Are you on the path to a comfortable retirement, or are you unknowingly sabotaging your future? After decades of hard work, nobody wants to spend their golden years worrying about money. Yet many retirees find themselves doing exactly that because of avoidable mistakes made before and during retirement.
I’ve collected insights from financial experts and real-life experiences to help you avoid the most common retirement pitfalls. These mistakes can seriously impact your financial security when you’re no longer earning a regular paycheck.
The Most Critical Retirement Mistakes to Avoid
1. Not Changing Your Lifestyle After Retirement
Many retirees continue spending as they did during their working years, forgetting that they’re now living on a fixed income. Dining out, entertainment, and discretionary spending should typically be reduced to match your new financial reality
An expert in money says, “One of the biggest mistakes retirees make is not changing their spending to fit their new budget in retirement.” People who have worked for a long time need to realize that their spending on things like lunch, clothes, and fun should go down since they don’t make as much money as they did when they were working. “.
Also, remember that healthcare costs usually increase as you age, requiring budgetary adjustments.
2. Claiming Social Security Too Early
Just because you can claim Social Security at 62 doesn’t mean you should. Taking benefits early permanently reduces your monthly payments by about 30% compared to waiting until your full retirement age (FRA) which is 67 for anyone born after 1959.
If you can afford to wait even longer, delaying until age 70 gives you an additional 8% boost in benefits for each year you wait after your FRA. As Natalie Colley, a financial analyst, notes: “If you can live off your portfolio for a few years to delay claiming, do so. Where else will you get guaranteed returns of 8% from the market?”
3. Waiting Too Long to Start Saving
Northwestern Mutual’s 2025 study found that only one in four Americans who are saving for retirement have saved enough to cover one year’s worth of salaries. More than half of Gen Xers who are getting close to retirement have saved three times or less of their current yearly income.
The power of compound interest means that starting early makes a massive difference. To build a $1 million nest egg by age 65 (assuming an 8% annual return):
- Starting at age 25: $300/month
- Starting at age 35: $700/month
- Starting at age 45: $1,700/month
- Starting at age 50: $3,000/month
As financial planner Ajay Kaisth says, “Many people do not start to aggressively save for retirement until they reach their 40s or 50s. The good news for these investors is that they may still have enough time to change their savings behavior and achieve their goals, but they will need to take action quickly and be extremely disciplined about their savings.”
4. Planning to Work Indefinitely
A lot of baby boomers plan to work past age 65, either because they want to or because they need to make money. Fidelity’s 2025 State of Retirement Planning survey found that more than half of workers plan to keep working part-time after they retire.
But health problems (yours or a loved one’s), employers cutting back, and skills becoming useless can all force you to retire early. According to the Transamerica survey (2025), 33% of workers don’t plan to retire at all, while 24% expect to retire at age 70.
5. Spending Too Much Too Soon
That retirement nest egg might look huge when you first retire, but remember: it needs to last potentially 20-30 years or more! Many retirees deplete their savings too quickly in the early retirement years.
As one retirement expert warns: “The temptation to spend your money can be tempting, but discipline is vital. Depleting your money beyond the interest that it earns will hurt the principal and would leave you with nothing after just a few years.”
6. Not Moving to More Conservative Investments
After retiring, you can’t afford large negative swings in your retirement savings. While younger workers can weather market volatility, retirees need to protect their principal.
Financial advisors generally recommend gradually shifting to more conservative investments as you approach and enter retirement. You’ll still want some growth-oriented investments, but not at the same level as during your working years.
7. Borrowing From Your 401(k)
Taking a loan from your 401(k) might seem like a good idea—after all, you’re borrowing from yourself. But this can seriously damage your retirement in several ways:
- You’ll likely reduce or stop new contributions while repaying the loan
- You’ll miss out on employer matching funds (free money!)
- The borrowed money isn’t growing in the market
- If you leave your job, the loan might be due in full within 60-90 days
- If you can’t repay it, it becomes a taxable distribution with a 10% penalty if you’re under 59½
Meghan Murphy from Fidelity Investments advises: “As you think about loans from retirement plans, the first thing we say is, is there anywhere else you might be able to borrow from?”
8. Supporting Adult Children Financially
Family is hard to refuse, but supporting adult children can drain your retirement savings. Your adult children have many more years to recover financially than you do.
“Remember that you will no longer be earning the same money as you did when you still had a job,” warns one financial expert. “Your retirement income could only be enough to cover your personal expenses.”
9. Falling for Scams and Frauds
Unfortunately, retirees are prime targets for financial scams. According to reports, Americans lose hundreds of millions of dollars annually to get-rich-quick and other scams.
Credit card fraud was the most common type of identity theft in early 2025 and is expected to reach $43 billion by 2026. Every 14 seconds, someone in the U.S. becomes a victim of identity theft.
Be extremely skeptical of any investment promising spectacular profits in a short timeframe with no risk, or anyone pressuring you to make immediate decisions.
10. Being House-Rich but Cash-Poor
Many retirees have most of their wealth tied up in their homes, with little liquid cash available. While houses typically appreciate in value, the ongoing costs of taxes, utilities, repairs, and maintenance can strain a fixed retirement income.
Consider downsizing to a smaller, more affordable home and investing the proceeds to generate income. Alternatively, explore options like finding a roommate for rental income or relocating to a lower-cost area.
