For many people, retirement planning feels like something you’ll “get serious about” later. Maybe once the kids are out of the house, after your income peaks or a few years before you plan to stop working.
The problem? Some of the most expensive retirement mistakes happen well before retirement actually begins, often in your 40s, 50s or early 60s. And by the time those mistakes become obvious, fixing them can be far more difficult and costly.
The good news is that most retirement planning mistakes are avoidable. With the right mix of saving, tax planning, investment strategy and realistic lifestyle expectations, you can course-correct long before retirement day arrives.
Below are the five biggest mistakes people make before retiring, along with practical ways to avoid them.
One of the most common retirement planning mistakes is assuming expenses will drop dramatically once you stop working. While some costs disappear—commuting, work clothing, payroll taxes—many others remain, and some increase.
Healthcare, travel, inflation and longevity play a bigger role than most people expect. Spending also isn’t static in retirement. Many people spend more in the early years when they’re active, and costs often rise again later due to healthcare and support needs.
A common rule of thumb suggests retirees need about 70% of their pre-retirement income. In reality, many households land closer to 80% to 90%, especially in the first decade of retirement.
Example:
A couple retiring at age 65 expects to spend $90,000 per year. Using a conservative 4% withdrawal rate, they would need roughly $2.25 million in retirement assets. If they’ve saved $1.6 million, that shortfall doesn’t disappear; it becomes a permanent income gap.
Healthcare is often a major contributor to this gap. A typical retired couple may spend $300,000 or more on healthcare over retirement, and long-term care can exceed $90,000 per year, yet many people don’t plan for these costs at all.
Start with a realistic spending estimate, not a guess. Factor in:
Inflation of 2.5%-3% annually
Healthcare and out-of-pocket medical costs
The possibility of long-term care needs
Taxes on retirement withdrawals
Plan conservatively and extend projections to at least age 95. It’s far better to have money left over than to run out.
Saving “something” for retirement is good. Saving enough, early enough, is what gives you options later.
The biggest mistake isn’t failing to save; it’s underestimating the power of timing and compounding growth.
For example, someone who begins saving $6,000 per year at age 30, earning a 7% return, could accumulate approximately $565,000 by age 65. On the contrary, someone who waits until age 45 and saves $10,000 per year may end up with closer to $340,000, despite contributing more each year.
That lost time is nearly impossible to recover.
General savings benchmarks often suggest:
At age 40: ~3× annual salary saved
At age 50: ~6× annual salary
At age 60: ~8-10× annual salary
These aren’t hard rules, but they do highlight how much progress should be happening long before retirement is close.
If you’re earlier in your career, prioritize consistency. If you’re in your 50s or early 60s, focus on optimization:
Maximize employer retirement matches
Use catch-up contributions after age 50
Balance pretax and Roth savings based on your tax bracket
Saving as much as possible is important, but how and where you save matters just as much.
It’s tempting to claim Social Security benefits as soon as you are eligible at age 62. You might think, “I paid into it, I want my money now.” But claiming early results in a permanent reduction of your monthly benefit. Conversely, delaying your claim can significantly increase your monthly check.
If your full retirement age is 67, claiming at 62 reduces your benefit by about 30%. However, for every year you delay claiming past your full retirement age (up to age 70), your benefit increases by 8%.
Example:
A worker eligible for:
$1,800/month at age 62
$2,600/month at full retirement age
$3,250/month at age 70
Over a 20-year retirement, that difference can exceed $300,000 in total benefits.
This guaranteed 8% annual return is hard to find in any other low-risk investment. Claiming early may leave tens of thousands of dollars on the table.
Think of Social Security as longevity insurance, income designed to last as long as you do.
Delay if possible: If you have other savings to live on or can continue working part-time, aim to wait until at least your full retirement age, or ideally age 70.
Coordinate spousal benefits: Married couples have unique claiming strategies. Often, it makes sense for the higher earner to delay claiming as long as possible to maximize the survivor benefit.
