Retirement is on your horizon, but do you see the potholes? One of our favorite financial columnists, USA Today’s Rodney Brooks, has an excellent piece on seven mistakes to avoid in retirement planning. Excerpts from Part 1:

“It’s complicated, this retirement thing.

“We keep hearing we need to save more money than we’ve saved. We’re worrying about if we have enough to survive a health care crisis in retirement. And in the middle of all that, we’re trying to figure out if we can, indeed, wait a few years before we start taking those Social Security checks like all the financial advisers are telling us.

“There’s a lot at stake, and most of us can’t afford to screw up. So, we talked to financial planners about some of the most frequent mistakes they’ve seen. Of course, they have seen a lot. Here are the top seven.

“1. Are you really going to spend less when you retire? High on the list of financial planner Joe Heider, regional managing principal for Rehmann Financial Group in Westlake, Ohio, is the assumption that you will spend less money in retirement than you do in your working years. The rule of thumb among some financial planners is that most people will spend 80% of what they spend while working – the assumption being that you won’t have to pay for that daily commute, that work wardrobe, lunches, etc. But, Heider says that assumption is wrong, especially in the early years.

“’Most people, in my opinion, initially after they retire, actually spend more money than when they were working’, he says. ‘When you have a job, you are in your office and you are not spending money. But now you have 24/7 to shop, travel and do all the things people couldn’t do before’.

“2. Do you really need that much money in bonds when you retire? The old rules of retirement were to go 60% stocks 40% bonds as you neared retirement, and go 80% bonds when you actually reach retirement. That would be a huge mistake today, says Karen Wimbish, director of retail retirement at Wells Fargo. ‘Today if you go that conservative, you won’t be able to keep up with inflation’, she says. ‘The old formula was based on your parents, who lived 10 years in retirement. People today will live a lot longer. They need to keep growth in their portfolio. The mix should be 50-50 (50% in stocks, 50% in bonds) instead of 80/20’.

“3. Are you taking into account inflation? ‘There is a tendency for people in retirement to be way too conservative in their investments’, says Heider. ‘They think that they no longer feel a need to hedge against inflation. Assume you’ll have 25 years of retirement with 3% inflation: Unless you have growing income, you would have a significant decrease in purchasing power’, Heider says.”