Retirement Mistakes to Avoid
There's an old saying that good judgment comes from experience, and experience often comes from bad judgment. Retirement, however, leaves much less room for learning through trial and error.
Fortunately, you don't have to learn every lesson firsthand. By understanding the mistakes and regrets that have shaped the experiences of other retirees, you can approach retirement with greater confidence and make more informed decisions for your own future.
Retiring Too Soon
Retirement doesn't always arrive according to plan. In fact, EBRI's 2026 Retirement Confidence Survey, 46% of retirees said they retired earlier than expected.
If your original plan assumed you'd work until 67 but you retire at 62, for example, you trade five more years of saving for five additional years that your retirement income and assets may need to fund.
Leaving work early can also affect Social Security because your benefit calculation uses your highest 35 years of earnings; if you have fewer than 35 years of earnings or replace what could have been higher-earning years with retirement, your eventual benefit may be lower.
Before choosing your retirement date, run the numbers based on the income and expenses you'll actually have after your paycheck stops. Estimate your essential and discretionary spending, healthcare and insurance costs, taxes, Social Security income, pensions, and expected portfolio withdrawals.
Ideally, use your remaining working years to pay down large debts so you're not carrying substantial monthly payments into retirement.
If the numbers look tight, delaying retirement by a year or two can already make a huge difference. You can continue contributing to retirement accounts, potentially collect an employer match, shorten the period your savings must support, and postpone withdrawals.
You can run these projections yourself or work with a financial planner who can model different retirement dates, stress-test your assumptions, and help you reach a decision confidently.
Claiming Social Security Earlier Than Necessary
You're eligible to claim Social Security retirement benefits at age 62, but that doesn't necessarily mean you should claim them right away. Filing before your full retirement age (FRA) permanently reduces your monthly benefit based on how many months early you claim.
For example, if you were born in 1960 or later, your FRA is 67. A retirement benefit worth $2,000 per month at age 67 would fall to about $1,400 per month if you claimed at 62 – a permanent 30% reduction.
On the other hand, waiting until age 70 allows delayed retirement credits to increase that same benefit to about $2,480 per month, or 124% of your FRA benefit.
All that’s to say, claiming at 62 is not a wrong decision. However, if you can comfortably delay claiming, you may qualify for a substantially larger monthly benefit for the rest of your life.
The numbers should drive the decision. Compare your estimated benefit at age 62, your full retirement age, and age 70 using your Social Security statement. Then weigh those amounts against your retirement income needs and overall financial plan before deciding when to claim.
Assuming Social Security Alone Will Cover Your Retirement
Looking at the SSA's recent data, the average retired-worker Social Security benefit was about $2,086 per month, or roughly $25,000 a year.
If Social Security will be your primary source of retirement income, ask yourself one simple question: Will that monthly benefit be enough to replace everything your paycheck once covered?
Even if you've already paid off major expenses like your mortgage, unexpected costs such as a major medical bill or costly home repair can put further pressure on a budget with little room to spare.
Social Security is designed to replace only part of your pre-retirement earnings, with the share becoming smaller as your income rises. So, if it's your only source of retirement income, you may find it much harder to maintain the lifestyle you enjoyed while working.
Before you retire, compare your personalized Social Security estimate with a realistic retirement budget. The difference between the two is your retirement income gap, the amount you'll need to cover from other income sources.
If that gap is larger than you'd like and you're still working, use the time you have left to strengthen your retirement savings by contributing to your 401(k) or IRA and taking full advantage of any employer match.
Better yet, build multiple sources of retirement income so your lifestyle doesn't depend entirely on one monthly check.
You can also reduce that income gap by eliminating expenses you don't expect to carry into retirement.
Not Saving Enough Before You Retire
Not saving enough for retirement may be one of the most obvious mistakes on this list, yet many Americans still approach retirement without confidence that they've put away enough. In fact, the Federal Reserve's 2025 household survey found that only 35% of non-retirees believed their retirement savings plan was on track.
A smaller nest egg leaves you with fewer options later in life. You may have to scale back your lifestyle, delay retirement, or withdraw your savings more aggressively than planned, increasing the risk of outliving your money.
But how much is enough? As a general benchmark, consider planning for retirement income equal to roughly 70% to 80% of your pre-retirement income.
Of course, the exact figure depends on your lifestyle, expected retirement expenses, and other sources of income. For a more detailed discussion, check out our guide on how much money you need to retire.
Spending Like You're Still Receiving a Paycheck
If your spending regularly exceeds your Social Security, pension, and sustainable portfolio withdrawals, you'll draw down your savings faster to cover the difference, increasing the risk of running short later in retirement.
Instead, build your spending around the retirement income and assets you actually have. Start by listing your recurring essential expenses, such as housing, food, healthcare, insurance, and taxes. Doing so gives you a clearer picture of where your money is going and which expenses are taking a bigger bite out of your budget than you realized.
From there, you can determine how much room you have for discretionary purchases. Retirement doesn't mean you have to stop treating yourself every now and then, but it does call for a few thoughtful tradeoffs.
For instance, if you're a car enthusiast, a well-maintained used car could scratch the itch without the price tag of a brand-new model.
Underestimating Healthcare and Long-Term Care Costs
Forty percent (40%) of retirees said their healthcare expenses were higher than expected in EBRI's 2026 Retirement Confidence Survey. This makes medical costs one expense you don't want to underestimate when deciding how much retirement income you'll need.
