Seven mistakes to avoid in retirement


We believe that confidence in your financial plan is the first step to having the freedom in retirement to do what is important to you and to not have to worry about whether or not you will have enough money. Here are 7 mistakes to avoid that can help you retire with confidence.

Fact Checked by

Taylor Hegna, CFP®




  1. Not Having a  Strategy

One of the most simple mistakes you can make in retirement is to not have a strategy of how to draw money from your accounts. What may seem appealing at the moment, like taking withdrawals from your Roth account to avoid taxes, may not be the best long-term strategy. Having a plan laid out without elements like taxation, longevity, and income needs thought through can lead to making simple mistakes that may add up to some significant issues down the road.


2. Frequent Trading

Buying specific stocks, or selling when you think the market is high, can be a very exciting and appealing method to locking in gains inside of your retirement accounts. The reality of actually being able to time the market and sell when a stock is high is very unlikely. “In the 10 years ending 12/31/2020, an average equity investor earned 10.32% per year, while the S&P 500 increased 16.63%.” (1). Instead of frequent trading, investing in an index or blend of holdings based on your risk tolerance tends to result in better returns.


3. Not Maximizing Tax-Deferred Savings

Tax-deferred money is beneficial when you are, or expect to be, in a lower tax bracket in retirement than you were in while working. If you are a high-income earner in the years leading up to retirement, a good strategy is to make pre-tax contributions to your employer plan or IRA. These contributions will reduce your taxable income for the current tax year so that you can withdraw the money in later years when you are in a lower tax bracket. Tax-deferred contributions may also be deductible in the year the contribution is made.


4. Overlooking Healthcare Costs

There is a common misconception that healthcare costs will be mostly covered by medicare during retirement. The average person expects their out of pocket cost to be $41,000 over the course of their retirement. In reality, a 65 year old couple retiring in 2022 can expect to spend an average of $315k in healthcare and medical expenses in their retirement. (2) This is a difference of $274,000. Knowing your options and strategies of when to retire and how to factor in your healthcare costs can make or break your plan. Read our blog Steps to take when designing your long term care plan for more information.


5. Not Adjusting Your Investment Approach Well Before Retirement

While we are in our working years, the focus of our investments tends to be accumulation and growth. We contribute to our retirement accounts and invest them mainly in equities so that they have more growth potential leading up to our retirement. A mistake to avoid here is leaving all of our investments in equities up until the date at which we need to start pulling money out. If the market is down, this could be damaging to the overall plan. Instead, it is vital to evaluate your plan and know how much you will need to draw down from your retirement accounts each year so that you can reallocate to more conservative investments and more safely withdraw the money you need. 


6. Retiring with Too Much Debt

Having debt like a mortgage is not necessarily a bad thing. These payments are generally stable over time and interest rates are lower than with credit cards, for example. Having high interest debt with high values (like credit cards) can be very damaging to your plan. Coming up with a strategy to pay down debt before retirement and get a budget plan in place if that is the reason behind your debt, should be a top priority.


7. It’s Not Only About Money

In the end, it’s not all about money. Picking the right strategy or avoiding all of the mistakes we have just discussed is not solely so you can have a larger account value. Although that’s not a bad thing.  It’s about the reasons behind the money. Why did you make the sacrifices you made to get to this next season of life? What is the purpose of your retirement – what adds meaning and value to your life? The reason to avoid making these mistakes is to build confidence in your financial plan in order to have the freedom to focus on what’s more important than the dollars and cents.

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