulled into these kinds of exciting investing opportunities that are happening around you. But I can't tell you how many times I have seen or heard about people getting burned. It is just not worth it. If it sounds too good to be true, it is. And be very, very careful about investing in, get rich, quick ideas, tips, or schemes. And, and also, you know, these scams tend to really prey on the elderly. So if you have parents who are still living, for example, make sure they're not getting caught up in these kinds of investment opportunities. Just stay away from get rich quick schemes. Okay. Alright. So let me recap for you. The seven major midlife money mistakes that can derail your retirement. Number one was overspending. Number two was under saving number three, paying too much in taxes. Number four, relying on social security and Medicare number five, investing too conservatively, or too aggressively. Number six, taking on too many family financial obligations and number seven falling for get rich quick schemes. If you can avoid these seven mistakes, then you are probably well on your way to creating a secure retirement for your future self. And remember, it's all about balance. You don't have to save every penny that you earn.

(20:24): You also don't have to spend every penny that you've earned, strike that healthy balance in taking care of yourself today and enjoying your life today, but also thinking about caring about your future self. You've been listening to the midlife money gal podcast. You can follow me on Instagram at Stephanie Sammons and Facebook at Stephanie Sammons CFP, or visit midlife money, gout.com. If you haven't yet go to Apple podcast and subscribe rate and review this podcast. Join me next week for another episode on navigating midlife and money. Thanks for listening. The information on this podcast is for educational purposes only and should not be considered specific investment tax or legal advice. Please consult with your own professionals who have a complete understanding.

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