Originally published May 2015. Last updated March 2026.
Saving for retirement takes decades of discipline. But the financial decisions you make after retiring are just as important. Here are three mistakes that trip up retirees and how to avoid them.
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1. Moving Everything to “Safe” Investments
It’s natural to want to protect your nest egg. But putting 100% of your money in bonds, CDs, or cash creates a different risk: inflation eats away your purchasing power.
At 3% inflation, $100,000 in purchasing power today is worth about $74,000 in 10 years and $55,000 in 20 years. If your investments aren’t growing faster than inflation, you’re losing ground.
A balanced approach works better. Many retirees keep 40-60% in diversified stock funds for growth and 40-60% in bonds and cash for stability and income. The exact split depends on your age, spending needs, and other income sources like Social Security and pensions.
2. Ignoring Required Minimum Distributions
If you have traditional IRAs or 401(k)s, you must start taking required minimum distributions at age 73 (or 75 if you were born in 1960 or later). The penalty for missing an RMD is 25% of the amount you should have withdrawn. Under SECURE 2.0, this drops to 10% if you correct the mistake within two years.
Your RMD is calculated based on your account balance at the end of the prior year divided by a life expectancy factor from the IRS Uniform Lifetime Table (updated in 2022).
Planning tip: if you’re charitably inclined and over 70 and a half, qualified charitable distributions (QCDs) let you send up to $105,000 directly from your IRA to charity. It satisfies your RMD without adding to your taxable income.
3. Underestimating Healthcare Costs
A 65-year-old couple retiring in 2025 needs roughly $315,000 for healthcare expenses over their lifetime, according to Fidelity’s 2024 estimate. That doesn’t include long-term care, which can run $65,000-$117,000/year.
Medicare doesn’t cover everything. Dental, vision, hearing, and long-term custodial care are mostly out of pocket. Budget separately for these expenses and consider a Medigap (Medicare Supplement) plan to reduce unpredictable costs.
FAQ
How much can I safely withdraw each year?
The general guideline is 3.5-4.5% of your portfolio in the first year, adjusted for inflation each year after. But the right number depends on your portfolio size, other income, and how flexible your spending is.
Should I keep working part-time in retirement?
If you enjoy it and it supplements your income, absolutely. Even modest part-time income ($20,000-$30,000/year) significantly reduces how much you need to withdraw from savings, extending the life of your portfolio.
Schedule a free 20-minute consultation to make sure your retirement spending plan avoids these pitfalls.
R.L. Brown Wealth Management
106 W Vine St, Suite 300, Lexington, KY 40507
859.317.5889
