Common Financial Mistakes that Keep People from Retiring On Time

Over the past few decades, the retirement timeline for the average worker in the US has undergone some significant changes. In the 1990s, the age most Americans targeted for retirement was 60, but by 2022, it had increased to 66.

What these changes reveal is that retirement is not really about how old you are, but rather about how much money you have socked away. Those who master the art of retirement planning are able to retire on time.

“The truth is that 95 percent of Americans fail to retire by age 65,” says Steve Davis, CEO of Total Wealth Academy. “The primary factor to blame for that failure is a low financial IQ. Most people end up trusting the wrong people and taking a financial path that does not ultimately lead them to where they want to go. The better approach is committing the time and energy necessary to educate yourself on the best way to build wealth.”

Total Wealth Academy is an education and mentoring platform that provides guidance on how to build a second stream of income through active and passive real estate investing. Drawing on his 30 years of experience in the real estate sector, Davis provides his students with insights designed to help investors at all levels, from those just beginning their investing journey to those looking for advanced strategies. He has trained hundreds of thousands of people through his classes and radio show.

Prioritize financial education to retire on time

Statistics show that financial literacy is on the decline in the US, with only one in three Americans having a working knowledge of key financial concepts like financial risk, interest rates, and mortgage rates. Over the past decade, the percentage of those who would be considered financially literate has fallen by nearly 20 percent.

Davis believes a big part of the problem lies in the reluctance of most Americans to take the lead in their financial education. “One of the top reasons that Americans are retiring so late is that they fail to continue their financial education after high school or college,” he says. “High school and college classes teach nothing about building wealth — they simply teach students how to be an employee, which is rarely the way to become wealthy. It is the individual’s responsibility to educate themselves on how to build wealth, but few do. In fact, 70 percent of Americans never read a financial book after high school or college.”

This lack of financial literacy has left many Americans in a tough spot when it comes to retirement. Experts say that funding 20 years of retirement requires having $1 million put away, which is something statistics show only 4 percent of Americans have achieved. The majority of Americans have less than $20,000 put away to cover their expenses after they stop working. 

Focus on income-producing assets to retire on time

According to Davis, choosing the wrong investment strategy is the other big mistake that most people make when preparing for retirement. “Low financial IQ leads people to speculate in the stock market, metals, and crypto,” he says. “People who have done their homework and learned how to become wealthy invest in income-producing assets like businesses and real estate.”

Less volatility is one of the reasons that Davis sees real estate as the superior investment option for those seeking to fund their retirement. “During the past 100 years, the stock market has crashed 18 times,” he points out. “On average, that’s one crash every six years, meaning the average retiree living off stock investments will need to navigate a crash three times during their retirement.”

For investors focused on rental real estate, fluctuations in the market are not a concern because they will continue to draw a stream of income from the property even when markets falter. Davis sees that stream of income is the key to building wealth.

“When you invest in a rental property, you continue to have rental income even when market fluctuations cause the value of the property to go down,” Davis explains. “In 2007, the Great Recession rocked the stock market, causing the value of my rental properties to drop by 35 percent. The income I was receiving from the properties, however, did not change at all.”

Investing in income-producing assets also helps to mitigate the negative impact that losing a job can have on retirement planning. “People need to realize that if their job is their sole source of income, they are in the highest risk position possible,” Davis says. “In order to protect against that risk and stay on track for retirement, everyone needs a second stream of income.”

The current economic landscape poses a number of challenges for retirees, from high grocery bills to rising medical costs. When confronted with those problems, many choose to simply keep working. 

Davis believes there is another solution. By increasing your financial IQ and choosing the right investments, anyone can achieve their dreams of retiring on time.