Four small retirement planning mistakes that'll cost you

Small mistakes can have a big impact on a retiree's financial security; SmartMoney magazine calls these four glitches the most costly errors:

  • Underestimating healthcare costs
  • Giving too much money to family
  • Investing too conservatively
  • Failing to make a plan for all that free time

While those are all problems to avoid, I think there are some others that can leave a retiree high and dry if he doesn't pay attention. Here's my list of four items:

No disability insurance. A 30-year-old worker has a 33 percent chance of being disabled for at least three months sometime in his career, according the Society of Actuaries. And a study byNorthwestern Mutual, which sells annuities and disability insurance, finds that a two-year disability at the age of 50 can reduce total investment accumulation by 30 percent at the retirement age of 65. In other words, if you're out there running around naked and you get hit by a beer truck, your retirement won't recover.

Changing jobs and spending up your retirement savings. You've been saving diligently, but then you get laid off and don't find a job for several months and in the meantime, you live on what used to be your 401(k). Not only have you eaten up your savings, but you've also paid dearly for the privilege because it bumps you into a higher tax bracket. And if you're younger than 59 1/2, you have to pay a 10 percent penalty on top of it. Ouch. That's your retirement plan you just ruined.

Counting on dying young. Longevity is the greatest risk to retirement security. Just because your mom and dad passed when they were in their 60s doesn't mean you are going to do the same. Don't buy a 20-year annuity and figure you'll be gone before it is. That's a sucker's bet and it will leave you gumming kibble.

Running up huge credit card debts when you are living on a fixed income. Don't spend what you don't have. And keep a little cash in the cookie jar for emergencies. Declaring bankruptcy at 70 is no fun.

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