Retirement planning is one of those things that feels easy—until you realize it’s not. You set money aside, invest wisely, and then one day, boom, you’re sipping margaritas on a beach, right? If only it were that simple.
The truth is, plenty of well-meaning people make retirement mistakes that could have been avoided with a little foresight. And these aren’t just minor missteps—we’re talking about errors that can cost hundreds of thousands of dollars over time. Let’s talk about five of the biggest retirement planning mistakes and, more importantly, how you can steer clear of them.
1. Underestimating How Much You’ll Actually Spend
A lot of folks assume they’ll spend less in retirement. No more commuting, no work wardrobe, fewer takeout lunches—sounds like a money-saving dream, right? But then life happens.
Travel. Grandkids. Hobbies you suddenly have time for. And let’s not forget inflation—that $4 latte today might be $7 in 15 years. Even everyday expenses like groceries, utilities, and healthcare creep up over time.
How to avoid it: Instead of guessing, track your actual spending now and project it forward with inflation in mind. And don’t just budget for the basics—make sure you’re accounting for the fun stuff, too. Retirement should be enjoyed, not just endured.
2. Ignoring Healthcare Costs (Because Medicare Won’t Cover Everything)
It’s a common myth: “Once I hit 65, Medicare will take care of my medical expenses.” Not quite. Medicare covers a lot, but it doesn’t cover everything—and those gaps can get expensive fast.
A healthy 65-year-old couple today might need over $300,000 just for out-of-pocket healthcare expenses in retirement. And that’s before factoring in long-term care, which can cost six figures per year if you ever need it.
How to avoid it: Look into Medigap or Medicare Advantage plans to cover what Medicare doesn’t. If you’re still working, consider a Health Savings Account (HSA)—it’s one of the most tax-efficient ways to prepare for medical expenses. And if long-term care insurance makes sense for you, the earlier you look into it, the better.
3. Taking Social Security at the Wrong Time
The minute you turn 62, you’re eligible to start claiming Social Security. But should you? Probably not.
Taking Social Security early locks in a permanent reduction in your monthly benefit. On the flip side, waiting until age 70 can boost your benefits by more than 75% compared to claiming at 62. That’s a serious raise for future you.
But here’s the catch: It’s not just about the highest number—it’s about what makes sense for your life.
How to avoid it: Work with a financial advisor to strategize the best claiming age based on your income needs, health, and other assets. The difference between a smart and not-so-smart decision here can add up to hundreds of thousands in lifetime benefits.
4. Forgetting About Taxes (Yes, They Still Exist in Retirement)
A lot of retirees get blindsided by taxes. Just because you’re no longer earning a paycheck doesn’t mean the IRS stops knocking.
Your 401(k) and traditional IRA withdrawals? Taxed. Your Social Security benefits? Possibly taxed. Required minimum distributions (RMDs) from your retirement accounts? Yep, those can push you into a higher tax bracket if you’re not careful.
How to avoid it:
Consider doing Roth conversions before you hit RMD age—this can help minimize taxable withdrawals later.
Be strategic about which accounts you tap into first. Sometimes withdrawing from taxable accounts first (rather than tax-deferred ones) can help lower your tax bill.
Don’t wait until retirement to plan for taxes. The sooner you strategize, the more options you have.
5. Thinking You Can DIY Everything
It’s tempting to think, “I’ve got this. I can handle my own investments, taxes, and retirement planning.” And sure, some people can—but for most, the stakes are too high to go it alone.
Retirement planning isn’t just about picking good investments. It’s about creating a cohesive strategy—one that includes tax planning, withdrawal strategies, healthcare costs, and Social Security decisions. Miss one key detail, and it could cost you more than you realize.
How to avoid it: Work with a financial advisor who can take a holistic look at your finances and create a retirement plan tailored to you. A good advisor helps you avoid costly mistakes and ensures your money lasts as long as you do.
Ready to Avoid Retirement Planning Mistakes?
Avoiding these mistakes isn’t just about protecting your savings—it’s about making sure retirement is everything you want it to be. The earlier you course-correct, the better your financial future will look.
If you want guidance on retirement planning, schedule a consultation with Halter Ferguson Financial today. We’ll help you build a rock-solid strategy so you can retire with confidence.