As you approach retirement, the instinct to protect your nest egg is strong. You might feel the urge to sell stocks and move everything into cash or bonds to avoid market volatility. While minimizing risk is important, eliminating growth potential can be just as dangerous.
Inflation is the silent threat to purchasing power. If your portfolio earns 2% in a savings account while inflation runs 3% or 4%, you are effectively losing money every year. Over a 25- or 30-year retirement, that loss can drastically reduce your standard of living.
Even in retirement, most portfolios still need a growth component to help your money keep pace with rising costs.
Maintain a balanced allocation that matches your timeline and risk tolerance. Keep a growth bucket. This common retirement strategy divides assets into “buckets” based on when they will be needed. Many retirees still need a portion of their investments to remain in equities (stocks) for long-term growth.
The bucket strategy:
Short-term (1-3 years): Cash and equivalents for immediate living expenses and emergency fund.
Medium-term (4-10 years): Bonds and income-focused funds for stability and moderate capital appreciation.
Long-term (10+ years): Stocks for growth to help outpace inflation.
This investing strategy can help you ride out stock market volatility without having to sell assets at a loss to cover expenses.
Accumulating wealth is only half the battle. Efficiently dispersing it without triggering unnecessary taxes or draining accounts too quickly is the other half.
Many retirees withdraw money based on “gut feeling” or immediate need, without considering how different accounts are taxed.
Traditional 401(k)s and IRAs are taxed as ordinary income upon withdrawal. Roth withdrawals are tax-free. Taxable brokerage accounts may be subject to capital gains taxes. Withdrawing from the wrong account in a high-income year can push you into a higher tax bracket or trigger higher Medicare premiums through IRMAA surcharges.
Example:
A retiree with $1.8 million in traditional retirement accounts may be required to take minimum distributions (RMDs) beginning at age 73. Their first RMD could exceed $65,000, pushing them into a higher tax bracket and increasing Medicare premiums. High-income earners are especially vulnerable here, because larger balances can result in higher taxable withdrawals later.
Create a tax-efficient withdrawal plan.
Sequence withdrawals intentionally: Start with taxable accounts, then tax-deferred accounts and then Roth accounts. This allows your tax-advantaged accounts to grow for longer. However, the correct sequence depends on your complete tax picture.
Consider Roth conversions: In lower-income years, often after you retire but before Social Security and RMDs kick in, converting some traditional IRA funds to a Roth IRA can help you pay taxes at a lower rate now and create tax-free income later.
At LTax Consulting, we emphasize lifetime tax planning, not just year-by-year filing. The goal isn’t simply to avoid taxes today. It’s to reduce total taxes over your retirement while protecting long-term income.
The most impactful retirement mistakes rarely come from a single bad decision. They come from a lack of coordinated planning across savings, taxes, income timing and lifestyle.
Avoiding these mistakes means:
Planning earlier than feels necessary
Revisiting projections regularly
Treating tax strategy as a core part of retirement planning
Adjusting assumptions as life changes
If you’re within five to 15 years of retirement, you still have time to make meaningful improvements. Even minor adjustments, like better tax planning, an improved savings structure and strategic withdrawal timing, can significantly improve long-term outcomes.
At LTax Consulting, we help individuals and families move beyond guesswork with proactive, tax-aware retirement strategies designed to support income, reduce unnecessary taxes and build confidence for the years ahead.
Because the goal of retirement planning isn’t just to retire, it’s to retire well.
Contact an LTax team member and start optimizing your retirement today.
LEGAL OR TAX: The information herein is not legal, such as trust or estate planning, advice, or tax advice. Any such information is provided for illustrative purposes only and must not be relied upon without the benefit of the advice of your lawyer and/or tax professional. Lido specifically disclaims any liability from any reliance on such information. Lido is not a legal service provider or tax professional and does not offer legal or tax advice. Should you desire to obtain tax or legal services or advice, you must enter into your own, independent engagement agreement with a licensed attorney or tax professional.