Most problems in retirement don’t arise from one big, dramatic mistake. They are often the result of a few smaller, perfectly understandable decisions that add up over time. Maybe the plan hasn’t been updated in a while. Maybe an assumption that once seemed reasonable no longer holds true. Or maybe a decision was made on its own without considering how it might affect the rest of the retirement picture. Here are some of the retirement pitfalls we see most often:
Underestimating how long retirement could last.
Planning for too few years can put unnecessary pressure on your savings later in life. Many people live well beyond what they initially expected. For couples, there’s an added consideration: one spouse may live considerably longer than the other. Building some extra cushion into the plan may mean making slightly more conservative assumptions today, but that’s usually preferable to discovering later that the plan didn’t account for enough time.
Not planning enough for healthcare and long-term care.
Healthcare is an expense that can be easy to underestimate before retirement. Medicare can cover a meaningful portion of healthcare costs, but it doesn’t cover everything. In particular, it generally doesn’t cover extended custodial long-term care. Premiums, deductibles, prescriptions, and other out-of-pocket expenses can add up over the course of retirement as well. Giving healthcare its own place in the retirement budget and thinking about how you would handle a potential long-term care need can help prevent those expenses from catching you off guard.
Claiming Social Security without a strategy.
Social Security can seem pretty straightforward. But when you choose to claim has a meaningful effect on the benefit you receive for the rest of your life. Claiming before your full retirement age can reduce your monthly benefit, while delaying benefits beyond full retirement age can increase it up to age 70. That doesn’t mean waiting is automatically the right choice for everyone. Your health, life expectancy, other income sources, marital situation, and overall financial plan should be taken into consideration. It’s important to make the decision intentionally rather than simply claiming at the first available opportunity.
Withdrawing from savings without a sustainable plan.
Taking too much from your savings too early can put additional pressure on a retirement portfolio, particularly if those withdrawals happen during a difficult stretch in the markets. Being so cautious that you’re afraid to enjoy the money you spent decades saving isn’t a great outcome either. A withdrawal strategy should provide structure without being unnecessarily rigid. It should also leave room to adjust as markets, spending needs, and your circumstances change.
Waiting too long to think about taxes.
Tax-deferred retirement accounts, Roth accounts, and taxable investment accounts can all receive different tax treatment. The accounts you draw from, and the order and timing of those withdrawals, can affect your tax bill and potentially other parts of your retirement plan. Tax planning often needs to be addressed well in advance of retirement and in your early retirement years. Don’t wait too long to try and take advantage of those potential opportunities.
Treating retirement planning as a one-time analysis.
A plan created five, ten, or fifteen years ago was built around the circumstances and assumptions you had then. Now, maybe your health is different or your family has evolved. Markets have moved and tax laws may have changed. Your retirement plan from years ago may no longer be applicable. Retirement planning works better as an ongoing process. Regular reviews give you a chance to make smaller adjustments along the way instead of waiting until a larger problem develops.
Not planning for the surviving spouse.
Often married couples build a retirement plan around life with two people. They may not spend enough time thinking about what happens financially when one spouse dies. Income, Social Security benefits, and taxes can change. Household expenses may decline, but not necessarily by half. Retirement accounts and other assets may also need to be handled differently. A good plan should help provide financial security for the person who may eventually manage things alone.
Trying to make every decision in isolation.
Retirement planning involves investments, taxes, Social Security, healthcare, estate planning, cashflow, and more. The challenge is understanding how those pieces affect one another. That’s why some of the costliest retirement mistakes aren’t obviously bad decisions on their own. They are often simply made without considering the bigger picture. You want to build a retirement plan with enough flexibility to adapt when life doesn’t unfold exactly as expected. You should also continue to revisit it as circumstances change.
Take some time to review your retirement plan with these common pitfalls in mind. A few small adjustments today can help strengthen your plan and put you in a better position for the years ahead. If you would like any guidance along the way, don’t hesitate to reach out.
Frequently asked questions.
How often should I review my retirement plan?
At least once a year, and any time you experience a major life or financial change. Regular reviews can help you spot potential gaps and adjust before they become bigger problems.
How do I know if I’ve saved enough for retirement?
There’s no single number that works for everyone. Your target depends on your spending, retirement age, income sources, healthcare costs, taxes, and how long your retirement may last. The key is whether your resources can reasonably support your lifestyle over time.
When is the best time to claim Social Security?
There’s no one-size-fits-all answer. Claiming earlier generally means a lower monthly benefit, while delaying can increase your benefit up to age 70. Your health, other income, marital situation, and overall retirement plan should factor into the decision.
What expenses are commonly overlooked in retirement?
Healthcare, long-term care, taxes, home repairs, and unexpected family expenses can be easy to underestimate. Building more flexibility into your budget can help you handle these costs without putting unnecessary pressure on your plan.
What should I do if my retirement plan feels off track?
Start by reviewing your income, spending, savings, investments, taxes, healthcare costs, and Social Security strategy together. That can help you identify where the biggest gaps are and which adjustments can make the most difference.
Disclaimer: The information above is for general educational purposes only and should not be considered financial, tax, or legal advice. Always consult with a qualified professional regarding your specific situation. You should consult with your CPA and/or attorney before implementing any estate planning, gifting, or tax-related strategy.