Retirement should be the reward for a lifetime of hard work—a time to enjoy life without the stress of a paycheck. But for many retirees, financial missteps turn what should be their golden years into a period of stress and uncertainty.
Consider this: A study from the Center for Retirement Research found that nearly half of retirees leave the workforce with less savings than they need, forcing difficult lifestyle adjustments. I’ve seen it firsthand—retirees who assumed they had enough, only to realize too late that they’d made costly errors. Some overspend early, thinking their nest egg will last forever. Others claim Social Security too soon or underestimate healthcare costs, only to find themselves scrambling years later.
Take Tim and Susan, for example. They entered retirement confident they had plenty saved—until unexpected medical bills and inflation eroded their nest egg faster than they ever imagined. By the time they realized their spending was unsustainable, they had limited options to course-correct. Tim had to return to work part-time, and Susan regrets not making different choices when they had the chance.
The most heartbreaking stories come from retirees who simply didn’t see the pitfalls ahead. They assumed their savings would be enough, that their expenses wouldn’t rise, or that they could navigate retirement on their own. By the time they realized their mistake, their choices were limited. Some were forced to downsize dramatically, while others had to return to work long after they had envisioned enjoying their golden years.
On the other side of the spectrum, some retirees make the mistake of underspending. They live in constant fear of running out of money, pinching pennies on experiences they had dreamed about for years. They delay travel, hold off on hobbies, and avoid spending on things that would bring them joy, all in the name of preserving their savings. The result? They reach their later years with more than enough money left but regret the adventures never taken. The balance between enjoying life and ensuring financial security is a delicate one, and knowing how to navigate it is key to a fulfilling retirement.
But it doesn’t have to be this way. Retirement success isn’t just about the size of your portfolio—it’s about the decisions you make along the way. From when to claim Social Security to how much risk to take in your investments, every choice plays a role in determining whether your money lasts. And the reality is, the financial landscape in retirement is far more complex than it appears. That’s why working with a professional can make all the difference. A well-planned retirement strategy doesn’t just prevent mistakes—it ensures you have a plan for whatever life throws your way.
Here are the seven biggest financial mistakes I see retirees make—and how you can avoid them.
Mistake 1: Rushing Into Social Security Too Early
Social Security is often a retiree’s most reliable source of income, but claiming it too early can reduce lifetime benefits significantly. Many retirees rush to file at 62, fearing they won’t live long enough to maximize benefits, but for most, delaying leads to a much higher payout.
The decision becomes even more crucial for married couples. If one spouse was the higher earner, delaying their benefit can significantly increase the survivor benefit left for the other spouse in the event of their passing. A common strategy is for the lower-earning spouse to claim earlier while the higher-earning spouse delays as long as possible, ensuring a higher guaranteed income stream later in life. Many retirees overlook this strategy and end up locking in lower benefits for both themselves and their surviving spouse.
How to Avoid It: Take a strategic approach. If you have other income sources, delaying benefits until full retirement age (or even 70) can greatly increase your monthly checks. Work with a financial professional to determine the optimal claiming strategy based on your specific situation, including spousal benefits and survivor planning.
Mistake 2: Underestimating Inflation
Inflation is the silent thief of retirement. Even modest inflation erodes purchasing power over time, making today’s comfortable budget inadequate in 10 or 20 years.
Many retirees assume their expenses will remain steady, but consider this: a retirement lasting 30 years could see prices double due to inflation. Healthcare, groceries, utilities—these costs will continue rising. If your investments and income sources aren’t keeping up, you could find yourself cutting back on essentials just to make ends meet.
How to Avoid It: Build inflation protection into your financial plan. This includes investing in assets that outpace inflation (such as equities), considering strategies like annuities with cost-of-living adjustments, and maintaining flexibility in spending. Additionally, having a well-structured retirement income strategy that accounts for inflation adjustments—such as using the 4% rule or retirement income guardrails—can help ensure your withdrawals remain sustainable while protecting your purchasing power. A well-diversified portfolio designed for long-term growth will help ensure your purchasing power remains strong throughout retirement.
Mistake 3: Going Big in the Early Years—and Paying for it Later
Many new retirees see their early retirement years as a time to splurge. They buy new cars, go on extravagant vacations, and give generously to family members. While enjoying life is important, overspending too soon can lead to financial stress later.
The reality is that retirement spending is rarely linear. The “go-go years” (early retirement) are often more expensive due to travel and entertainment, while the “slow-go years” tend to taper off before healthcare costs rise again in the “no-go years.”
Spending more early in retirement isn’t inherently a mistake—as long as it’s accounted for within your plan. The key is ensuring that you have a structured strategy in place so that you can spend with confidence rather than fear. Knowing exactly how much you can afford in your early years allows you to enjoy your retirement without the anxiety of running out of money. Without a clear plan, however, unchecked early spending can have a compounding effect over time, leaving less flexibility in later years when healthcare costs and other needs arise.
How to Avoid It: Establish guardrails on your spending. A dynamic withdrawal strategy—adjusting withdrawals based on market conditions and portfolio performance—helps ensure your savings last. Work with a financial professional to create a plan that allows you to fully enjoy your early retirement years while maintaining long-term security. A structured approach gives you the freedom to spend without regret and without jeopardizing your future.
Mistake 4: Living a “Just in Case” Retirement
Just as some retirees overspend, others underspend out of fear. They live frugally, avoiding the experiences they once looked forward to—whether it’s travel, home renovations, or even simply enjoying dinners out—all because they’re worried they might need the money later. Sadly, many of these retirees reach their later years with far more money left than they ever needed, but without the memories and fulfillment they could have had.
