Retirement is a personal endeavor. Everyone is different when it comes to wants and needs in retirement. There really is no “one size fits all” when it comes to designing a comfortable retirement.  Those of you who are planning a relaxing, low-cost retirement in an extremely low cost of living region, like Costa Rica, have far different requirements than those retirees wanting a whirlwind jet-setter lifestyle in their golden years. Only you know you and your partner’s dreams, hopes, and needs once your employment or business income winds down.

Make the right choices and your retirement will be everything you ever dreamed. Choose wrong and your time after employment will be nothing but stress and heartache.

#-ad_banner-#One way to ensure your dreams don’t turn into a nightmare is to avoid the common mistakes made by most retirees.

Regardless of the scope of your retirement plans, many of the same mistakes are made again and again. Knowing these mistakes and how to avoid them will help bring your dreams closer to reality.

Here are 5 common retirement mistakes:

1. Not Planning
I was shocked when I read the statistics about how many fail to plan for retirement. Going into your golden years without a plan is the No. 1 reason many struggle during this time. While having a plan in no way guarantees a worry-free retirement, not having one just about guarantees tremendous fiscal worries.

A retirement plan does not have to be elaborate and is predicated upon your goals.  A proper plan should include where and how you wish to live, how much monthly income it will take to live in the style and place you desire, how much capital is required to produce the needed income, and finally how this income will be created from your capital.

This may seem like a daunting task, particularly if you have waited until you are near retirement to start planning. While it is true that the longer you wait to plan, the more difficult planning becomes, it is never too late to start your retirement plan.

2. Underestimating Expenses
It is often not lack of capital that stymies retirement dreams, but underestimating expenses. It is always best to overestimate spending and underestimate income when it comes to retirement planning.

Major expenses like your mortgage and educational expenses may be far in your past. But after you retire, other expenses crop up. Expenses like travel, gifts, uninsured medical costs, and a host of other ways to overspend show up when they are least expected.

Fortunately, many extra expenses are voluntary. However, you must keep in mind that with all the extra free time you will have, it will be much easier to overspend than when you were in the work world.

A good rule of thumb is to underestimate your retirement income by 20% per month while adding 10% to your estimated expenses.

3. Not Diversifying
It is indeed the fortunate few who do not diversify their investments yet still create a comfortable retirement. While it certainly can be done with a single investment or investment style, odds are strong that the non-diversified portfolio will suffer a severe setback prior to or during retirement.

When I say diversification, I am not talking just about a well-diversified stock portfolio but rather across asset classes. While a well-diversified, income-producing stock portfolio is a must, the wisest investors own assets outside of the financial markets for retirement.

The most successful retiree’s own income-producing real estate, a diversified stock portfolio, annuities, money market accounts, and insurance products. Being truly diversified can save your retirement should a financial disaster occur in a single asset class.

Make certain you are in the stock market as well as at least 3 other asset classes when planning your retirement.

4. Failing To Downsize
The family home holds a lot of memories. Many retirees hesitate to sell the family homestead due to the memories and thoughts of children and grandchildren coming to visit. Typically only the wealthiest retirees are able to retain the family home and experience the optimal post-work lifestyle.

The smartest thing for most everyone else is to downsize by selling the home and reinvesting the proceeds into a diversified, income-producing portfolio.

I have seen far too many retirees struggle to retain the family home rather than liquidating it. Downsizing is the smart thing to do. Don’t hesitate when the time is right!

5. Not Maximizing Returns
Make no mistake, safety is paramount during your retirement years. The catch-22 is that safety often means low returns. So what is the best course of action?  A prudent portion of your portfolio should be allocated to riskier, higher return type investments. The portion should depend on your goals and how much you are willing to risk to increase the returns.

Risks To Consider: Anything can and does happen in the markets and economy. While diversification across asset classes can help lessen risk, risk is ever present despite a well-diversified portfolio.

Action To Take: Start your retirement plan today and avoid the aforementioned mistakes!