40 Biggest Retirement Mistakes to Avoid

By Shannon
40 Biggest Retirement Mistakes to Avoid

During retirement, it is more important than ever to make sure that you have a healthy amount of savings. After all, the definition of retirement is that you are no longer working, and you need to live on your investments and social security benefits. According to The Motley Fool, studies have shown that one out of three Americans only have $5,000 in retirement savings, and 21% have absolutely nothing. This is a significant portion of the US population that is hoping to only live on their benefits. If you want to prevent yourself from becoming part of that statistic, read on to see the 40 biggest financial mistakes most retirees make.

Make sure you move your investments from high-risk to secure ones. Credit: Shutterstock

40. Making Risky Investments

If you have the entrepreneurial spirit, it is all too easy to make risky investments in your 20s and 30s. Sometimes, these risks pay off in a big way. When they are done correctly, they will be able to help you make a lot of money. However, the closer you get to retirement, the more detrimental a failed risk may be to your livelihood. Instead of putting your money into high-risk pursuits you may want to consider having secure Investments once you get older. For example, instead of putting your money into a brand new start up that needs an angel investor, you may want to start putting your money into mutual funds that are guaranteed to pay you interest every year. Many people are able to live off of the interest from a mutual fund so long as you save during the course of your lifetime.

Always look for property tax discounts for seniors. Credit: Shutterstock

39. Not Taking Advantage of Property Tax Discounts

In certain jurisdictions, if house is owned by someone who is of full retirement age, they will make an exception to lower the property tax amount. Or, you could potentially get a tax freeze to guarantee that your property tax will never get any higher than it currently is. This is vital for people in retirement, because you don’t want your taxes to suddenly become so high that you can no longer afford to pay for it with your Social Security. Make sure you talk to your state and local municipality and have an assessor come in to lower your property tax where applicable. For example, in New York, senior citizens are eligible to save 50% on their property taxes after the age of 65. This can mean saving thousands of dollars over the course of the year.

Make sure not to withdrawl your Social Security too soon. Credit: Shutterstock

38. Withdrawing Social Security Too Early

The longer you wait to take out your Social Security the better. In the United States people are allowed to take out their social security at age 62. However, they will only recieve 75% of what the usually would, because they are receiving it early. If they are patient enough to wait until they are “full retirement age”, which is 66 years old, they will get the maximum amount of benefits. For more information on how all of this works, check out the Social Security Administration’s guide to retirement age.

Be careful not to withdarwl from your ROTH IRA too soon. Credit: Shutterstock

37. Withdrawing Your Roth IRA Too Soon

A Roth IRA is one of the greatest ways to save for retirement, because of the magic of compound interest. However, if you withdraw your money too soon, you may end up paying much higher taxes than if you waited. The minimum wage required for someone to take money out of their Roth IRA without penalty is age 59 and a half. If you want to know more information on distributions and how withdrawals work, check out this in-depth guide by H&R Block.

Be careful before you move spur-of-the-moment during retirement. Credit: Shutterstock

36. A Spur-Of-The-Moment Move

There are loads of articles on the internet that will try to convince couples to become expats during their retirement. These statistics about how much cheaper it is to live in another country are enough for some people to pack their bags and get on a plane. However, a lot of couples realize all too late that the laws and regulations of this new country are more than what they bargained for. They also may not be able to speak the language. Many people become sad that they are far away from their grandchildren and family support as you are growing older. Before you move to another state or country for a dramatic lifestyle change, make sure that you plan everything out. Remember to look 20, 30, 40 years into the future as well, because you never know how long you will live. 

You may be able to refinance your mortgage using the FMERR program. Credit: Shutterstock

35. Ignoring the FMERR Program

As you get closer to retirement age, you may or may not owe money on your mortgage. The Freddie Mac Enhanced Relief Refinance Program (FMERR for short) allows people to refinance their mortgage if they have little-to-no equity. Leading up to the 2008 financial crisis, the prices of homes ballooned, and people applied for mortgages left and right. Now, many of those homes have lost value, which means the home owner gets no equity by no fault of their own. If you are in this situation, serious read up on FMERR, and it will help ease your worries going forward.

Sadly, many retirees are targets of online scams. Credit: Shutterstock

34. Falling For An Online Scam

Unfortunately the elderly are one of the biggest targets of scams nowadays. According to the FTC elderly people account for a large portion of the victims of scams. This is for a lot of reasons. It may be that elderly people are not as technologically savvy. Or it may be that they feel lonely and they’re willing to talk to someone who calls them on the phone or send them a friend request on Facebook. Sadly a lot of these people end up losing thousands of dollars and having their lives completely ruined. Before you fall for a scam please check out the FTC’s guide to protecting older consumers to see what these scam artists are doing to attack retirees.