11. Cashing Out Pension Too Soon
Some retirees are tempted to cash out their entire pension for a lump sum, hoping to invest it for higher returns. This is rarely the best move, as investments are unpredictable and it’s difficult to find options that pay as much as a guaranteed pension over the long term.
Remember that cashing out a pension early often comes with significant costs. The longer you live, the more you’ll lose from this decision.
12. Not Planning for Long-Term Care
Healthcare and long-term care costs can quickly deplete even substantial retirement savings. According to A Place For Mom (2025), monthly costs average:
- Assisted living: $5,190
- Memory care: $6,200
- Independent living: $3,145
- In-home care: $30 per hour (for 20 hours weekly)
Medicare doesn’t cover most long-term care costs. Options include long-term care insurance, though premiums are high. In 2024, a policy offering $165,000 of total lifetime coverage for a 65-year-old male cost an average annual premium of $1,700.
13. Ignoring Estate Planning
Estate planning isn’t just for the wealthy. Even with modest assets, you need a valid will to specify who gets what and who will handle your affairs.
Without proper estate planning, your assets could get tied up in court, and a judge might award them to unintended parties. Review your estate planning documents periodically, especially after major life changes like divorce, remarriage, or the birth of grandchildren.
14. Paying More Taxes Than Necessary
Having multiple retirement accounts can be beneficial, but each is taxed differently. Without proper withdrawal strategies, you could end up paying more in taxes than necessary.
Finding the most tax-efficient way to access your retirement funds is complex but crucial. Consider consulting with a tax professional who specializes in retirement planning.
15. Not Having a Plan for Your Free Time
A friend of mine retired early from his government job, only to go back part-time soon after. “There’s only so many movies to see alone during the day in an empty theater,” he told me. “That got old fast.”
After decades of structured workdays, suddenly having endless free time can be challenging. Plan meaningful activities, consider part-time work, volunteer opportunities, education, or developing hobbies to keep yourself engaged and fulfilled.
Final Thoughts
Retirement planning isn’t just about saving money—it’s about creating a lifestyle that brings you joy and security in your later years. By avoiding these common mistakes, you’ll be well on your way to the retirement you’ve worked so hard to achieve.
Remember, it’s never too late to improve your retirement outlook. If you’re struggling with any of these issues, consider consulting with a certified financial planner (CFP) who can provide personalized guidance based on your specific situation.
Your golden years should be about enjoying life, not stressing about finances. Start making adjustments today to ensure your retirement is everything you’ve dreamed it would be!
Selling assets in a downturn
Collecting Social Security too early
| Age | Monthly benefit |
|---|---|
| 62 | $1,706 |
| 67 (FRA) | $2,437 |
| 70 | $3,022 |
My 7 BIGGEST Retirement MISTAKES (So COSTLY!)
FAQ
What is the #1 regret of retirees?
1. Waiting too long to retire. This regret comes up over and over. We all know stories of people who worked hard, made responsible choices, saved diligently, and finally reached retirement — only to fall ill or pass away soon after.
What is the 3 rule in retirement?
The 3 percent rule is a conservative way to withdraw money from retirement. You take out 3 percent of your initial retirement savings in the first year and then adjust that amount for inflation every year after that, with the goal of making your savings last for 20 years or more. This method is considered safer than the 4% rule, especially for early retirees, those with lower risk tolerance, or those who want to leave an inheritance. It’s just a suggestion; you should use it along with a full financial plan, because market conditions and real-life needs call for flexibility.
What is the number one mistake retirees make?
Among the biggest mistakes retirees make is not adjusting their expenses to their new budget in retirement. Those who have worked for many years need to realize that dining out, clothing and entertainment expenses should be reduced because they are no longer earning the same amount of money as they were while working.
How many Americans have $500,000 in retirement savings?
Approximately 9-10% of American households had $500,000 or more in retirement savings in recent surveys and data from 2022-2025.
What are some common retirement planning mistakes people make?
This post examines seven common retirement planning mistakes people make during their working years and how you can avoid them. First, we’ll look at two mistakes that people of all ages might make. Then we’ll focus on five additional mistakes that apply to people in their 50s and older. 1. Not Saving Enough Money While You’re Working.
Are you making a mistake by retiring early?
One common mistake when retiring, especially retiring early, is not having a plan for your life. Without a plan, retirement can become boring, and people may struggle to find purpose. To avoid this, have a plan for what you will do in retirement.
Should you avoid retirement planning mistakes in your 50s or older?
Take advantage of a wellness program if your employer offers it. Avoiding these two mistakes can put you in a good position to be financially secure and healthy in your retirement years. Now let’s look at five mistakes that people in their 50s and older should address. 1. A Big Retirement Planning Mistake To Avoid For People In Their 50s Or Older.
Are you making a retirement mistake by waiting?
One common retirement mistake is waiting until retirement to enjoy doing the things you love, such as traveling or pursuing hobbies. While delayed gratification is important, you may not have the same energy to do these things in retirement. If there’s something you want to do, consider doing it now.
Why are retirement missteps so common?
It’s easy to understand why retirement missteps are so common. Our lives are busy juggling work, family and personal commitments, so financial planning often takes a backseat. It’s easy to see why a lot of people feel lost: there is so much information out there, some of it true and some of it not.
Should Retirees make financial mistakes or become a victim of fraud?
All retirees should take steps to prevent financial losses by making mistakes or becoming a victim of financial fraud. The best time to address these potential mistakes is when you transition into retirement. These decisions can help you determine whether you need to set aside financial resources for that period of life and even where to live.