5 Common Mistakes That Can Derail Your Retirement
Last week, a recently retired executive came to me frustrated. He had saved diligently for decades, built a solid portfolio, and felt financially prepared.
But six months into retirement, he was already questioning whether he’d made the right decision.
His problem wasn’t his investment returns or market volatility – it was something far more common yet completely avoidable.
After helping hundreds of professionals navigate retirement, I’ve learned that the biggest threats to a successful retirement aren’t what most people expect.
It’s not the stock market that derails most retirements, and it’s not even inflation.
It’s a handful of predictable mistakes that quietly erode your peace of mind, your money, and your freedom.
Let’s examine these five retirement-wrecking mistakes and, more importantly, how to avoid them.
Mistake 1: Flying Blind on Your Spending
The first and most damaging mistake is entering retirement without knowing your actual spending needs. Many people focus intensely on portfolio size – do I have a million, two million? – but never ask the crucial question: what kind of lifestyle does my portfolio actually support?
Some retirees spend less than they did during their working years. Others, particularly in those active early years, spend significantly more on travel, home projects, and helping adult children. Without knowing your spending baseline, you can’t determine if you’re truly ready for financial independence.
The solution starts with tracking your current expenses, then adjusting for your envisioned retirement lifestyle. Create three categories: needs, wants, and one-time purchases. Don’t forget to stress-test these numbers against inflation, especially healthcare costs, which historically rise faster than general inflation.
Understanding your spending number gives you the foundation for every other retirement decision.
Mistake 2: Withdrawing Money in the Wrong Order
Most retirees have a mix of account types – taxable accounts, tax-deferred accounts like traditional IRAs, and tax-free Roth accounts. The order in which you withdraw from these accounts can mean the difference between paying thousands or tens of thousands in unnecessary taxes.
Generally, the most tax-efficient approach involves starting with taxable accounts, moving to tax-deferred accounts, and saving Roth withdrawals for last. However, this isn’t a rigid rule – your specific situation might call for a different strategy.
You also need to plan for required minimum distributions (RMDs), which begin around age 73 for most people. Failing to factor RMDs into your withdrawal strategy can create significant tax surprises that derail your retirement budget.
A coordinated withdrawal strategy helps you keep more of what you’ve worked to build while avoiding unnecessary tax payments.
Mistake 3: Investing Like You’re Still Building Wealth
Retirement represents a fundamental shift in your investment needs, yet many people either panic and move everything to cash or maintain an overly aggressive approach better suited for their working years.
Both extremes carry risks. When your portfolio becomes your primary income source, market timing matters more than it did during your accumulation years. A significant market drop early in retirement, combined with ongoing withdrawals, creates sequence of return risk that can drain your portfolio faster than expected.
The key is balancing your risk tolerance (how you emotionally react to market movements) with your risk capacity (how much time you have for recovery). Strategic approaches like bucket strategies, where you maintain separate pools for short-term and long-term needs, or guardrails strategies that adjust spending based on portfolio performance, can help protect your income while allowing for continued growth.
Your investment strategy should evolve with your life stage.
Mistake 4: Having Money But No Meaning
This mistake has nothing to do with dollars and everything to do with fulfillment. Many people enter retirement with a solid financial plan but no lifestyle plan, leading to what I call the “what now?” moment.
The structured routine disappears, the professional identity fades, and suddenly the days feel longer than expected. This isn’t universal, but it’s common enough that it deserves serious attention during your retirement planning process.
A meaningful retirement isn’t just about freedom from work – it’s about freedom to pursue what fulfills you. What gets you out of bed each morning? How will you stay mentally and physically engaged? Who will you spend time with?
Some retirees volunteer, others consult or teach, many pursue hobbies or learning opportunities. The specific activity matters less than being intentional about it. The emotional side of retirement deserves as much planning attention as the financial side.
Mistake 5: Leaving Your Loved Ones With a Mess
The final mistake is leaving your family to navigate an incomplete or outdated estate plan. Without proper documentation, you can unintentionally create stress, conflict, and substantially higher taxes for the people you care about most.
Most people need some combination of wills, trusts, updated beneficiary designations, powers of attorney, and organized important documents. Estate planning isn’t just about asset distribution – it’s about making difficult times easier for your family.
Think of comprehensive estate planning as a gift of clarity and peace of mind for your loved ones.
Building a Better Approach
Avoiding these five mistakes puts you ahead of many retirees. The good news is that a successful retirement isn’t about perfection – it’s about being intentional with both your money and your time.
Each of these areas deserves attention during your retirement planning process. Start with understanding your spending needs, develop a tax-efficient withdrawal strategy, align your investments with your new life stage, plan for meaningful use of your time, and organize your estate documents.
Take the Next Step
Ready to build a retirement strategy that addresses both the financial and lifestyle aspects of your transition?
I can help you evaluate your current approach, identify potential gaps, and create a comprehensive plan tailored to your goals.
Click here to get started.