Some people try to live a lavish retirement even if they cannot afford it. Credit: Shutterstock

33. Continuing A Lavish Lifestyle

During the course of your career, you may have gotten used to a luxurious lifestyle. If you were making six-figure salary, you may have been the type of person to go on expensive vacations have a boat or a fancy sports car. But when you retire, you are living on the savings that you had throughout the course of your career. Even with the help of a social security check, the amount of money is very modest. Since this money needs to last you the rest of your life, it is very likely that you will no longer be able to live the same lifestyle that you did when you were working. It is always a good idea to be more frugal as you get older, instead of less.

Some people choose to work for the rest of their lives. Credit: Shutterstock

32. Planning To Work Forever

After the 2008 recession, there are more and more people who decided that they simply would never retire. Sadly, in some cases, people have no choice but to continue working, because they would not be able to afford their living expenses otherwise. However, no one can truly live forever. Imagine being a hundred years old still working at your desk job. Instead of telling yourself that you will simply work for the rest of your life, try to plan an escape for your retirement. You never know when there may be a health crisis that forces you to stop working. This “escape plan” may mean downsizing to an apartment, selling your house, or moving to a cheaper area.

When you retire, you should try to use coupons to help save money. Credit: Shutterstock

31. Never Using Coupons

When people are young, they roll their eyes at the thought of using a coupon at the store. Do you think that it is embarrassing and a waste of time. However, when people get older and wiser they usually realize that coupons are incredible. During the course of your retirement it will be more important than ever to make sure that you can stretch your money for as long as humanly possible. So it is really important that you begin using coupons. It can help you save tons of money, and if you play your cards right you can actually get items for free. If you have never done couponing before, check out TheKrazyCouponLady.com.

This older couple is super jazzed about their senior discounts. Credit: Shutterstock

30. Not Taking Advantage of Senior Discounts

There are so many restaurants, movie theaters, and entertainment venues that will give seniors a discounted price. However, in a lot of cases, you will never know about the discount unless you ask. You may also want to sign up for AARP which gives you a list of various institutions that will give you discounts for being above a certain age. There are many people who will decide to begin going to these places to eat or have their entertainment based on the senior discount. We changing this lifestyle you will be able to save tons of money over time.

Time shares are popular in Orlando, Florida, because of Disney World. Credit: Shutterstock

29. Buying a Time-Share

When people retire, they start to think about going on vacations with their grandkids. Since you’ve been saving money all your life, you may be tempted to invest that money into something like a timeshare. In case you are not aware, a timeshare is owning a small portion of a property where you are only allowed to go there certain times of the year. For example, Disney has a timeshare program where you can “own” a part of an apartment, but you were only allowed to go there maybe one week out of the entire summer. Some people say that timeshare is amazing way for them to have a vacation and have a more comfortable experience in a vacation spot. However, there are plenty of other people that are also burned financially by the timeshare system, especially if you do not go to that location every summer. Before you jump into something like this make sure you do your research beforehand.

You should always try to match your employer’s maximum contribution. Credit: Shutterstock

28. Not Matching Your Employer’s 401K Benefits

If you are giving the minimum amount of a 401k distribution from your paycheck, even when your employer is willing to match it dollar-for-dollar, that is literally like throwing away free money. According to the Motley Fool, there is $24 billion in unclaimed 401k matching just left on the table in The United States, simply because people do not elect to match their employer’s contributions.

It is best not to spoil your adult children for too long. Credit: Shutterstock

27. Babying Your Adult Children

Parents will always see their children as their little babies, and they truly will always love them. After the recession in 2008, there are more adults living with their parents for longer than ever before. However, they do grow up someday, and there’s a certain point in life where they need to take responsibility for their own lives, no matter what the economy is like. Unfortunately there are some parents out there that continue to coddle their adult children far longer than necessary. If you continue this type of lifestyle, there is a good chance that your children may drag you down and use all of your hard-earned money. Make sure that you establish certain boundaries with your adult children to let them know that it is not okay for them to continue to take money from you beyond a certain age. 

Taking from your 401K is like stealing from your older self. Credit: Shutterstock

26. Borrowing From Your 401K

If you have a full time salary job, chances are your employer gives you the opportunity to make deposits into your 401k. According to The Motley Fool, 29% of Americans admit to withdrawing from their 401K early. However, if you take that money out before you actually reach retirement age, this can cause a lot of issues. First of all, you have to pay taxes on that money. Secondly, it takes away from the potential compound interest that you could be earning over the course of several years. Taking out of your 401k should be an absolute last resort if you want to retire comfortably. Think about it this way: Taking from your 401K when you are young is like stealing from your older self. So you are only hurting yourself by doing it.

