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Here are five costly financial mistakes many retirees make

To make your money last, you need a plan

Updated:

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Mark Huffman
Reporter

Mark Huffman has covered consumer issues since 2004, with a special focus on protecting and empowering older adults. A former news correspondent for the Associated Press Radio Network, Westwood One, and ConsumerAffairs, Mark brings decades of journalistic experience to RetirementLiving.com. He is passionate about giving consumers a voice and helping them make informed decisions. Mark has also created educational content, including Senior Scam Alert, a video resource designed to help seniors recognize and avoid fraud. He holds a B.A. from the University of Kentucky and lives with his family in Richmond, Virginia.
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Key Insights

  • Retirement is one of life’s biggest milestones, and preparing for it requires foresight, discipline, and adaptability.
  • Nearly half of Americans expect to retire with less than $500,000, though most estimate they’ll need about $1.28 million, according to the Schroders 2025 U.S. Retirement Survey.
  • The gap between expectations and reality underscores the importance of careful financial planning — and avoiding common pitfalls.

As Americans enjoy longer lifespans but face rising costs of living, a secure retirement depends on making strategic choices — and steering clear of mistakes that can quietly erode financial stability. Writing in Kiplinger, Vincent Birardi,  a certified financial planner, highlights five traps that can derail even well-intentioned savers, along with practical ways to sidestep them.

The first is pretty basic. Too many people retire without having a retirement plan. Without a plan, it’s easy to underestimate future needs, fail to factor in inflation, or overlook growing health-care expenses.

Birardi points to research from Allianz that shows 47% of Americans don’t have a written financial plan, and confidence in long-term financial goals has dropped to 70%, down from 83% in 2020. Without a roadmap, even diligent savers can lose direction.

How to fix it: Start planning early using a retirement calculator, document your income and expense projections, and revisit your plan regularly with a certified financial planner.

Mismanaging retirement accounts

It’s tempting to take a cash payout when leaving a job, but doing so can be a costly mistake. Cashing out a 401(k) or similar account before age 59½ can leave you with only about 70% of the funds after taxes and penalties.

How to fix it: Whenever possible, opt for a direct rollover into your new employer’s plan or an IRA. Avoid having the check sent directly to you — that usually triggers withholding — and consult a financial adviser to ensure the rollover is handled correctly.

It’s not enough to have an IRA or 401(k) account. Too many people stash all their cash in these tax-deferred accounts. However, when they withdraw the money in retirement, the money is taxed as ordinary income.

How to fix it: Diversify your savings by contributing to Roth IRAs or taxable brokerage accounts. Consider Roth conversions in lower-income years and develop a long-term tax strategy with a professional.

Not being diversified

This can be an issue for younger savers as well. Putting too much faith in a single asset class — or focusing too heavily on volatile markets — can jeopardize your portfolio. Market downturns can hit retirees especially hard if they need to withdraw funds when values are down.

How to fix it: Diversify across asset classes such as stocks, bonds, real estate, and alternative investments. Rebalance regularly to ensure your mix aligns with your risk tolerance and income goals.

Pay attention

Finally, you can’t put your finances on autopilot. Retirement is a financial turning point — the focus shifts from building wealth to generating sustainable income. Yet many people stick with outdated strategies or hesitate to adjust their plans.

How to fix it: Stay adaptable. Revisit your portfolio as markets and personal circumstances evolve, and don’t hesitate to make changes that improve efficiency or reduce risk.

Successful retirement planning isn’t about perfection, Birardi says; it’s about preparation. With nearly half of Americans facing a savings shortfall, the stakes are high. By addressing these common mistakes early, you can help ensure your retirement years are defined by confidence and stability, not financial uncertainty.