The Top Ten Worst Retirement Mistakes To Avoid Making

Plenty of resources online today will give you a “top 10” list of various topics. We recently used Gemini, Google’s version of Chat GPT, to find out what it considered the top ten worst retirement mistakes.  While the results weren’t bad, they weren’t necessarily realistic to what happens in the real world.  That’s why we decided to provide you with a more objective, real-life list of retirees’ top ten retirement mistakes.  

Watch our podcast on “The Top Ten Worst Retirement Mistakes-The Real List!”

#10. Choosing A Retirement Date That Is Not Based On Your Comprehensive Retirement Plan.

Choosing a retirement date without a comprehensive financial plan is a critical mistake because it overlooks essential factors like income needs, healthcare costs, and longevity. Retiring based on age or peer influence, rather than a detailed financial analysis can lead to insufficient savings and unexpected financial shortfalls. 

A comprehensive retirement plan ensures that your assets are aligned with your long-term goals, providing a clear picture of when you can retire comfortably. Without this planning, you risk outliving your savings and compromising your financial security during retirement. Always base your retirement date on a thorough financial strategy to avoid these pitfalls.

#9. Ignoring Or Underestimating The Bad Things: Expenses, Health Care, Ltc, Longevity

Ignoring or underestimating the bad things like expenses, healthcare, long-term care (LTC), and longevity is the ninth worst retirement mistake because it leaves you financially vulnerable. 

Many retirees face unexpected costs, from rising medical expenses to extended lifespans, which can deplete savings faster than anticipated. Without proper planning, these overlooked expenses can erode your financial security, forcing difficult decisions and compromising your quality of life. 

Accurately estimating and incorporating these costs into your retirement plan better prepares you to handle life’s uncertainties and safeguard your financial stability.

#8. Getting Emotional In Bad Times: Getting Greedy In Good Times

Emotional decisions often lead to buying high and selling low, which erodes your retirement savings. Fear can drive you to sell investments prematurely when markets dip, locking in losses. 

Conversely, during market highs, greed can push you to take excessive risks, chasing short-term gains and potentially facing significant losses when the market corrects. 

Maintaining a balanced, long-term perspective and adhering to a well-planned investment strategy is crucial to safeguarding your retirement funds and achieving financial stability.

#7. Ignoring The Opportunities A Roth Ira Can Bring

Did you know that Roth IRAs grow tax-free, and qualified withdrawals in retirement are also tax-free, providing significant savings over time?  Are you aware that Roth IRAs have no minimum required distributions (RMDs), which could allow your investments to grow over a longer period?

By not considering a Roth IRA, you may be missing out on substantial tax benefits over time. This flexibility can enhance your retirement strategy, especially if you are a high-income earner looking to leave a tax-efficient legacy for your heirs. 

Missing out on these advantages means potentially higher taxes and less financial freedom in retirement.

Check out our newest podcast, “How One Client Saved $500K in Taxes With a Roth IRA- Here’s How You Can Too!

#6. Not Incorporating a CPA Into The Planning Process ..Or Just Using a CPA Advisor.

As your wealth grows, so can your tax exposure. Not incorporating a CPA into the planning process is the sixth worst retirement mistake because it overlooks crucial tax planning and optimization strategies. 

CPAs provide expert advice on tax-efficient withdrawals, deductions, and retirement account management, ensuring you minimize tax liabilities. You might miss tax-saving opportunities, such as Roth conversions or strategic charitable donations, without the services of a CPA. 

Additionally, CPAs help navigate complex tax laws and keep you compliant, reducing the risk of costly errors. Using a CPA ensures your retirement plan is comprehensive, maximizing your savings and preserving your wealth for the future.

#5. Not Adopting An “Income First” Approach With Mailbox Money

Mailbox Money, or guaranteed income sources like annuities, pensions, and Social Security, ensures a steady cash flow throughout retirement. 

Focusing solely on investments without securing a reliable income can lead to financial stress, especially during market downturns. An income-first strategy provides peace of mind by covering essential expenses and reducing reliance on volatile markets. 

This approach creates a solid foundation, allowing for better management of discretionary spending and long-term financial planning.

Watch our podcast on the importance of Mailbox Money.

#4. Not Protecting Your Nest Egg In The Danger Zone Years (Five Years Before And After You Retire)

The five years before and after retirement are considered the “danger zone.” Why? During this critical period, market volatility can drastically reduce your retirement savings just as you start withdrawing funds. 

Significant losses at this stage can be hard to recover from, jeopardizing your long-term financial security. 

By adopting a more conservative investment strategy and ensuring a portion of your assets are in stable, low-risk investments, you can safeguard your nest egg and maintain financial stability throughout retirement.

#3. Making The Wrong Decision About Social Security….How And When To Take It

Making the wrong decision about how and when to take Social Security is the third worst retirement mistake because it can significantly reduce your lifetime benefits. 

Claiming Social Security too early, at age 62, can result in a 30% reduction in monthly benefits while delaying benefits until age 70 can increase them by up to 32%. 

This decision impacts your long-term financial security, especially if you live longer than expected. A poorly timed claim can also affect spousal benefits. Careful planning and timing are crucial to maximize your Social Security benefits and ensure a more secure retirement.

#2. Not Having A Comprehensive Financial Plan/Not Knowing What A Financial Plan Is

Not having a comprehensive financial plan or not knowing what a financial plan is ranked as the second worst retirement mistake because it leaves your financial future uncertain and vulnerable. 

A comprehensive financial plan includes budgeting, investment strategies, tax planning, healthcare costs, and estate planning. Without this roadmap, you risk running out of money, paying unnecessary taxes, and facing unplanned expenses. 

A well-structured plan helps you anticipate and manage financial challenges, giving you the best chance for a financially secure retirement. 

#1. Not Doing Your Homework On Choosing The Right Financial Advisor Or Not Using One At All

If you were building a new home, you’d hire a general contractor specializing in constructing new homes.  The same can be said about managing your wealth.  

The right fiduciary financial advisor can provide invaluable investment, tax, and estate planning guidance. Without financial guidance and advice, you risk costly errors and missed opportunities. 

About Cyr Financial Wealth Advisors 

As retirement planning specialists, our team at Cyr Financial uses a proprietary retirement planning process called the AIM Retirement System™:

1. Assess your goals and situation
2. Implement a custom strategy
3. Monitor your plan to ensure it continues meeting your needs

We examine all the important parts of your financial plan—income, investments, health care, taxes, Social Security, long-term care, and estate planning—to help you reach your goals with confidence and ease.

We know a fulfilling retirement needs a team of skilled financial and tax professionals to manage various aspects and provide coordinated guidance. That’s why at Cyr Financial, every meeting includes a financial advisor, a financial planner, and a CPA.

If you’re ready to move forward, we’re here to help you AIM for new goals with our three-step process: connect with us.