Most retirement planning mistakes are obvious in that you didn’t save enough money, you claimed Social Security too early, or you invested too conservatively, and ran out of growth. These are the kinds of errors financial advisors have warned you about for decades, and they’re easy to spot before retirement.
A 15% portfolio drop in year one with 3.3% withdrawals makes 30-year depletion six times more likely.
55% of recent retirees regret their savings approach. Only 40% remained on track with their original budget.
Over 60% of retirees struggle adjusting to spending down assets they spent decades building.
A recent study identified one single habit that doubled Americans’ retirement savings and moved retirement from dream, to reality. Read more here.
The harder mistakes to catch are the ones that look fine on paper but fall apart the moment you stop working. These are unquestionably the planning failures that will only reveal themselves after the paycheck ends and you’re living off the portfolio.
Recent data from Nationwide’s Retirement Institute shows that 55% of people who retired in the last five years regret how they saved, and only 40% said they were on track with their original budget. Ultimately, the problem isn’t that they didn’t plan, but that the plan didn’t survive contact with reality.
Sequence-of-returns risk is the silent killer, and most retirees don’t understand it until it’s too late. The concept here is simple in that the order of investment returns matters far more in retirement than it did during your working years. A market crash in year three of retirement does more damage than a crash in year 20, because you’re forced to sell assets at depressed prices to fund withdrawals, locking in losses that can never recover.
According to Morningstar research, if your portfolio drops at least 15% in the first year of retirement and you withdraw at least 3.3% of the balance, you are six times more likely to deplete your portfolio within 30 years than someone who experiences positive returns in year one.
The mistake here isn’t retiring in a bad market, it’s assuming that average returns over 30 years will protect you regardless of when they occur. If you took two identical $1 million portfolios and identical 7% returns over 20 years, you can still end up in completely different places. The one who experienced early losses might run out of money in 17 years, while one who caught gains early still has healthy returns. The takeaway is that order here matters, and you don’t find out which sequence you have until after you are already retired.
The 4% rule works great, at least in theory, but it assumes you’ll adjust for inflation every year regardless of market conditions or actual spending needs. The same Nationwide survey also found that 21% of recent retirees have had to be more conservative with spending than planned, which suggests their withdrawal strategies didn’t account for real-world volatility or unexpected costs.
The bigger issue is that most retirees don’t stick to any withdrawal rates consistently. They either spend too much early because they finally have freedom and time, or they spend too little because they’re terrified of running out. Neither approach works, as overspending in the first five years, especially if it coincides with a market downturn, can permanently damage a portfolio. On the other hand, underspending can mean leaving money on the table during years in the market when you could have compounded.
The mistake shows up when you realize that static withdrawal rules don’t match how retirement spending actually works. You’re not going to spend the same inflation-adjusted amount every year for 30 years. Early retirement tends to have higher discretionary spending on travel and hobbies, mid-retirement spending stabilizes, and late retirement spending spikes due to healthcare.
The psychological shift from earning to spending is harder than any financial model predicts. For approximately 40 years, your income came from working day in and day out, while you tried to save a portion and spend another, and the cycle continued.
In retirement, every dollar you spend comes from the same assets you spent decades building. This mental shift can create anxiety that can manifest itself as either overspending to prove you’re financially secure or underspending because you’re terrified of depletion.
Financial advisors are likely to report that more than 60% of their clients will struggle with adjusting to life without a paycheck, at least according to Nationwide’s study. Rest assured that this isn’t about having enough money, it’s about the emotional weight of seeing your net worth decrease with every withdrawal. Retirees who intellectually understand they have plenty of savings still feel guilt or fear every time they move money from investment to checking accounts.
The planning mistake is failing to build a psychological infrastructure around withdrawals. Creating a “retirement paycheck” system where you can automatically transfer money from checking accounts, just like a salary, can help. So can separating money into buckets with one bucket specifically established to cover the next two years, while another bucket covers years three through ten, and so on.
Everyone knows healthcare is expensive in retirement, but planning for “average” costs is a mistake that only becomes clear after you’re actually paying the bills. Fidelity estimated in 2025 that a 65-year-old would need approximately $172,500 saved just for healthcare while retired, and this excludes long-term care.
The mistake also compounds when retirees don’t properly shop for Medicare plans carefully during annual enrollment. Far too many retirees stick with their original choices instead of optimizing plan selection, which could save hundreds or even thousands annually.
Long-term care is another wildcard that few people can properly plan for, as nursing home costs are still running well over $100,000 annually, on average, for a semi-private room. These expenses aren’t covered by Medicare, which means they hit as pure out-of-pocket shocks. It’s believed that around 70% of retirees will need some kind of long-term care, and most don’t have this kind of funding available and simply live off the hope it doesn’t happen to them.
Retirees frequently spend more in early retirement than expected because they finally have some time to do things they were unable to do during working years. This means traveling more, renovating a home, helping kids and grandkids financially, as well as trying their hands at any number of hobbies that require equipment or membership, and all of these costs surge in the first five years of retirement.
The planning mistake is budgeting for pre-retirement spending levels and assuming they will stay flat, when reality shows that spending often increases initially before stabilizing. There is also a concern that recent retirees are more vulnerable to sudden spending creep in expected categories, like higher utility bills and subscription services, as they spend more time at home. The same goes for upgrading furniture, remodeling kitchens, or investing in home projects.
This compounding of spending in early retirement coincides with the sequence-of-returns risk. If you’re spending more than planned during the same years the market is down, you’re selling more shares at lower prices, permanently reducing your portfolio’s ability to recover.
Most Americans drastically underestimate how much they need to retire and overestimate how prepared they are. But data shows that people with one habit have more than double the savings of those who don’t.
And no, it’s got nothing to do with increasing your income, savings, clipping coupons, or even cutting back on your lifestyle. It’s much more straightforward (and powerful) than any of that. Frankly, it’s shocking more people don’t adopt the habit given how easy it is.
