5 Big Mistakes People Make When Drawing from Retirement
Retirement should be your time to kick back, relax, and enjoy the good life. But if you're not careful, a few missteps in managing your withdrawals can turn your golden years into a financial headache. Let’s go over five common mistakes retirees make when tapping into their hard-earned savings—so you can steer clear of them!
Burning Through Savings Too Fast
It’s easy to get a little too excited when retirement finally arrives. You’ve got a bucket list, free time, and plenty of reasons to celebrate—but blowing through your savings too fast can leave you in a tough spot later on.
How to Avoid It:
Set a reasonable spending plan that allows for fun while keeping your savings intact.
Be mindful of big-ticket expenses early on and pace yourself.
Regularly check in on your financial plan to make sure you're staying on track.
Forgetting About Taxes (Ouch!)
Taxes don’t magically disappear when you retire, and if you’re not paying attention, Uncle Sam might take a bigger bite out of your withdrawals than you expected.
How to Avoid It:
Be strategic about which accounts you pull from first—mixing taxable, tax-deferred, and tax-free withdrawals can help you keep more of your money.
Consider Roth conversions to help lower your tax bill down the road.
Plan ahead for Required Minimum Distributions (RMDs) so you don’t get hit with a surprise tax bill.
Rushing Into or Delaying Social Security
Social Security might feel like free money, but if you grab it too early, you could shortchange yourself for life. The longer you wait (up to a certain point), the bigger your monthly checks will be.
How to Avoid It:
If it makes sense, hold off on claiming benefits until full retirement age (FRA) or later.
Consider your overall income and health before making a decision.
Work with a financial pro to maximize your benefits alongside other income sources.
Ignoring Market Swings
The stock market goes up and down—it’s just what it does. But if you’re pulling money out at the wrong time, a market dip can do some real damage to your long-term finances.
How to Avoid It:
Keep a cash cushion so you don’t have to sell investments during market slumps.
Diversify your portfolio so all your eggs aren’t in one basket.
Chat with a financial advisor about strategies for handling market ups and downs.
Underestimating Inflation (It’s Sneaky!)
Things are only going to get more expensive over time—groceries, healthcare, travel, you name it. If you don’t account for inflation, your retirement dollars might not stretch as far as you thought.
How to Avoid It:
Invest in a mix of assets that help keep up with inflation, like stocks and real estate.
Plan to gradually increase your withdrawals over time to keep up with rising costs.
Consider annuities or other options that provide inflation-protected income.
Wrapping Up
Nobody wants to run out of money or have to pull back on lifestyle in retirement, and with a little planning, you won’t have to. Avoiding these common pitfalls will help you enjoy financial peace of mind while you focus on what really matters—living your best life! So take a step back, make a solid plan, and go enjoy those golden years the way you deserve.
