Linda and Mark did everything by the book. They paid off their mortgage, contributed faithfully to their 401(k)s, and even downsized to a modest condo in their early 60s. But five years into retirement, their savings were dwindling. What went wrong? One big mistake: they withdrew too much, too soon. Like many retirees, they underestimated how long their money needed to last—and how a single misstep could unravel decades of planning. Before it could happen to you, you should know this 9 common financial don’ts of retirement.
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Retirement should be the reward for years of hard work and sacrifice—not a financial minefield. But even smart, responsible savers can get blindsided.
9 Financial Don’ts of Retirement
In this article, we break down 9 critical financial don’ts of retirement that can derail your golden years—especially if you’re not watching for them.
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Don’t # 1. Rely Only on a Single Income Source
Putting all your retirement eggs in one basket—particularly Social Security—is risky. While it’s an important pillar, it was never intended to be your only source of income.
According to the Social Security Administration, the average monthly retirement benefit in 2024 is about $1,907—just over $22,000 annually.
Compare that to the average annual expenses for retirees, which has exceeded $50,000 per household.
Why is this risky?
Social Security benefits are subject to political changes, inflation pressures, and are only partially adjusted for cost of living. A diversified income mix—such as pensions, IRAs, rental income, or part-time work—can cushion your finances if things shift.
Don’t # 2. Withdraw Too Much, Too Soon
Spending too fast early on is one of the fastest ways to outlive your nest egg. It’s tempting to enjoy those “go-go” years with travel and indulgence, but without a withdrawal strategy, you could face harsh consequences later.
Some experts recommend a safe withdrawal rate of 3.8% in today’s high-inflation environment, lower than the traditional 4% rule. If the market drops early in retirement and you keep withdrawing aggressively, you risk sequence-of-returns risk, where early losses damage long-term viability.
To avoid this, create a sustainable withdrawal strategy and adjust it as the market or your lifestyle changes.
Don’t #3: Underestimate Healthcare and Long-Term Care Costs
Many retirees assume Medicare will cover everything. It won’t.
Did estimated that a 65-year-old couple retiring today will need about $315,000 to cover out-of-pocket healthcare costs during retirement—not including long-term care.
Add to that the reality that 60% of Americans 65+ will need some form of long-term care. Services like assisted living, nursing homes, or in-home aides aren’t fully covered by Medicare.
Don’t #4: Ignore Tax Implications of Withdrawals
Treating retirement income like it’s all tax-free is a costly mistake. Most traditional retirement accounts -like 401(k)s and IRAs- are tax-deferred, not tax-exempt.
Withdrawals from these accounts count as income—and RMDs (Required Minimum Distributions) start at age 73. Failing to take them can trigger penalties up to 25% of the amount not withdrawn.
Plus, if your income exceeds certain thresholds, up to 85% of your Social Security benefits may also be taxed.
A good strategy to avoid this is to work with a tax advisor to explore Roth conversions and sequence withdrawals for maximum efficiency.
Don’t #5: Delay or Mismanage Estate Planning
A will isn’t just for the wealthy—it’s for anyone who wants to avoid leaving their loved ones in legal and financial limbo.
Common pitfalls:
- Not updating beneficiaries
- No healthcare proxy or power of attorney
- Assets titled incorrectly, creating probate delays or extra taxes
A 2023 survey revealed two-thirds of adults don’t have a will, despite 60% saying it’s important. Dying without a plan can cause tension, costly delays, and unintended financial consequences.
If you don’t want to leave trouble to your children or spouse, get your estate documents in order now, not later.
Don’t #6: Get Too Conservative (or Too Risky) with Investments
Some retirees panic and move everything into cash. Others chase high-risk returns to “make up” for low savings. Both are dangerous.
Vanguard’s Retirement Study (2024) recommends a balanced portfolio, even in retirement—typically 40–60% stocks for growth and the rest in bonds or stable value funds.
Staying too conservative may not beat inflation. Being too aggressive can leave you exposed to market volatility when you need stability.
Rebalance annually and avoid emotional decision-making during market swings.
Don’t #7: Keep Supporting Adult Children Financially
It’s hard to say no to family, but overextending yourself to help adult children can wreck your retirement.
NBC News recently published that 50% of U.S. parents with adult children financially support them—sometimes at the cost of their own future.
You can’t take out a loan for retirement. They can for school or housing. Set financial boundaries, even if it feels uncomfortable.
Don’t #8: Fail to Track Spending or Maintain a Retirement Budget
Without a plan, it’s easy to overspend in retirement—especially in those energetic early years.
Consider the “Go-Go, Slow-Go, No-Go” phases of retirement spending. Most people spend more on travel and entertainment in the first decade, then gradually shift toward healthcare and essentials.
Use digital tools to keep your retirement plan on track, review spending yearly, and use all the FREE tools that I have to help you manage money better.
Don’t #9: Fall for Scams or Poor Financial Advice
Older adults lose an estimated $3 billion annually to scams, according to the FTC. Retirement-age adults are targeted through phone, email, romance scams, fake IRS agents, and investment opportunities.
Avoid this by:
-Only working with fiduciary financial advisors
-Verifying credentials on FINRA BrokerCheck
-Involving a trusted family member in large financial decisions
-Signing up for FTC scam alerts.
Final Thoughts
Even with the best-laid plans, retirement can take unexpected turns. But knowing what NOT to do is just as important as knowing what to do.
By avoiding these 9 financial traps, you give yourself the best shot at a peaceful, stable, and enjoyable retirement.
Which of these retirement mistakes are you most worried about—and what are you doing to avoid them?
Last Updated on 8th May 2025 by Emma
