Let me tell you about my neighbor, Carol. She spent 35 years as a teacher, diligently saving, checking off all the boxes. Then retirement hit, and within 18 months, she was back working part-time at Target. Not because she was bored—because she ran out of money.
Carol did everything “right” on paper, but she made a few critical mistakes that cost her the retirement she’d dreamed about since she was 30.After spending a decade helping people navigate their retirement planning—and watching my own parents struggle through theirs—I’ve seen these same mistakes play out over and over.
Here’s the thing: retirement planning isn’t just about saving money. It’s about avoiding the landmines that can blow up your carefully constructed plans. So grab your coffee, settle in, and let me walk you through the 10 biggest mistakes I’ve seen people make as they approach retirement—and more importantly, how to avoid them.
Mistake #1: Assuming Everything Will “Just Fall Into Place”
I’m going to be blunt: This is the most dangerous assumption you can make.
I’ve lost count of how many conversations I’ve had that go like this:
“So, what’s your retirement plan?”
“Well, I’ve been saving for 20 years. I figure it’ll work out.”
It won’t. Not without a plan.
The Reality Check
You’ve probably heard the advice to “start early” and “invest in index funds.” That’s great advice—necessary, even. ETFs and broad market exposure can minimize risk while giving you solid growth potential. But here’s what nobody tells you: the accumulation phase is only half the battle.
The spending phase? That’s where things get tricky.
Without a detailed budget for retirement, you’re flying blind. You don’t know if you can afford that dream vacation. You don’t know if you should downsize. You don’t know if you’re on track or headed for disaster.
What This Looks Like in Real Life
My friend Jim had $850,000 saved when he retired at 63. Sounds great, right? He thought so too. Two years later, he’d burned through $200,000. Why? Because he never calculated what his actual monthly expenses would be. He just assumed that since he’d “worked hard,” things would be fine.
What You Should Do Instead
Six months before you retire, track every single expense. I mean everything—from your morning coffee to your quarterly insurance premiums. Then add 20% for the unexpected because life always throws curveballs.
Create multiple budget scenarios:
- Best case (everything goes smoothly)
- Realistic case (normal bumps in the road)
- Worst case (major unexpected expenses)
If your savings can’t handle the worst case, you’re not ready yet.
Mistake #2: Taking Your Foot Off the Gas Because You’re “Ahead”
Oh, this one drives me crazy.
You hit your target savings goal at 45. You’re ahead of schedule. Time to ease up and enjoy life more, right?
Wrong. So very wrong.
The Numbers Everyone Gets Wrong
According to the Social Security Administration, the average net earnings in 2023 were just under $64,000. Financial advisors typically recommend having:
- 1x your salary saved by age 30 ($64,000)
- 3x your salary saved by age 40 ($192,000)
- 6x your salary saved by age 50 ($384,000)
- 8x your salary saved by age 60 ($512,000)
Hit those targets early? Fantastic! But don’t you dare slow down.
Why “Ahead” Is Never Far Enough Ahead
Here’s the uncomfortable truth I learned when my mom retired in 2019: retirement costs way more than anyone expects.
Healthcare costs alone average around $315,000 per person over the course of retirement (and that’s assuming you qualify for Medicare). Inflation doesn’t stop when you retire—it actually hits retirees harder because so much spending is concentrated in healthcare, which inflates faster than general prices.
Plus, life happens. Your roof needs replacing ($15,000). Your kid loses their job and needs help ($10,000). Your car dies ($35,000 for a new one). Your grandchild needs college support ($20,000).
These aren’t luxuries—they’re real expenses that will happen.
What My Experience Taught Me
I was “ahead” at 38. I’d saved $250,000, more than three times my salary. I got cocky and reduced my 401(k) contributions from 15% to 8%. “Just for a year or two,” I told myself.
That “year or two” became five years. By the time I got back on track, I’d missed out on about $87,000 in contributions plus growth. That mistake will cost me roughly $350,000 by the time I retire.
Don’t be me at 38. Be smarter.
Mistake #3: Putting All Your Eggs in One Basket
Remember that saying your grandmother used? She was onto something.
The Three Accounts You Actually Need
The Roth IRA: Your Tax-Free Future
This is my personal favorite. You invest money you’ve already paid taxes on, and then—here’s the magic—you never pay taxes on it again. Not on the growth, not on the withdrawals, never.
Currently, you can contribute up to $7,000 per year ($8,000 if you’re 50 or older). That might not sound like much, but let’s do the math:
If you max out a Roth IRA from age 30 to 65 (35 years), with average 8% annual returns, you’ll have about $1.17 million. All tax-free.
