The biggest retirement planning mistake of all

Compass and money on graphs iStockphoto

(MoneyWatch) Most people spend more time planning their next vacation or car purchase than planning for their retirement and rest-of-life. That's a huge mistake. Neglecting to plan for a period of your life that might last 20 years or more -- during which you have to rely mostly on your accumulated financial resources -- could be the biggest mistake you'll ever make.

And while it's an ambitious task to plan for such an extended period of time, it's a necessary one. So it makes sense to spend a significant amount of time and effort to do the job right.

There are a number of important issues you'll need to research and think about, including:

One important step many people overlook during the planning phase involves the amount of money you need to save for retirement. According to the 2012 Retirement Confidence Survey conducted by the Employee Benefit Research Institute (EBRI), only 42 percent of Americans have actually calculated how much money they'll need to save for retirement. An equal percentage of Americans simply guess at this amount -- and they usually guess too low. The unfortunate result is that these people will most likely exhaust their retirement savings while they're in their 70s or 80s, and will then need to make drastic changes in their lifestyle because they no longer have enough money to maintain their standard of living.

The EBRI study also showed that people who calculate how much savings they'll need are more confident about their ability to retire. So try calculating how much money you really need to save by following the steps in this post.

If you do a good job addressing the financial aspects of retirement, it's likely that your financial planning will quickly morph into life and career planning, too, especially if you see that your financial resources aren't enough for a traditional retirement of "not working." Finding that out now, however, is a good thing, since it helps you focus on what you really want for the rest of your life and what type of work you can do to generate those needed funds so that you'll be both happy and financially secure.

Retirement planning: How to do it right
4 retirement planning mistakes you may be making
5 biggest retirement planning mistakes
5 tips for using retirement calculators

While it might take some time to do it right, planning ahead means you'll learn how you can have the best possible rest-of-life and avoid common financial and lifestyle mistakes. If you take steps to avoid these retirement planning mistakes now, you can focus on what's really important -- what you want for the rest of your life and the legacy you might leave.

Want to avoid making any retirement planning mistakes? I've prepared a free, online series of posts titled 12 weeks to plan your retirement. These posts guide you through the important decisions you need to make to plan for a happy, secure future.

And if you want more information, check out my innovative online retirement planning guide, Money for Life. This guide is a rich -- yet free -- collection of more than 150 blog posts, articles, research reports, and video clips on the most important retirement planning decisions you'll need to make regarding your money, health, and lifestyle.

  • Steve Vernon On Twitter»

    View all articles by Steve Vernon on CBS MoneyWatch»
    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.

Comments

Market Data

Watch CBSN Live

Watch CBS News anytime, anywhere with the new 24/7 digital news network. Stream CBSN live or on demand for FREE on your TV, computer, tablet, or smartphone.

Market News

Stock Watchlist