Underestimating your life expectancy: A generation ago, it was probably safe to assume that men would live to approximately age 70, and women to perhaps 75. But advances in medical science have pushed those ages up at least fifteen to twenty years. Realistic financial planning for seniors should probably assume that at least one spouse will live to age 90 or beyond. To make sure your money lasts, you may need to annuitize your assets to create a sufficient income (explained later).

Are you thinking that you’ll be able to retire when you want? In financial planning for retirement, many workers plan on working into their 70s-until illness, disability, or mere fatigue forced them to reconsider. If you plan on working past the normal retirement age, do not count on the extra money earned to pay for essential expenses. Sound financial planning for senior years would have a sufficient nest egg by age 65 in case health reasons prohibit you from working longer.

Neglecting to adequately factor health care costs: Failure to do this can be disastrous, especially if long-term care treatment is needed. And don’t count on the government to pick up the bill for you either. Make certain that your health coverage is adequate and that you have a plan to cover other elder care needs. This is the #1 error in financial planning for seniors, as it’s estimated that half of the bankruptcy in the US is caused by health failures and accompanying costs.

Settling for low returns: Don’t let your fear of risking principal leave you with a guarantee of running out of money prematurely. Sensible asset allocation may lower the risks of investing-including the chance that your money will grow enough to meet your needs. Although asset allocation may reduce risk, it does not insure a profit or guarantee against loss. But if you insist on keeping money in three month CDs and T-bills as many seniors do, your earnings will be low that you increase the likelihood of running out of money. Sound financial planning for seniors means that your investment horizon should match your actuarial life expectancy. In simple English, if you are age 70 with an expectancy of 16 more years, your investment portfolio should be constructed to serve you for 16 years, not 6 months.

Failure to monitor or control your distribution rate: Your financial advisor should be able to run some basic calculations based on the size and allocation of your portfolio that show a safe rate of withdrawal. A general rule of thumb is somewhere between three and five percent per year, depending on your portfolio’s allocation between equity and fixed level income investments. We have seen some financial planning disasters when people spend beyond this level.

Refusing to get a fresh perspective: No matter how effective your advisor or plan is, getting a second opinion on it will never hurt. Different advisors have different areas of expertise, such as taxes or mutual funds. Therefore, having a different set of eyes review your situation may provide insights that you would otherwise miss.