The Traditional IRA: Your Tax Break Today
This is the Roth’s opposite twin. You invest pre-tax dollars, reducing your taxable income now. The trade-off? You’ll pay taxes on withdrawals later.
Why would you want this? Because many people are in a higher tax bracket while working than they will be in retirement. You get a tax deduction at, say, 24%, then pay taxes at 12% when you withdraw. That’s smart math.
The 401(k): Your Employer’s Contribution
This is where the real magic happens—if your employer offers matching.
My company matches 100% of the first 6% I contribute. That’s an immediate 100% return on investment. If I contribute $6,000, they add another $6,000. Show me any other investment that guarantees doubling your money instantly.
If you’re not contributing enough to get the full employer match, you’re literally leaving free money on the table.
The Diversification Nobody Talks About
It’s not just about having different accounts—it’s about tax diversification.
Here’s a scenario: You retire with $1 million. Sounds great! But if it’s all in a Traditional 401(k), that’s not really $1 million—it’s $1 million minus whatever taxes you’ll owe.
Now imagine you have:
- $400,000 in a Roth IRA (tax-free)
- $400,000 in a Traditional IRA (taxable)
- $200,000 in a regular brokerage account (capital gains taxes)
You now have flexibility. Need $50,000? You can pull it strategically from different accounts to minimize your tax bill. That’s power.
Mistake #4: Relying Too Heavily on Your Employer’s Promises
This one’s personal for me because I watched it devastate my father.
Dad worked for the same manufacturing company for 32 years. They promised a generous pension. He planned his entire retirement around it. Then, at 59, the company filed for bankruptcy. His pension was “restructured”—a fancy word for “cut by 40%.”
The Harsh Reality of Employer-Sponsored Plans
Don’t get me wrong—employer benefits are fantastic. Use them! But here’s what they don’t tell you in the employee handbook:
Vesting schedules can burn you. That stock vesting program that seems so generous? You might have to stay with the company for 4-5 years to actually keep it. In today’s job market, where the average person changes jobs every 4.3 years, that’s a problem.
Pensions aren’t guaranteed. Companies can and do reduce pension obligations through bankruptcy or restructuring. Even if they don’t, inflation can erode the value of a fixed pension over 20-30 years of retirement.
Company loyalty is dead. I hate to say it, but it’s true. Companies will lay you off without hesitation if it helps their bottom line. Your loyalty won’t protect you or your retirement benefits.
The Smart Approach
Think of employer benefits as a bonus, not your foundation. Your personal retirement accounts—the ones you control—should be your primary plan.
Max out that 401(k) match, but don’t stop there. Build your own Roth IRA. Create your own safety net. Because when push comes to shove, the only person who will definitely look out for your retirement is you.
I learned this lesson watching my dad. Don’t wait until it’s too late to learn it yourself.
Mistake #5: Claiming Social Security Too Early
This is the mistake I see most often, and it breaks my heart every time.
The Math Nobody Wants to Hear
You can start claiming Social Security at 62. But should you? Let’s look at the numbers as of November 2025:
- Average Social Security check: $1,976 per month (with the 2.5% COLA increase from January 2025)
- Claim at 62: You get about 70% of your full benefit—roughly $1,383 per month
- Wait until 67 (full retirement age): You get 100% of your benefit—$1,976 per month
- Wait until 70: You get about 124% of your benefit—roughly $2,450 per month
Over a 20-year retirement, that difference between claiming at 62 versus 70 is about $256,000. A quarter of a million dollars.
Why People Make This Mistake
I get it. I really do. You’re 62, you’re tired of working, and there’s a check with your name on it waiting. Why not take it?
Because:
You’re probably still working. If you claim before 67 while still earning income, your benefits get reduced further. For every $2 you earn over $24,480 (2025 limit), they deduct $1 from your benefits.
You’re locking in a lower rate forever. Once you start claiming, that percentage is locked in. You don’t get to “upgrade” to the full benefit later.
You might live longer than you think. The average life expectancy is now 78.4 years, but that’s just the average. Plenty of people live into their late 80s or 90s. My grandmother is 94 and still sharp as a tack.
The Break-Even Point
Yes, if you take benefits at 62 and invest them wisely, you might come out ahead if you die before 78. But that’s a pretty grim calculation, isn’t it?
