4 Biggest Retirement Mistakes To Avoid
24 Feb 2025
Retirement marks a significant transition in life, but without careful planning, it can quickly become a financial minefield. Many retirees make costly mistakes that could have been avoided with a little planning and putting the right strategies in place. We spoke with our financial professionals to identify the biggest pitfalls they see people make as they transition into retirement — and get tips on how you can avoid them.
Retiring Without a Spending Strategy
One of the most common mistakes people make is entering retirement without a clear plan for how to spend accumulated savings. “People go into retirement without a strategy to spend their money,” said Elias Randel, Vice President of Premier Investments & Wealth Management. We are taught to save as much as possible for retirement, but many fail to consider how to use those funds once they stop working. Prior to the 401(k), which was introduced in 1978, retirees relied on income streams like pensions and Social Security that paid out in regular intervals similar to a paycheck, said Randel. “We are watching the first generation of retirees with a majority of their savings in 401(k)s having to navigate turning that chunk of money into an income stream.”
Without a structured approach, retirees risk depleting their assets too quickly or on the flip side become overly fearful of running out of money and don’t allow themselves to enjoy their golden years. “Overspending sometimes happens—taking lump sums out for big trips or purchases without seeing how that impacts your overall financial picture and longevity,” says Brock Renner, Wealth Manager. “Spending in retirement is about finding a balance between enjoying life and having enough money to continue to live comfortably.”
Start by breaking your retirement spending into three categories:
1. Needs:
These are the expenses that you have to maintain your basic standard of living. Things like food, shelter, utilities, health care, transportation, etc. fall into this category.
2. Wants:
These are your lifestyle expenses, or the things like memberships, subscriptions, entertainment, and travel that enhance your life, but you don’t necessarily need.
3. Wishes:
This is the icing on the cake. If money was no concern, what you would like to do? Buy a second home? Charter a private plane for your vacation? Even if it seems out of reach, taking the time to think of your wishes can help you avoid lifestyle creep and spend your money in a more meaningful way.
Once you have a clear idea of your spending needs in retirement, you can develop an income strategy that provides a balance between enjoying your life now and managing longevity risk.
Not Developing A Proper Investment Strategy
As retirees transition from earning to spending, their investment strategy should shift accordingly. However, many fail to make this crucial adjustment. “People don’t change their investment allocation or strategy to reflect the change from accumulating assets to distributing assets,” warns Jonas Everett, Wealth Advisor. Most investors are growth-focused during their working years, and while growth is necessary in retirement as our life expectancies continue to rise, it can open you up to the sequence of returns risk in retirement. “If you have to sell investments while the market is down to have cash to live on, you are locking in those losses”, said Everett. “Doing that early in retirement can have a significant impact on how long your money will last in retirement.”
Wealth Manager Ron Pfeiffer cautions investors that going too conservative can also be a mistake. “People forget that they still have another 30 years to live once they retire.” If you become ultra-conservative at retirement, you increase the risk that you could outlive your money and may find yourself needing to cut expenses as time goes on. “Rising costs can erode purchasing power over time, if you aren’t at least keeping up with inflation you are behind,” Pfeiffer said.
So how do you find balance? Everett recommends a bucket strategy, “we help our clients assign responsibility to their money with the Premier Bucket Strategy.” Separating short-term, medium-term, and long-term funds can help you balance the need for growth with your income needs. “You have your liquid bucket for your cash & cash alternatives, or the money you need in the next 12-36 months, your income bucket for the money you need in the next 3-5 years, and your growth bucket for the money you won’t need for 5 or more years,” Everett said.
A bucket strategy can also help investors avoid panic during stock market fluctuations. Knowing how your money is working for you can help keep you on track said Everett, “If the market goes down 20%, but you know that it’s your bucket #3 [growth] money, you know you don’t need that money for 5 or more years, you have time for it to recover.”
Entering Retirement Without Clear Goals
Retirement isn’t just about financial stability—it’s also about having a purpose. “People often enter retirement without really considering what they want to do with their time,” said Scott Klahn, Wealth Advisor. Many retirees experience a loss of identity, purpose, and structure, which can lead to feelings of boredom, loneliness, and even depression. Without meaningful activities, social engagement, or personal goals, the days can feel empty, increasing stress and anxiety.
Klahn says that while most retirees focus on their newfound financial freedom, they don’t think about the things they lose in retirement. “Working provides us with social interaction, mental stimulation, and structure to our lives. When all of that goes away, and you don’t have a plan in place to fulfill those needs, you can feel letdown by retirement.” Spend time thinking about how you want to fill your time in retirement. Taking your retirement lifestyle for a test drive can also help you define your goals. Find hobbies, social clubs, and organizations you can participate in. Part-time work is an increasingly popular trend for retirees, said Klahn, “going back to work knowing you are there because you enjoy it, and not because you need the money can be a great way to fill time.”
Lack of a Personalized, Comprehensive Financial Plan
Retirement goes beyond simply having savings—it requires a solid plan. “Not having a financial plan is a major mistake,” explains Chris McNeal, Regional Vice President. Without a clear strategy, you risk making isolated financial decisions—such as when to retire, how to invest, or how much to save—that may conflict with your long-term goals. A well-structured plan aligns your income, savings, investments, tax strategy, and estate planning to make informed decisions, said McNeal. “It helps make informed based on the bigger picture, increasing confidence in your future.”
President of Premier Investments and Wealth Management, Roger Abel, also advises investors to have a personalized financial plan. “People who don’t have a personalized financial plan end up relying on rules of thumb, like the 4% rule, which may or may not work for them.” A tailored plan considers your specific circumstances and provides the flexibility to adjust as your life changes. “With a customized financial plan, you gain clarity and confidence, knowing that every decision is aligned with your financial goals,” said Abel.
Final Thoughts
Retirement should be a rewarding and fulfilling stage of life, but without proper planning, financial missteps can make it stressful. By avoiding these common mistakes and crafting a plan personalized to your needs, you can retire with confidence. Seeking guidance from a financial professional can further help you navigate this critical transition successfully.
Important Information:
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
All investing involves risk including the possible loss of principal. No strategy assures success or protects against loss.
