The Six Best Ways to Screw Up Your Retirement

Retirement is like a trip to Las Vegas: if you don't plan ahead, you'll probably wind up with an empty bank account and some novel health problems.

We hear this - or a version of it - all the time. "Make sure you save for retirement" is the grown-up equivalent of "eat your veggies and don't stay up past your bedtime."

While you can binge on junk food and late nights many times before your health takes a turn, the margin for error for a successful retirement is less generous. Neglect your retirement planning for too long and you'll turn your golden years into leaden ones.

Which is why it pays to pay attention to Jim Yih, '91 BCom, retirement guru and founder of the popular Retire Happy blog. Drawn from Yih's 27 years as a professional retirement adviser, here are the six best ways to screw up your retirement.

Screwup #1: Start too late

"All my clients, no matter how much they have saved, say they wish they'd started earlier," Yih says. "This is not rocket science."

But it's not easy, either, especially if you have student loans or a mortgage or kids who keep bugging you for frivolous luxuries like food and shelter.

Yih can cite scads of financial planning advice and data. He recommends making a serious effort to put away 10 per cent of your gross income, starting as soon as you can. The longer you wait, the more you'll have to cut back when you do start saving.

Screwup #2: Don't cover your butt

Yih sees many of his clients focus their planning efforts almost entirely on income and investments for a bigger payoff. But it's risky. "We want to grow our assets, make good investments, save lots of money," he says. "But we can't forget how important it is to protect ourselves from hiccups, curveballs or even disasters."

Yih recommends using at least four tools to cover your butt. Life insurance and a will, are two of them. Third is a power of attorney document that names someone to do things like pay your bills and manage your investments if you - say - fall into a coma. And finally, you should have a personal directive which, in case of said coma, names someone to make personal and medical decisions on your behalf.

Screwup #3: Leave it all to the pros

The world of finance can intimidate the uninitiated. It bristles with acronyms and jargon. The stakes are high. Everyone wears a suit. But don't let that deter you from paying attention to your money, says Yih.

"I love people who want to DIY their retirement plans," he says. "Nobody will care more than you about your money or your retirement than you. And the DIYer is more engaged."

Plus, he points out, it has never been easier to educate yourself on things financial. There are scads of books - Yih mentions The Wealthy Barber by David Chilton and The Richest Man in Babylon by George Samuel Clason as good ones for beginners - plus an embarrassment of material online. Just be sure to read widely and remember that if something sounds too good to be true, it probably is.

Screwup #4: Try to do it all

"If you did everything you were supposed to do as a young person saving for retirement, you'd have no money left over," says Yih. Pay your mortgage down, buy life insurance, save 15 per cent of your income, have an emergency fund, don't carry credit card debt. "It's almost impossible [to do it all] unless you have a big income, and even then, things don't always work out."

Yih recommends focusing on two or three key areas that are the most important to you right now. (Paying down credit card debt is a great way to start, he suggests.) Then reassess your priorities periodically and shift your focus when needed.

Screwup #5: Play it too safe

Losing money on the stock market is no fun. But Yih says this reasonable fear can drive people to unreasonable actions, like keeping all their money in a savings account earning precious little interest. He says it's important to have a bit of risk in your retirement savings because without it, you can't realize returns.

Yih advocates what he calls a "core and explore" approach to this.

"Eighty per cent of your efforts, time and resources should go to the core, built on basic principles that have stood the test of time. Boring stuff. Then the other 20 per cent should go to exploratory stuff," he says.

Today, "exploratory stuff" might mean Bitcoin or the nascent legal marijuana industry. Tomorrow, who knows? Maybe flying cars and lab-grown meat will be hot growth opportunities.

Screwup #6: Ignore happiness

Make no mistake: you need to save money to have a successful retirement. But that's not all you'll need.

"The lifestyle component is massively important to retirement. But it doesn't get enough attention," Yih says. "I meet people all the time who have enough money [but] they don't know what to do. They're bored. The most successful retirees are not the ones with the most money. The busiest retirees are the most successful ones."

Jim Yih, '91 BCom, is a financial expert, pension consultant, author, speaker and founder of RetireHappy.ca. He regularly shares his advice with alumni at events. Sign up for Alumni Insider to learn about events near you.