And here’s the thing: Social Security isn’t just about maximizing lifetime benefits. It’s insurance against running out of money. The longer you wait, the bigger your guaranteed monthly check—guaranteed by the U.S. government, which has never missed a Social Security payment.
What I’m Doing
I’m planning to work until at least 67, maybe 70 if I’m healthy and enjoying it. Every year I wait is a permanent 8% increase in my benefit. That’s better than most investment returns, with zero risk.
Mistake #6: Raiding Your Retirement Accounts Early
Let me tell you about the $30,000 mistake that will cost me over $200,000.
My Personal Disaster
At 35, I needed $30,000 for a home renovation. I had options: take out a home equity loan, save up, or—the option I chose—take an early withdrawal from my 401(k).
Here’s what that “simple” $30,000 withdrawal actually cost me:
- $30,000 withdrawn
- $7,200 in taxes (24% tax bracket)
- $3,000 in early withdrawal penalty (10%)
- Total immediate cost: $40,200 to net $30,000
But wait, it gets worse.
If I’d left that $30,000 in my 401(k) for the next 25 years at 8% annual return, it would have grown to about $205,000.
So my $30,000 withdrawal actually cost me $205,000 in retirement savings. For a kitchen renovation that I’m not even that happy with anymore.
The Rules You Need to Know
The basic rule: Don’t touch retirement accounts until you’re 59½ years old. Period.
The penalty: 10% of whatever you withdraw, plus regular income taxes. So if you’re in the 24% tax bracket and withdraw $50,000, you’re paying $17,000 in taxes and penalties. You net $33,000.
The exceptions: Yes, there are some. First-time home purchase (up to $10,000), certain medical expenses, disability, domestic abuse situations. But even with these exceptions, you’re still paying regular income taxes and losing all that potential growth.
The 401(k) Loan Trap
Some people think borrowing from your 401(k) is smarter than withdrawing. After all, you’re paying yourself back with interest, right?
Wrong mindset.
When you take a 401(k) loan, that money stops growing. If the market goes up 10% that year and you’ve borrowed $30,000, you just missed out on $3,000 in gains—even though you’re “paying yourself back.”
Plus, if you lose your job or change companies, most loans become immediately due. If you can’t pay it back within 60 days, it becomes a withdrawal—with all those taxes and penalties.
The Emergency Fund You Need
This is why everyone should have 6-12 months of expenses in a regular savings account before maxing out retirement contributions. I learned this lesson the hard way. Don’t be me.
Mistake #7: Borrowing Against Your Home Right Before Retirement
I watched my uncle make this mistake two years ago, and it still makes me wince.
What Happened to Uncle Mike
Mike was 61, planning to retire at 63. His house was paid off—completely debt-free. Then he decided to do a “small” renovation, taking out a $75,000 HELOC (Home Equity Line of Credit).
The renovation ended up costing $110,000. He retired on schedule but now had a $110,000 loan with payments of about $650 per month. For the next 15 years.
That’s $7,800 per year, or $117,000 over the life of the loan—money he hadn’t budgeted for in his retirement planning.
Why This Is Especially Dangerous Before Retirement
You’re about to lose your primary source of income. Adding a new debt obligation at exactly that moment is financial insanity.
Yes, sometimes it makes sense to tap home equity—maybe to consolidate crushing credit card debt at 24% interest. But that’s the exception, not the rule.
The Retirement Housing Question
Here’s what you should be thinking about instead: Does your current house fit your retirement lifestyle?
My parents had a 4-bedroom, 2,500 square foot house. After retiring, they were spending $500/month on utilities, $350/month on maintenance and repairs, plus property taxes of $4,800/year.
They downsized to a 2-bedroom condo. Their housing costs dropped by about $1,200/month—$14,400 per year. Over a 20-year retirement, that’s $288,000 in savings. Plus, they pocketed $180,000 in equity from the home sale.
That’s the conversation you should be having as you approach retirement—not “how can I borrow more money?”
Mistake #8: Putting Off Estate Planning Because You’re “Not Old Enough Yet”
Nobody wants to think about death. I get it. But let me tell you what happens when you don’t plan.
The Story Nobody Wants to Hear
When my friend Sarah’s husband died suddenly at 67, she discovered:
- She couldn’t access his 401(k) for three months because he’d never updated the beneficiary designation
- His life insurance policy had lapsed because he forgot to pay the premium
- They owned their home jointly, but his truck was in his name only, requiring probate to transfer
- His passwords were all saved in his head, including to their online banking
Sarah spent six months sorting through legal and financial hell while grieving. It cost her about $15,000 in legal fees and countless hours of stress.