A reverse mortgage can put your property at risk. Credit: Shutterstock

25. Taking Out a Reverse Mortgage

There are loads of commercials on TV that advertise reverse mortgages. The write these scripts to make it sound like a really great idea, as of it is a form of income. However, it could seriously put your largest asset at risk.  A reverse mortgage puts a lien against the title of your house in exchange for a loan on the equity of your property. Basically, it’s taking out another mortgage on your house, and there is really nothing “reverse” about it. In most cases people who are retiring are not going to have the money to ever pay that loan back. This means that you may be in danger of losing your home some day, or it will guarantee that you can never pass it on to your children. If you want to find out more about how reverse mortgages actually work check out this guide on Investopedia.

The sooner you start saving for retirement, the better. Credit: Shutterstock

24. Avoiding Saving Until the Last Minute

If you are already nearing retirement age, this advice may be too little too late. However, if you are lucky enough to be planning ahead you really should be saving starting in your 20’s. If you get a Roth IRA in your 20’s or even when you’re 30 years old, you can begin saving the maximum amount, you may actually retire a millionaire. This may sound too good to be true, but it is the power of compound interest. On top of that, if you put that money into a account that will generate interest then you could live on that for the rest of your life. Waiting until the last minute and believing that your Social Security will be enough to carry you is a guarantee that you will struggle through retirement.

You may not be able to go out every weekend anymore once you retire. Credit: Shutterstock

23. Trying To Maintain Your Working Lifestyle

There are many people that get used to a certain lifestyle when they’re working. It may be spending $10 on lunch every day and going out to eat multiple times a week. It could also involve buying new clothes every two weeks, or going out to drinks with friends. This lifestyle of spending frivolously on a weekly basis usually needs to stop once you reach retirement age. Once you are nearing retirement, try to transition your lifestyle into more modest way of life. For example instead of going out to eat for your lunch break try to bring a bag lunch. Small changes can truly add up to a lot of money over time.

It’s good to organize, but don’t go overboard. Credit: Shutterstock

22. Extreme Decluttering

There are some people that subscribe to the belief that when you retire you should truly downsize everything about your life. With shows like Tidying Up With Marie Kondo on Netflix, more and more people are aiming towards minimalism. There is nothing wrong with that, and downsizing can truly help a lot of people live more fulfilled lives at any age. However, there reaches a certain point when decluttering can go too far. Make sure that you are not getting rid of things that may come in handy for you later or something that holds sentimental value to you. As you get older, you will have far less money to replace the things you get rid of. So think long and hard before your purge everything you own.

Sometimes, working full-time can cost more than retiring. Credit: Shutterstock

21. Collecting Social Security and Still Working Full-Time

Believe it or not, working through retirement could mean that you are missing out on free money. Some people do not realize that if you try to collect social security, there is a limit to how much money you can make before you begin losing money out of your benefits. At age 62, there is an annual limit of $17,040. So for every $2 you earn above that amount, you lose $1. After age 65, you lose $1 for every $3 earned, and the annual limit becomes $45,360. Eventually, after you reach full retirement age of 66, there is no longer a limit to how much money you can earn. This is the best time to sell your assets, or earn additional income by finding a new job.

Some retirees end up hoarding things they do not actually need. Credit: Shutterstock

20. Hoarding

We already talked about the dangers of decluttering too much, but it may actually be more common that retirees tend to hoard. This was especially true for people who were born in the 1920s and 30s and had to experience the Great Depression. Unfortunately for those of us who were adults during the 2008 recession, we are likely to have the same sort of feelings about holding onto things “just in case.”

However, this mindset that we need to hold onto every little thing is what usually triggers hoarding to happen.  You need to find a balance between hoarding and extreme minimalism. When you are going through your stuff, ask yourself if you really truly need it. And if you feel that it may come in handy someday ask yourself how much it would cost to buy it again if you needed to replace it. More often than not these items that we feel such an attachment to are actually $5 or less and you really can get rid of it. The odds are that you may get rid of 20 items worth $5 or less, and if you mistakenly need to buy one out of those 20 things again, it’s truly not a big deal.

