8 Mistakes Even Prepared Retirees Make

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No matter how prepared you are–you’ll always have blind spots — particularly when it comes to retirement. 

“Something that no one can predict is what the market will be doing when they retire. Will it be up? Will it be down?” said Eric Mangold, founder of Argosy Wealth Management.

The issue, he explained, is if you happen to schedule your retirement when the market is down, you are entering into a situation that could be a double-whammy for your portfolio. 

“When the market is down and you are withdrawing money from your portfolio so you can live and enjoy retirement, it can erode the value of your portfolio faster than you may have anticipated,” said Mangold. 

When building your retirement plan for income, he said you need to try to insulate your portfolio for this scenario as much as you can.

Let’s look at some common mistakes that even prepared individuals can make, which can jeopardize their financial security. Below are the top mistakes even prepared retirees make, according to experts.

Underestimating Health Costs 

According to Anna Yen, CFA, money expert and author at MoneyLion, this is a common mistake because people assume Medicare will cover all healthcare costs.

However, the reality is something different. It excludes items such as long-term care, dental, vision, or hearing aids, and out-of-pocket healthcare costs.

“Most retirees make the mistake of ignoring the potential need for assisted or nursing home care. Medicare does not cover everything, and the average cost of a nursing home can exceed $100,000 a year.”

Michael Boggiano, managing partner at Wealthcare Financial, observed the same. “As a financial advisor, I see a lot of mistakes, even among the retirees who have done everything ‘right,'” said Boggiano.

He said one of those mistakes is underestimating the financial impact of significant healthcare costs that come from out-of-pocket expenses like experimental treatments, uncovered long-term care, or even modifications to their home to accommodate mobility issues. 

“Some of these out-of-pocket expenses can add up to hundreds of thousands of dollars over the course of one’s retirement,” said Boggiano.

Assuming That Their Expenses Will Remain Static

Another blunder to keep in mind because inflation erodes purchasing power. “As a result, the retirement savings may not stretch as far as they think,” said Yen.

Underestimating Life Expectancy

Another mistake is underestimating life expectancy. “Advances in healthcare have extended life expectancy, as many people live 30-plus years after retirement,” Yen noted.

Boggiano agreed. “It’s unfortunate to talk about but a lot of retirees don’t account for their cognitive decline. It’s one thing to manage your own finances in your 50s or 60s, but it’s another thing to continue doing that in your 80s and beyond.” 

He encouraged retirees to have a structured plan in place such as naming a trusted financial power of attorney or setting up guardrails to prevent financial exploitation. 

“Retirees leave themselves vulnerable to costly mistakes or even fraud when they don’t have these things in place,” said Boggiano.

Relying Too Heavily On Social Security

Relying too heavily on social security is another grave error. 

“Social security usually replaces about 40% of pre-retirement income, which might just not prove sufficient,” said Yen.

Failing To Budget for Major Expenses

Unexpected expenses like major home repairs, emergency travel, or helping family members can derail even the best-laid plans. 

Failing to budget for these expenses is a significant mistake, according to Yen.

Withdrawing Too Much From Retirement Accounts Too Soon

“Many people make the mistake of withdrawing too much from their retirement accounts too soon,” said Yen.

She said that can deplete savings faster than expected, especially if the market underperforms.

Ignoring Taxes in Retirement

Another silly mistake is ignoring taxes in retirement. 

“People typically forget that traditional 401(k)s and IRAs are taxable,” Yen said. “The taxes can bite off a significant chunk out of their retirement income.”

Failing To Adjust Withdrawal Strategy

“Another oversight I see retirees making is failing to make changes to their withdrawal strategy,” said Boggiano. “As market conditions change, a fixed withdrawal rate can deplete savings.”

Instead, he said retirees should consider a more flexible approach, such as adjusting their withdrawals based on their portfolio’s performance.

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