The Current Reality
As of November 2025, life expectancy in America is 78.4 years. The average retirement age is around 62. That means the average person has about 16 years of retirement.
Sixteen years sounds like a long time—until you realize it can pass in a blink. And the older you get, the faster time seems to move.
What You Actually Need
A will. Even a basic one. You can do this for a few hundred dollars or even free through some online services. Just do it.
Beneficiary designations. These override your will! Check every account:
- 401(k)
- IRA
- Life insurance
- Bank accounts
- Brokerage accounts
Update them whenever your life changes—marriage, divorce, birth of children or grandchildren, death of a family member.
A power of attorney. Two actually:
- Financial POA: Someone who can manage your finances if you’re incapacitated
- Healthcare POA: Someone who can make medical decisions if you can’t
A master document. This is something I created after Sarah’s nightmare. It lists:
- All accounts and approximate values
- Insurance policies and policy numbers
- Location of important documents
- Usernames (not passwords, but enough to know what accounts exist)
- Key contacts (lawyer, financial advisor, insurance agent)
I update mine every year on my birthday. Takes about an hour. Could save my family months of agony.
Mistake #9: Ignoring Taxes in Retirement
Here’s a shock for many new retirees: You don’t stop filing taxes just because you stopped working.
The Mistake I Almost Made
I was so focused on tax advantages during accumulation—contributing to my Traditional IRA for the deduction, maxing out my 401(k) to reduce taxable income—that I didn’t think about the tax bomb waiting for me in retirement.
All those pre-tax dollars I socked away? They’re all taxable when I withdraw them. If I have $800,000 in my Traditional IRA and need to withdraw $60,000 per year, that’s all taxable income.
Plus, my Social Security benefits become taxable once my combined income exceeds $25,000 (for single filers) or $32,000 (for married filing jointly). “Combined income” includes half of your Social Security benefits plus all other income.
The Tax Traps Waiting for You
Required Minimum Distributions (RMDs): Starting at age 73 (as of 2025), you must start withdrawing money from Traditional IRAs and 401(k)s whether you need it or not. These withdrawals are fully taxable.
If you’ve been a good saver and have a large Traditional IRA, your RMDs could push you into a higher tax bracket than you were in while working. Ironic, right?
The Social Security Tax Torpedo: This is brutal. Once your income crosses certain thresholds, up to 85% of your Social Security benefits become taxable. It’s essentially a hidden marginal tax rate increase that catches many retirees by surprise.
State Taxes: Don’t forget about these. Some states don’t tax Social Security benefits or retirement account withdrawals. Others do. If you’re considering relocating for retirement, factor this in.
What Smart People Do
Create a tax diversification strategy now, before you retire:
- Some money in Roth accounts (tax-free in retirement)
- Some in Traditional accounts (tax-deferred)
- Some in regular brokerage accounts (long-term capital gains rates, usually lower)
Consider Roth conversions in lower-income years. If you retire at 62 but don’t claim Social Security until 67, those five years might be low-income years. You could convert portions of your Traditional IRA to a Roth, paying taxes now at a lower rate.
Work with a tax professional starting at least five years before retirement. Not just for filing—for strategy. A good tax advisor can save you tens of thousands of dollars over your retirement.
Mistake #10: Underestimating Healthcare Costs
This is the killer. Literally and financially.
The Numbers That Should Scare You
A healthy 65-year-old couple retiring in 2025 will need approximately $315,000 to cover healthcare costs throughout retirement. That doesn’t include long-term care, which can run $50,000-$100,000 per year.
Let me put that in perspective: You might need as much saved for healthcare as you do for everything else combined.
What Medicare Doesn’t Cover
Medicare is wonderful—don’t get me wrong. But it has gaps:
Dental care: Not covered. A full set of dentures? $3,000-$8,000.
Vision care: Not covered. Prescription glasses, cataracts surgery beyond basic coverage—you’re paying out of pocket.
Hearing aids: Not covered. Quality hearing aids run $2,000-$6,000 per ear and need replacing every 5-7 years.
Long-term care: Not covered. If you need a nursing home or home healthcare, you’re looking at $50,000-$100,000 per year, possibly for many years.
Medicare Part B and D have premiums. Medigap policies (to cover the gaps) have premiums. It all adds up.
My Mom’s Wake-Up Call
Mom retired at 65 with a solid financial plan. She’d budgeted $400/month for healthcare costs. Seemed reasonable.
