Avoid these 5 deadly retirement mistakes

Even the smartest and most surefooted among us have been known to stumble on the path to retirement. Some of our mistakes are easily remedied. Others, like neglecting to save anything at all, require something more like a miracle.

Miracles are outside the purview of this department, unfortunately. But here are five common mistakes that I think most of us can avoid if we try.

The tax deferral we've all enjoyed on our individual retirement accounts and 401(k) plans lo these many years came with a catch: When we withdraw that money, it's going to be taxed as ordinary income rather than as capital gains. So instead of paying 20 percent or less under current rules, we could owe as much as 39.6 percent. That might be an argument for keeping our mitts off those accounts for as long as possible, but the Internal Revenue Service thought of that too, requiring us to take required minimum distributions every year after age 70 1/2. (Roth IRAs are an exception here; they're neither taxed nor subject to minimum withdrawals during the owner's lifetime.)

That may have been the case generations ago, but these days many retirees find that their cost of living either remains the same or even rises. When our recent retirement survey asked 9,642 retirees what their typical monthly expenses were like now compared with their expenses in the year before they retired, only 42 percent said they were lower, while 32 percent said they were about the same, and 23 percent said they were higher.

Our survey then took it a step further, asking what our respondents actually meant by higher or lower. That resulted in some fascinating data that I've never seen collected before. Among retirees who told us their expenses were higher, 16 percent said about 5 percent higher, 31 percent said about 10 percent higher, 27 percent said about 11 to 19 percent higher, and 17 percent said 20 to 29 percent higher. And an unfortunate 9 percent said their expenses were at least 30 percent higher.

Pardon all the numbers, but I think they make a point. Not only are your expenses likely to be higher, but they could also be a lot higher.

Of the retirees who said their expenses had fallen, a majority (55 percent) pegged the decline at between 10 percent and 19 percent. I'm not dwelling on that group because they don't seem to have much of a problem, unless they're making themselves miserable by scrimping on expenses.

Returning to the workforce isn't an easy task these days, and it can take much longer than it used to. A 2012 study by AARP found that job seekers age 55 and up were out of work for an average of 55.4 weeks compared with 37.1 weeks for younger workers.

Whether that's due to age discrimination, the fact that older workers tend to be better paid, or whatever, it's a number worth noting. Of course, if you have the skills and the contacts to walk out of retirement and into a job whenever you please, more power to you. If not, just be aware that it could take a while.  

There was a time not long ago when lots of us thought a 10 percent annual return on our portfolios was a market-given right. So what's a fair assumption these days? Percy Bolton, a fee-only financial planner in Pasadena, Calif., tells me he's using 3 1/2 to 4 percent, which is conservative but less likely to get clients in trouble. He'd rather be wrong on the upside than the downside, he says.

Just as we're supposed to think long-term when planning for retirement, it's a good idea to think long-term while we're in retirement. So even if you now have time to watch all those financial programs on TV, resist the urge to constantly fiddle with your asset mix based on the news of the moment. Bolton remembers anxious phone calls last December from clients worried about how the 11th-hour "fiscal cliff" deal might affect them. The answer, it turned out, was that it probably wouldn't have any effect unless they had estates that were worth more than $5 million or incomes higher than $400,000.

A well-known annual study by the market research firm Dalbar has found that both stock and bond investors tend to overreact to events, moving money in and out of mutual funds with breathtakingly bad timing and ultimately ending up with less than if they'd simply done nothing.

I think there's a lesson in that, too. In retirement planning, as in much else, there's a time for action and a time for inaction, and wisdom lies in knowing the difference.

—Greg Daugherty