The Five Worst Retirement Mistakes to Avoid at All Costs (2024)

To do retirement right you need a disciplined savings plan, a good understanding of Social Security, a sound investment strategy and a vision of retirement that provides for adequate self-fulfillment without overspending your fixed-income budget. Behind those simple principles lies a complex set of ways it can all go wrong, ranging from borrowing against your 401(k) to taking up smoking late in life. There are certain things, though, that you’ll want to make sure to avoid at all costs.

Doing Retirement Right and Wrong

It is certainly not impossible or even rare to achieve a financially secure and rewarding retirement. People over age 65, in fact, are much less likely to live in actual poverty than those still working, according to the Census Bureau. And retirees surveyed by the Employee Benefit Research Institute (EBRI) in 2022 rated their satisfaction with life in retirement at an average 7 on a scale of 1 to 10.

That does not, however, mean there’s no way to go wrong. After all, more than 1 in 10 retirees do live in poverty, per Census. And 27% of EBRI’s respondents said their spending was much higher or a little higher than they could afford.

Five Retirement Mistakes to Avoid

Every retiree’s case is a little different, and it’s likely that the people who aren’t having a great retirement have a multitude of stories about how things didn’t turn out well. Still, we can make some useful generalizations about most important retirement mistakes to avoid. Here are five of the worst:

1. Failing to Plan

The biggest single error mistake may be pretending retirement won’t ever arrive when, for a large majority of people, it does. About 67.8% of men born in 1980 will live to age 65, according to the Social Security Administration. For women, the figure is 80.9%. Not planning to retire encourages more mistakes, like failing to budget, save and invest to fund living expenses later in life when working becomes difficult or impossible. It’s worth noting that EBRI’s survey found lower senses of well-being and satisfaction for those who, among other traits, did not use a financial advisor.

If you’d like to discuss retirement planning, you can get matched with up to three financial advisors for free.

2. Mismanaging Tax-Advantaged Retirement Plans

Neglecting to contribute enough to your workplace IRA or 401(k) to get the maximum employer match is one of the worst retirement savings moves you could make. Close behind could be borrowing from a plan and failing to pay it back. Another worst-move rival is taking early withdrawals that subject you to costly penalties. Investing retirement plan funds exclusively in shares of your employer instead of diversifying also ranks high as a seriously risky and potentially catastrophic error.

3. Messing Up Social Security

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Key Factors in Retirement Planning

When it comes to nearly universally available, almost perfectly reliable ways to fund retirement, nothing compares to Social Security. To qualify for monthly benefits for as long as you live after reaching the age of eligibility, all you have to do is work the required number of years while contributing through mandatory payroll taxes.

This apparent simplicity masks some complexities, though, and failing to navigate them can take the shine off your retirement. For example, if one member of a retired married couple dies, the survivor must carry on with just one monthly check, the larger of the two. For this reason, the higher-earning partner should wait to claim benefits as long as possible, since delaying filing increases the monthly payment. SmartAsset’s Social Security Calculator will help you avoid mistakes and make the most of this benefit.

4. Emotional Investing

The investment field almost seems designed to punish people who make investment decisions based on feelings of fear and greed. For instance, if you get rattled and sell securities during a bear market to convert to safe-seeming cash, you are effectively locking in losses and making it harder to participate in any future upturn.

Studies have shown that the best approach is to stay fully invested through good times and bad. Trying to time the market, especially on the basis of your emotions, is one of the least promising investment strategies you could have. A financial advisor can help you determine an appropriate investment strategy for your goals.

5. Focusing Only on the Financial Side of Retirement

Retiring is only partly about money. You’ll also need to find ways to fill the time you spent working, preferably in ways that maintain or improve your health and enrich your life. Unfortunately, that’s not always the case. A 2018 National Bureau of Economic Research study found male mortality increases by about 2% at age 62, a common age for retirement. The increase is smaller for women and doesn’t appear at all for either sex at other ages.

Why retirement seems to cause more deaths isn’t clear. However, most of the increased deaths are due to traffic accidents and lung cancer and other respiratory conditions tied to smoking, which other studies tends to go up with job loss at any age. No amount of being smart about employer matches can help much if you’re not around to enjoy your non-working years at all.

The Bottom Line

The worst retirement mistakes are probably not planning to retire at all, failing to take full advantage of retirement savings plans, mismanaging Social Security, making poor investment decisions and neglecting the non-financial side of retirement. It’s possible to avoid all of these, however, by being aware of the potential for costly errors and taking some relatively simple and well-proven steps to counteract them.

Retirement Planning Tips

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