Long-term care, should it become necessary, can put even more pressure on your finances. You may need care for months or even years, which can steadily draw down savings you had intended to last throughout retirement.
Compounding the problem, Medicare doesn't cover most long-term care, including most custodial care in a nursing home or at home.
Prepare for these costs by:
Budgeting for healthcare. Include Medicare premiums, supplemental coverage, prescriptions, and out-of-pocket medical expenses in your retirement projections.
Taking advantage of an HSA while you're eligible. HSAs offer a triple tax advantage: contributions can be tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are tax-free.
Deciding how you'll pay for long-term care. You might self-fund the cost from savings, buy traditional long-term care insurance, use a hybrid life insurance policy with long-term care benefits, or consider other alternatives to long-term care insurance based on your finances and coverage needs.
Mismanaging Your Retirement Withdrawals
A few common ways retirees mismanage their withdrawals include:
Taking too much money too soon. The faster you draw down your portfolio, the less money you leave invested to potentially grow and support you later in retirement.
Poor withdrawal timing. If the market falls early in retirement and you continue selling investments to fund your usual spending, you may have to sell more shares at depressed prices. This exposes you to sequence-of-returns risk, where early investment losses combined with withdrawals can leave your portfolio with less money to participate in a subsequent recovery.
Withdrawing without considering the tax consequences. Money taken from a traditional 401(k) or IRA generally counts as taxable income. A large withdrawal could push part of your income into a higher tax bracket and may also increase your modified adjusted gross income (MAGI), which can affect Medicare premiums through IRMAA.
You can avoid many of these problems by having a withdrawal strategy before you start drawing heavily from your portfolio.
Set an annual withdrawal amount or range and decide which accounts you'll draw from and when. Review those rules each year against your remaining portfolio and expected longevity. Remember, the plan you retire with isn't set in stone and will likely need a change as your finances do.
Ignoring Tax Planning in Retirement
As we touched on above, which accounts you withdraw from can affect your tax bill. But several other retirement decisions can have tax consequences that are easy to overlook:
Social Security: Depending on your combined income, up to 85% of your benefits may be subject to federal income tax.
Medicare: A higher modified adjusted gross income (MAGI) can trigger IRMAA, which increases your Medicare Part B and Part D premiums.
RMDs: Required minimum distributions from traditional retirement accounts generally count as taxable income, and failing to take the required amount can result in an excise tax.
Roth conversions: Converting pre-tax retirement funds to a Roth generally creates taxable income in the year of the conversion, so converting too much at once could produce a larger tax bill than you intended.
Review your projected taxable income each year before making large withdrawals or conversions. Account for your Social Security, pensions, investment income, and RMDs together so you can see how one decision may affect the others.
If the tax picture gets complicated, you can also have a tax professional or financial advisor run the numbers before you act.
Taking More Investment Risk Than You Can Afford
The closer you get to retirement, the less time you have to recover from a major investment loss before you may need to start withdrawing from your portfolio.
Be particularly careful about putting too much of your retirement savings into individual stocks, cryptocurrency, meme stocks, leveraged investments, or any single company or sector.
None of these investments are inherently bad. The challenge is that larger price swings and concentration risk become much harder to absorb once your portfolio starts funding your retirement income.
How much risk is appropriate ultimately comes down to both your risk tolerance (how comfortable you are with market swings) and your risk capacity, or how much financial loss you can realistically afford to absorb.
To get a sense of your own, ask yourself what would happen if your portfolio suddenly fell 20% or 30%. Would you still have enough income and cash reserves to cover your living expenses without selling investments at a loss?
Also think about how much of your portfolio you'll need over the next few years. The sooner you'll need that money, the less investment risk you may be able to afford.
Falling for Retirement Investment Scams
This mistake has less to do with retirement planning strategy, but it's worth mentioning because a scam can cost you money you've spent decades accumulating.
In 2025, Americans over age 60 reported more than $7.7 billion in fraud losses, according to the FBI, with investment schemes accounting for more than $3.5 billion of those losses.
Investment scams can take many forms, from fake cryptocurrency or stock opportunities to scammers impersonating legitimate financial professionals.
Scammers rely on people acting before they have time to think. As such, your best protection is a healthy dose of skepticism. Before sending a single dollar, make sure you've researched both the person and the investment.
Just as importantly, learn to recognize the warning signs from the outset. This usually includes promises of guaranteed or unusually high returns, pressure to invest immediately, unsolicited investment offers, and requests to send money through unusual payment methods.
Failing to Keep Your Estate Plan Up to Date
An outdated estate plan can leave assets going to people you no longer intended to benefit. It may also place important financial or healthcare decisions in the hands of someone you would no longer choose to act on your behalf.
This commonly happens after major life events such as marriage, divorce, the birth of a grandchild, the death of a loved one, or a significant change in your finances. That's why it's important to review your estate plan whenever circumstances like these arise.
Even if nothing major has changed, it's still good practice to review your will, trusts, powers of attorney, healthcare directives, and beneficiary designations every few years to confirm they still reflect your wishes and long-term goals.
Do you already have a retirement plan in place, or has it been years since you last reviewed it? The last thing you want is to spend retirement worrying about your finances when this should be the stage of life where you enjoy the freedom you've worked so hard to achieve.
At Smart Financial Lifestyle, we believe retirement planning should be personal. If you're tired of sorting through conflicting advice or settling for generic financial plans, book a call today.
We'll walk you through how a personalized retirement strategy, backed by more than 50 years of experience, can help you move forward with greater confidence.
