4 Costly Retirement Planning Mistakes

It’s no secret that most Americans aren’t saving enough for retirement — the latest figures cite a shortfall of $6.6 trillion dollars. But with a strategy to avoid the most common retirement planning mistakes, aspiring retirees can close that gap.

“The mistakes you make along the way… can really shrink the size of your retirement nest egg down the road," says Mark Miller, a syndicated retirement columnist and author of “The Hard Times Guide to Retirement Security.”

First on the list: Many savers still rely on the old adage that you’ll need 70% of your pre-retirement income to fund your lifestyle in your golden years.

“The biggest pothole in this logic is that it assumes your home is paid for in retirement... but today many retirees still have mortgages,” says Manisha Thakor, a Houston-based CFA and the author of “On My Own Two Feet,” a personal finance guide for women. And that figure doesn’t take into account the rising cost of health care or, say, a newfound desire to travel extensively post-retirement.

Here are four more costly retirement mistakes that could be eating away at your savings.

1. Underestimating health-care costs

Most people know that Medicare isn’t enough to cover healthcare costs in retirement. So how much do you really need? More than you think. In 2009, a typical 65 year-old male retiree could need as much as $378,000 in savings to cover health insurance premiums and out-of-pocket health expenses in retirement, says the Employee Benefit Research Institute. A typical woman of the same age would need as much as $450,000.

Strategy: A calculator like this one can help estimate costs, but it’s also important to stay on top of the latest healthcare legislation, experts say. Your medical history matters too – do you have a history of chronic illness, or does breast cancer run in your family? A financial planner can help you estimate costs as well.

2. Giving too much money to adult children

Four out of five parents regularly give money to their adult kids, according to a 2009 study published in the Journal of Marriage and Family – typically, nearly once a month. That adds up. And a survey by CreditCards.com found that 42% of parents had paid off a debt for an adult child, with auto loans, medical expenses and utilities being the most common.