It is better for retirees to live in a single-story home. Credit: Shutterstock

19. Buying a Two-Story Home

There are a lot of people that have a two-story house when they are raising a family. However once it is time to retire in the kids are grown up it may be a good idea for you to transition to a one-story house.  If you have never experienced an injury in your legs or hips before then you truly don’t know how difficult and impossible it is to go up and down stairs to use the bathroom kitchen and other necessities to get on with your life. This is especially true if you live alone or with just a partner. As you get older seriously consider getting a one-story home that will be injury and arthritis friendly.

Don’t spoil your grandchildren to the extreme. Credit: Shutterstock

18. Spoiling Your Grandkids

We can’t help but love our children. And with age and wisdom, grandchildren receive arguably even more love than their parents did. However, there reaches a certain point when grandchildren truly can be too spoiled. Even though we love grandchildren and we want to give them everything you have, make sure that you are taking care of yourselves as well. You also want to make sure that these children are growing up with a certain sense of responsibility for their own finances. Instead of spoiling your grandchildren with material things, considered blessing them with your knowledge of life instead. 

A huge number of people never sit down to figure out a retirement budget. Credit: Shutterstock

17. Forgetting to Make a Retirement Budget

According to The Motley Fool, 46% of Americans are just guessing a ballpark number of what they need for retirement. Unfortunately this is one of the biggest mistakes that most people make. A shockingly large number of people never actually sit down and figure out how much money they can live on every year of their retirement based on their savings. For example if you only have $100,000 saved for retirement divide that by 10 years and that’s still only $10,000 a year. If you retire at age 65 this means that you’re only giving yourself $10,000 a year for the next 10 years of your life and if you live to be older than 75 you are really doing yourself a disservice. Unfortunately if you do not actually do this math to figure this out ahead of time people will run out of money very quickly and have to rely solely on their social security benefits.

You should always plan for long term health care. Credit: Shutterstock

16. Avoiding Long-Term Medical Care Planning 

If you have been lucky enough to have a relatively healthy life you may not think too much about future medical care.  As you get older it is more important than ever to have health insurance. It is also important to have friends and family who can be there to help you in case you need a ride to medical appointments or anything along those lines. In a lot of cases, if people are not planning for these things ahead of time, they may end up living in a retirement facility. Try to make a plan before it’s too late and let your family know what your intentions are.

It is always important to write your last will and testament before it’s too late. Credit: Shutterstock

15. Never Writing a Will

There are some people that have a mindset that they are going to live for a very long time, and therefore, they put off writing their will. While it is good to be optimistic, we still need to be realistic that anything can happen at any moment. After all, people die in car accidents every day at any age. You never know what might happen. Make sure that you write your last will and testament long before it is time for you to pass away. You can always adjust the will later on if you change your mind, so don’t worry about that. It is just a lot more important to make sure that after you pass away your assets will be split up the way that you want them to be.

Make sure you get life insurance before it is too late. Credit: Shutterstock

14. Waiting Too Long To Buy Life Insurance

In the United States, 40% of people do not have life insurance at all, and 80% of people assume it is more expensive than it actually is. The older you are when you sign up for life insurance, the more expensive it will become. Unfortunately, if you wait until the last minute to get life insurance your loved ones may not be last with anything at all. Make sure that you sign up for life insurance plan when you are still healthy enough to qualify for lower premiums.

Hobbies like sailing can help ease any boredom you might feel during retirement. Credit: Shutterstock

13. Not Planning For a New Hobby

One of the biggest problems that retirees face is boredom. This happens a lot to people who are workaholics. If they don’t have a lot of hobbies outside of work, they don’t know what to do with themselves once everything is over. There is a statistic that after people retire, they actually died soon afterwards. According to OSU, people who continued working past age 65 lived 11% longer than everyone else, regardless of pre-existing health conditions. Some people theorize that it is because of boredom and a sense of purpose in life. It is extremely important to feel that you have something to live for. This does not necessarily mean that you need to keep working forever. Make sure you plan for a new hobby whether it’s golf sailing knitting sewing or anything that brings you joy.

It is possible to invest too much into retirement. Credit: Shutterstock

12. Investing Too Aggressively

Investing is a great thing to do. However, there reaches a point when some people go too far. You should save for retirement but you also need to remember that it’s okay to live your life too.  If you are investing in something like a Roth IRA there is a cap for how much you can invest for good reason. You should not be putting everything you make into your retirement because you really do not know how long you have to live. Instead of aggressively investing, try to put aside a comfortable percentage of your income every month. 

Many senior decide to downsize as they get older. Credit: Shutterstock

11. Refusing to Downsize

There are a lot of benefits to downsizing your home when you are ready to retire. First of all is it is just you and your partner living together you do not need a huge house. Getting a small home that is a one-story building is great for a lot of reasons. First of all, it is less to clean. Secondly if you suffer from arthritis or any other types of injuries that may occur you can get to everything you need on just one floor. There are some people out there who refuse to downsize because they feel as though they deserve to have a large house for the rest of their life. If you can afford to do this and still get the help that you need, go for it. However, in most cases people do much better going into their old age by downsizing to a smaller home. 

