Retirement Money Mistakes: What Smart Retirees Avoid

By Dr. Mary Kelly, Leadership Economist and Keynote Speaker

I was recently talking to a group of people who were all of retirement age, and they are all worried. “How do we prevent from making money mistakes during our retirement years?”

Retirement should be a time of freedom, not financial stress. After decades of challenging work, the goal is to enjoy life—not to worry about outliving your savings or wondering if you made the wrong investment move. And yet, I see even the most financially prepared retirees fall into some common traps.

Here are some of the most frequent (and preventable) money management and investing mistakes retirees make—and how to avoid them.

1. Cashing Out When the Market Dips

Fear is a terrible financial advisor. Retirees often panic and sell during market downturns, locking in losses and missing out on the recovery. The smart move? Have 1–3 years of expenses in cash or low-volatility assets. That buffer gives you breathing room and keeps you from selling during the market lows.

2. Neglecting Portfolio Rebalancing

The right investments five years ago might not be right now. If you don’t revisit your portfolio regularly, your asset allocation can drift out of alignment with your risk tolerance and income needs. A good rule is to rebalance once or twice a year to stay on track. I talk with my financial advisor every quarter.

3. Chasing “Hot” Investments

High yield often equals high-risk. Some retirees fall for products promising great returns with minimal risk. Reality check: If it sounds too good to be true, it probably is. Focus on a diversified strategy built on sustainability, not sizzle.

4. Underestimating Longevity

Here’s the great news—you might live longer than you expect! The not-so-great news? That means your money needs to last longer, too. Retirement planning should account for 25–30 years of income, especially with rising healthcare and housing costs.

5. Relying Too Heavily on Social Security

Social Security is a baseline, not a retirement plan. It typically replaces only 30% of your pre-retirement income. The rest? That needs to come from personal savings, pensions, annuities, or other retirement income. Don’t let false confidence in monthly checks derail your long-term strategy.

6. Withdrawing Too Much, Too Soo

That European River cruise sounds amazing, but is it worth taking a 7% withdrawal in year one? It may be, it may not be. Overspending early in retirement can jeopardize long-term sustainability. Most financial advisors would suggest sticking to a flexible withdrawal rate, ideally starting around 4%, and adjust as needed.

7. Ignoring Inflation Risk

Retirees often over-allocate to cash and CDs, thinking they’re playing it safe. But if your returns don’t outpace inflation, you’re actually losing purchasing power. Consider keeping part of your portfolio in assets with growth potential, like dividend-paying stocks.

8. No Tax Strategy for Withdrawals

Which account should you withdraw from first? Your Roth IRA, your traditional IRA, or your brokerage account? The order matters. Strategic withdrawal planning can minimize taxes and stretch your retirement dollars further.

9. Forgetting About RMDs

Required Minimum Distributions (RMDs) from tax-deferred accounts begin at age 73 in 2024. Missing the RMDs triggers penalties of up to 25%. Even if you don’t need the money, the IRS wants you to cash out so they can collect taxes, so plan accordingly to stay compliant and avoid a surprise tax bill.

10. Not Planning for Healthcare and Long-Term Care

Medicare is not a catch-all. Unexpected out-of-pocket expenses can derail even the best-laid plans. Whether it’s a supplemental policy, long-term care insurance, or designated funds, plan now for what could be a very costly “what if?”

11. Financially Supporting Adult Children

You love them. You want to help. But you can’t fund both your retirement and their lifestyle. Generosity is noble, but your kids have more time to earn than you do. Set clear boundaries so your financial future stays protected. They can borrow for their house. You cannot borrow money to fund your retirement.

12. Letting Estate Plans Get Dusty

Wills, powers of attorney, and beneficiaries all need regular reviews. One outdated beneficiary form can undo years of careful planning. Revisit your documents at least annually or after major life events, like marriage, divorce, death, or new grandchildren.

13. Skipping Professional Advice

Some retirees try to go it alone or are hesitant to pay for advice. But a fee-only financial advisor can help avoid costly missteps and optimize everything from taxes to legacy planning. It’s not an unnecessary expense; it’s part of your investment planning.

14. Not Preparing for Widowhood or Solo Aging

Many women, in particular, will outlive their spouses. Yet many don’t have a plan for navigating retirement alone. Consider your support systems, financial access, and decision-making authority before you need them.

15. Assuming Retirement Spending Stays Flat

Your spending will shift over time. Travel and bucket-list items may spike in the early years, while healthcare may dominate later. A flexible retirement budget reflects these phases and helps avoid shocks.

Final Thought: You Deserve to Enjoy This Time

Avoiding these mistakes doesn’t require a PhD in finance, it requires awareness, intentional planning, and regular check-ins. Whether you’re already retired or just looking ahead, a little foresight goes a long way.

If you’re ready to stress-test your plan or help others, make better financial decisions, visit my free resource vault at www.ProductiveLeaders.com/free-resources for tools, checklists, and financial planning guides you can use today.

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