How to Avoid It: The solution to underspending is the same as it is for overspending—having a well-structured retirement income plan. This allows you to spend with confidence, knowing exactly how much you can afford without jeopardizing your financial future. The fear of running out of money is alleviated when you have a clear strategy in place, enabling you to balance both security and enjoyment in retirement. Work with a financial planner to determine sustainable withdrawal rates and create a budget that allows for both responsible spending and meaningful experiences. If you’re consistently living well below what you can afford, it might be time to reassess whether your “rainy day” fund is actually preventing you from enjoying your retirement.
Mistake 5: Failing to Account for Healthcare Costs
Healthcare costs are one of the biggest financial burdens in retirement. Medicare helps, but it doesn’t cover everything. Unexpected medical expenses, long-term care needs, and rising prescription costs can quickly deplete savings.
Many retirees assume Medicare will cover all their needs, only to find themselves paying thousands out-of-pocket for things like dental work, hearing aids, and uncovered prescriptions. Long-term care is another often-overlooked expense, with costs easily surpassing six figures per year in some cases.
Pro Tip: It is generally advisable to avoid Medicare Advantage plans. While they may seem cost-effective initially, they often come with network restrictions, unexpected out-of-pocket costs, and limited provider choices. Make sure you work with a local expert to ensure that your coverage aligns with your healthcare needs and that you will be able to continue seeing your preferred healthcare providers.
How to Avoid It: Plan ahead. Consider supplemental insurance (Medigap), long-term care coverage, and setting aside dedicated funds for medical expenses. Look into health savings accounts (HSAs) if you’re still working, as these can be a tax-efficient way to cover healthcare costs.
Mistake 6: Bunting When you Should Go for a Base Hit
Ok, maybe this shows that I am coming fresh off my son’s baseball tournament this weekend, but the analogy seems to jive in my mind so I’m just going with it.
Retirees often fear market volatility, leading them to park too much in cash, CDs, or bonds that don’t keep up with inflation. While it feels safe, this strategy can cause a slow erosion of purchasing power over time.
This might be the most frequent mistake I see retirees make. The impact isn’t always immediate, but compounded over years, it can have devastating effects. Many people believe that as they age, they need to shift more and more into conservative investments, but this mindset can be dangerous. The reality is that retirement today often lasts 30 years or more, meaning your assets need to keep growing to sustain your lifestyle. Without sufficient exposure to equities, retirees risk falling behind inflation and gradually losing their purchasing power—effectively making their money worth less over time.
How to Avoid It: Maintain a well-balanced investment portfolio. A thoughtful mix of stocks, bonds, and other assets can provide stability while still allowing for long-term growth. A properly structured portfolio should factor in both short-term income needs and long-term growth potential. By staying invested in equities to some degree, retirees can ensure their wealth continues to grow rather than slowly diminishing due to inflation.
Mistake 7: Not Having an Estate Plan
Estate planning isn’t just for the ultra-wealthy—it’s essential for anyone who wants to ensure their assets are distributed according to their wishes, minimize taxes, and make things easier for their loved ones. Unfortunately, too many retirees put off estate planning, assuming they’ll have plenty of time to handle it later. The reality is that without a plan in place, your family may face unnecessary legal hurdles, costly probate fees, and potential disputes.
Pro Tip: Hold a Family Legacy Meeting. One of the best ways to ensure your estate plan is carried out as intended is to hold a family legacy meeting. This allows you to communicate your wishes clearly, set expectations, and reduce the risk of disputes among heirs. Many retirees assume their family will “just figure it out,” but unclear or unspoken intentions often lead to unnecessary conflict.
A family legacy meeting doesn’t need to be a formal legal process—just a conversation to help your loved ones understand why you’ve structured your estate the way you have. If you’re unsure how to approach this, check out my blog How to Hold a Family Legacy Meeting for practical steps on facilitating this important discussion.
How to Avoid It: Having an estate plan doesn’t just protect your assets—it provides peace of mind, knowing your family won’t be left scrambling during an already difficult time. Start by ensuring you have a will that clearly outlines how your assets should be distributed and designate powers of attorney for healthcare and financial decisions so someone you trust can act on your behalf if needed. Review and update beneficiary designations on retirement accounts, life insurance policies, and investment accounts to avoid unintended distributions. Depending on your situation, setting up a trust may be beneficial to protect assets and ensure a smooth transfer to heirs while minimizing estate taxes and probate delays. Working with an estate planning attorney can help ensure your plan is structured correctly and legally sound.
Planning > Challenges
Retirement isn’t just about reaching a financial finish line—it’s about making the right choices along the way to ensure your savings support the life you’ve envisioned. The mistakes outlined here aren’t just hypothetical; they’re real challenges I’ve seen retirees face time and time again. The good news? Every single one of them is avoidable with proper planning. Whether it’s making smart decisions about Social Security, balancing spending habits, or ensuring your investments keep pace with inflation, small adjustments today can make a world of difference down the road.
The key to a successful retirement isn’t just having enough money—it’s having a strategy that allows you to enjoy your wealth without fear of running out. That’s why working with a financial professional is invaluable. A well-structured plan not only helps you avoid costly mistakes but also gives you the confidence to spend wisely, invest prudently, and enjoy retirement on your terms. The best retirements aren’t left to chance—they’re built with intention.
This post is for education and entertainment purposes only. Nothing should be construed as investment, tax, or legal advice.