Clients typically make mistakes when saving and investing for retirement.

“In the quest to accumulate as much money as possible for retirement,” says Aiman Dally, CEO of Copia Financial Solutions in Toronto, “clients often make the mistake of not considering other costs that can erode their retirement funds.”

These mistakes can leave clients with less money to fund a comfortable retirement lifestyle.

Here are five important retirement-planning mistakes you can help your clients avoid:

1. Retiring with too much debt
“In a perfect world, people need to attempt to retire with no debt,” says Matthew Williams, head of defined contribution at Franklin Templeton Investments in Toronto. “[That means] no mortgages, no credit card debt and no other loans.”

Dally says clients need to review their income and expenses prior to retirement and strive to eliminate all debt. Clients who anticipate that they might need additional funds during retirement should secure a line of credit while they are still working, he says.

2. Not paying sufficient attention to taxes
Clients often forget to consider the long arm of the tax man when planning for retirement, Dally says.

“They need to pay special attention to strategies that will minimize taxes such as income splitting, spousal RRSPs and investing in tax-efficient assets such as corporate class funds,” he says.

Clients must also consider the impact of estate taxes and income taxes to prevent their heirs from having to liquidate assets to pay taxes.

3. Not having sufficient insurance
Many clients believe they do not need insurance during retirement — which might be true if they have sufficient money.

However, says Dally, “The older we get, the greater the probability of disability and critical illness, and the need for long-term care.”

Acquiring the relevant insurance prior to retirement can help offset the costs of these potential life events. Costs for long-term care keep rising, Williams says. “You don’t want to put the financial burden on the next generation.”

4. Giving away too much, too soon
Some clients begin to share their wealth with their children or make charitable donations too soon, depleting their estates and leaving themselves with inadequate assets during retirement.

“Unless clients have a plan to fund their retirement needs, including unanticipated costs,” Dally says, “they could find that they have given away too much, too soon.”

Williams suggests that clients would be better off making any disbursements through their estates rather than up front.

5. Not having an estate plan
Many clients do not consider the importance of having an estate plan. However, they must be aware of probate fees, taxes on deemed dispositions and other expenses related to their estates.

“These issues will come up during retirement when [clients] least want to think about them,” Dally says, “so they will have to plan ahead.” He suggests that clients consider using insurance in their estate plans to offset costs and avoid burdening their families.

This is the second part in a two-part series on common retirement-planning mistakes.

Click here for part one.