Retirement is one of those milestones that looks simple from a distance. Save enough, stop working, enjoy life. The reality, of course, is considerably messier. Many people underestimate the amount of money they will need in retirement, which could mean their savings need to stretch further than anticipated. That gap between expectation and reality is where most of the damage happens.
A 2023 study by the Transamerica Center for Retirement Studies found that nearly half of retirees worry about outliving their money, and that fear is real. The good news is that the most common retirement mistakes are also the most avoidable. Knowing what they are is already most of the battle.
1. Claiming Social Security at Age 62 Without Running the Numbers
If you claim Social Security at age 62, rather than wait until your full retirement age, you can expect up to a 30% reduction in monthly benefits. For every year you delay claiming Social Security past your full retirement age up to age 70, you get an 8% increase in your benefit. That compounding math is hard to beat and most people never fully appreciate how permanent the early-claiming penalty really is.
This reduction remains fixed for life. For as long as he lives and receives Social Security, a retiree’s benefits will reflect this monthly penalty. Annual inflation adjustments may raise the check amount, but it will always be the reduced amount, adjusted for inflation. If you begin claiming Social Security at 62 and start with reduced benefits, your cost-of-living-adjusted benefits will be lower too. Every raise from inflation is calculated off a smaller base.
2. Ignoring the Real Cost of Healthcare in Retirement
A 2023 survey by Nationwide Retirement Institute found that one of the top retirement-related fears for nearly three-quarters of adults age 50 or older is that their retirement costs will go out of control, and two-thirds believe that a single health-related issue could ruin their finances for years to come. The average couple will need $315,000 in today’s dollars for medical expenses in retirement, excluding long-term care. That figure alone stops most people in their tracks.
A 2025 survey found that nearly 40% of Medicare beneficiaries mistakenly believe it covers long-term care. It doesn’t. The U.S. Department of Health and Human Services reports an almost 70% chance that someone turning 65 today will need some form of long-term care services in their remaining years. Planning for healthcare costs is not optional. It’s simply not.
3. Mishandling Required Minimum Distributions
Required Minimum Distributions are minimum amounts that IRA and retirement plan account owners generally must withdraw annually starting with the year they reach age 73. Taking two taxable withdrawals in one calendar year is a real risk. The current penalty for missing an RMD is 25%, reduced to 10% if the shortfall is corrected within a specified correction window, typically two years. The IRS does not offer much sympathy for missed deadlines.
While the IRS allows you to delay your very first RMD until April 1 of the year following your 73rd birthday, doing so can be a costly mistake. If you wait until April, you must take two distributions in that same calendar year. This “double-up” often pushes retirees into a higher tax bracket and may increase Medicare Part B premiums. A little upfront planning around RMD timing can save thousands in avoidable taxes.
4. Carrying High-Interest Debt Into Retirement
U.S. credit card balances topped $1.18 trillion in May 2025. With current average interest rates above 21%, making only minimum payments often fails to reduce debt. Entering retirement while servicing this kind of debt is a direct drain on fixed income that most people simply cannot absorb.
Going into credit card debt is among the worst financial mistakes you can make as a retiree. Retirement is supposed to be the place where you live debt-free, not use your credit card like a debit card to make purchases. If you must use a credit card, ensure you pay it off as soon as possible and avoid credit card debt at all costs. The math of compounding interest working against you on a fixed income is particularly unforgiving.
5. Skipping a Written Retirement Withdrawal Strategy
Treating the 4% rule as a guarantee is a mistake. It is a planning heuristic, not a promise. Ignoring taxes until filing season is another common error. Withdrawal order can change tax outcomes by thousands per year. Most retirees simply don’t realize that which account you draw from first matters almost as much as how much you draw.
Many people save money in traditional 401(k)s and IRAs assuming that when they start withdrawing in retirement, their income tax rate will be lower. However, it’s not unusual for retirees to find themselves in the same or even a higher tax bracket when required minimum distributions kick in. Failing to consider the tax impact of retirement withdrawals is another common mistake. Different types of accounts, like Roth IRAs, traditional IRAs, and 401(k)s, are taxed differently. Strategic withdrawals and understanding how taxes affect your income can help you preserve more of your savings.
6. Underestimating How Long Retirement Will Actually Last
A 2022 Natixis Global Survey of 2,700 financial professionals across 16 countries revealed that the two biggest pitfalls are underestimating how long retirement will last and how much inflation can eat away at savings. Thanks to advances in healthcare, many people are living well into their 80s and 90s. Yet nearly half of advisors say clients don’t plan for the possibility of living longer than average. Running out of savings is one of the greatest risks in retirement.
If you retire around age 65, you could spend a quarter century or more in retirement. Many advisors now urge clients to save enough to last 25 to 30 years. Even with relatively mild inflation over the past 25 years, the cost of living has more than doubled. Longevity is increasingly less of a blessing and more of a financial planning variable that demands serious attention.
7. Investing Too Conservatively or Too Aggressively Near Retirement
When you were younger, you could invest more aggressively because you had time to recoup any losses. As you approach retirement, the game changes and you may want to consider adjusting the level of risk that you take. You’re going to need the assets you’ve accumulated for day-to-day expenses, which may cost more due to inflation, and you no longer have the luxury of time that you once enjoyed.
Some retirees move their money into “safe” investments like bonds or CDs. While this can reduce risk, it also limits growth and may not keep up with inflation over decades of retirement. Now that you no longer have a regular income coming in, it might make sense to adjust your asset allocation to something less risky. Markets can be volatile, and it might be harder to recover from market downturns when you don’t have extra years of salary earnings ahead of you. The sweet spot is a portfolio tailored to actual risk tolerance and timeline, not a one-size-fits-all formula.
8. Raiding the 401(k) Before Age 59½
Without rainy-day reserves, people often raid their 401(k). A $5,000 withdrawal before age 59½ triggers a 10% penalty and taxes, shrinking it to $3,400. Worse, early withdrawals stall compounding, pushing retirement further out of reach. This is one of those decisions that feels manageable in the moment and catastrophic in hindsight.
An emergency fund should be an important part of your budget, regardless of whether you are working or have retired. Your emergency fund can be a crucial source of income should you encounter unexpected health issues or home repairs. Without an emergency fund, you could end up depleting your savings faster than you expected. Building a dedicated cash buffer specifically to avoid touching retirement accounts early is one of the highest-return moves a pre-retiree can make.
9. Financially Supporting Adult Children at the Expense of Your Own Retirement
Helping your kids financially can feel like the right thing to do, but it’s easy to give away too much. Many retirees compromise their own security trying to support adult children. Setting boundaries and offering guidance instead of constant cash support protects both your finances and your family relationships. The impulse is understandable. The financial consequences, though, can be severe and long-lasting.
As financial experts note, you shouldn’t borrow from your retirement fund to help fund a child’s education. Parents and their kids should explore 529 plans, scholarships, grants, student loans, and less expensive in-state schools in place of raiding the retirement nest egg. Nearly 60% of savers worry they aren’t securing enough for retirement, according to a 2024 Bankrate survey. An AARP report found about one-quarter of adults over 50 who aren’t yet retired believe they may never be able to stop working. There is simply no financial aid program for retirement. Your children have options; your future self may not.
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