Then at 67, she needed a hip replacement. Even with Medicare:
- $5,000 deductible
- 20% coinsurance on various services
- Physical therapy copays
- Prescription pain medications
- Total out-of-pocket: about $12,000
At 69, she was diagnosed with Type 2 diabetes. New costs:
- Increased medication expenses: $200/month even with Part D
- More frequent doctor visits: $40 copay per visit
- Testing supplies: $50/month
- Annual total: about $3,500
Her $400/month budget ($4,800/year) wasn’t even close. She’s now spending closer to $10,000/year on healthcare, and she’s relatively healthy.
What You Must Do
Open an HSA if you’re eligible. Health Savings Accounts are the most tax-advantaged accounts that exist:
- Tax-deductible contributions
- Tax-free growth
- Tax-free withdrawals for qualified medical expenses
It’s like a Roth IRA specifically for healthcare. Max it out if you can. The 2025 limits are $4,150 for individuals, $8,300 for families, plus an extra $1,000 if you’re 55 or older.
Take advantage of free Medicare benefits. Annual wellness visits, many cancer screenings, diabetes screenings, cardiovascular disease screenings—all free. Use them. Catching problems early is way cheaper than treating them late.
Budget conservatively. Whatever you think healthcare will cost, add 50%. I’m serious. It’s better to overbudget and have money left over than to underbudget and have to choose between medication and groceries.
Consider long-term care insurance in your 50s. The premiums are much lower when you’re younger and healthy. Once you have health issues, you might not qualify at all.
Pulling It All Together: Your Action Plan
Alright, we’ve covered a lot of ground. Let me give you the simple action items based on where you are:
If You’re 10+ Years From Retirement:
- Max out all available retirement accounts, especially any with employer matching
- Open a Roth IRA if you don’t have one
- Build a 12-month emergency fund in a regular savings account
- Start tracking your spending to understand what retirement will actually cost
- Get term life insurance if people depend on your income
If You’re 5-10 Years From Retirement:
- Everything from the 10+ years list, plus:
- Create detailed budget projections for retirement
- Review and update all beneficiary designations
- Schedule a meeting with a fee-only financial planner
- Start thinking seriously about housing—does your current home fit retirement?
- If eligible, max out HSA contributions
- Create a preliminary estate plan (will, POAs)
If You’re Less Than 5 Years From Retirement:
- Everything from the previous lists, plus:
- Calculate your Social Security benefits at different claiming ages
- Finalize your withdrawal strategy across different account types
- Review and adjust healthcare planning and insurance
- Meet with a tax professional to plan your first five years of retirement
- Finalize estate planning documents
- Create your master document with all account information
- Consider doing a “test retirement” for a month—live on your projected retirement budget
If You’re Already Retired (But It’s Never Too Late):
- If you haven’t already, stop making the mistakes listed above immediately
- Review your budget monthly for the first year—adjust as needed
- Build or rebuild that emergency fund if you’ve had to dip into it
- Make sure all estate planning documents are current
- Review your Social Security claiming strategy—if you claimed early, understand the implications
- Stay on top of healthcare expenses and plan for future increases
The Truth About Retirement Nobody Tells You
Here’s what I’ve learned watching people retire over the past decade:
Retirement isn’t about having a magic number in your account. It’s about having a plan, understanding your expenses, staying flexible, and avoiding the big mistakes that can derail everything.
Carol, my neighbor I mentioned at the beginning? She made mistakes #1, #2, and #10. She assumed things would work out, she slowed her savings when she thought she was ahead, and she massively underestimated healthcare costs.
Uncle Mike made mistake #7, borrowing against his home right before retiring.
My dad made mistake #4, relying too heavily on his employer’s pension.
I’ve made mistakes #3 and #6—not diversifying enough early on and raiding my 401(k).
We all make mistakes. The key is learning from them before they become catastrophic.
The good news? Unlike some areas of life, retirement planning rewards those who think ahead and avoid obvious pitfalls. You don’t need to be a financial genius. You just need to be thoughtful, disciplined, and willing to plan.
Start today. Not tomorrow, not next month—today. Open that Roth IRA. Check those beneficiary designations. Calculate what you’re actually spending. Make that appointment with a financial planner.
Your future self will thank you. Trust me on this one.
Final Thoughts
Retirement should be a reward for decades of hard work—a chance to finally do the things you’ve been putting off, spend time with people you love, and live life on your own terms.
But it only works out that way if you plan for it. If you avoid the mistakes that have derailed countless others. If you start now and stay disciplined.
You’ve got this. And now you know what to watch out for.