Many people need a retirement job to help keep them financially stable. Credit: Shutterstock

10. Refusing to Get a Part-Time Retirement Job

There are some people out there who hate their job so much they cannot wait to get out as soon as possible. They swear that they will be much happier when they are not working. However this eagerness to get out of work can cause issues in multiple ways. We already mentioned on this list that withdrawing your Social Security early means that you are getting less money in the long run. It also May mean that you will struggle financially. Instead of deciding to completely quit working once you hit age 62 consider getting a part-time job that you would actually enjoy. Part of retirement is embracing the things that bring you joy and incorporating them into your life. Try to find a second career in your “dream” field, even if it’s just a minimum wage income.

There are loads of opportunities for senior citizens to get free entertainment. Credit: Shutterstock

9. Never Going to Free Senior Events

In almost every town in the United States there are opportunities for elderly people to get free entertainment. It may be concerts in the park during the spring and summer months. You may also find free events at local community and senior centers. Check out your local towns website and consider visiting the municipal building to ask if there are any opportunities in your local area.

Having debt during your retirement is incredibly stressful. Credit: Shutterstock

8. Still Having Debt

Having debt is difficult at any age. But it becomes exponentially more difficult as we get older. If you are reaching retirement age and you still are holding debt on your mortgage or credit cards it is time to consider alternatives. You may want to refinance your loans or dump as much money as you possibly can and to becoming debt-free. In some cases you may want to consider working for an additional year or two just so that you can retire debt free. It becomes so much more difficult to survive during retirement when you are trying to pay off debt. Social Security is barely enough to keep you alive when it comes to rent taxes and everything else that you need to pay for. So it is best to have as few bills as humanly possible.

Some people are afraid of investing in the stock market. Credit: Shutterstock

7. Avoiding the Stock Market

Having a healthy stock portfolio can give you a huge boost in your retirement savings. But for a lot of people, the stock market seems intimidating. Some people imagine that you have to be a mathematical genius in order to understand how it all works. In reality, it is not as hard as you would think. And if you truly do hate math you can hire a broker or financial advisor. There are also plenty of apps out there like Robin Hood that make it easy for you to invest in stocks with just a few clicks on your smartphone. If you are interested in getting started, do some research on Investopedia on how to get started in the stock market.

Don’t put all of your eggs in one basket. Credit: Shutterstock

6. Putting All Of Your (Investment) Eggs In One Basket

A lot of people make the mistake of putting all of their eggs in one basket. In order for an investment portfolio to be healthy and needs to be diversified. This is important because if one of your Investments goes down in value others may be going up and it continues to balance things out. However if you are investing in just one thing you are putting yourself in danger of losing it all. Look at what happens to the people during the financial crisis in 2008. Many of those people who lost everything did so because they put all their eggs in one basket.  Before you put all of your money into your favorite stock make sure you do your research on the marketplace and any business that you are investing in.

Loads of people get a luxury car during their retirement. Credit: Shutterstock

5. Buying a New Luxury Car

Whenever you see an extremely expensive luxury car on the street, chances are that it is being driven by an older man. This is because many retirees feel that they deserve to get a luxury car. After all, they worked for decades saving up their money. Now they want to live the life that they’ve always dreamed of. However a brand new luxury car will dramatically decrease in value as soon as you drive it off the lot. The cost of repairs for luxury vehicles is also significantly higher than any other type of car.  At the end of the day a car is really just there to help you get from point A to point B. It doesn’t have to have a fancy luxury car name in order for it to be a good vehicle. Before you run out and buy your dream car, try to make a budget to see how expensive it truly will be for you to maintain it. Your retirement savings may not be enough to justify the splurge.

It’s best to stop all of your old habits once you get older. Credit: Shutterstock

4. Continuing With Bad Habits

You don’t need a doctor to tell you that it’s unhealthy to smoke and drink. However there are plenty of people out there who continue to do these things no matter what. As you get older your body cannot handle the things that it once did. Alcohol and cigarettes lead to illness is much faster when you are at retirement age.  Many people feel that they can make an excuse to continue these bad habit. Many feel as though the damage has already been done. Or, they feel that they have already lived a long enough time. Keep in mind that if you have grandchildren, they will want more time with you. Your health and your quality of life will also decline meaning that you will not be able to enjoy your retirement as much as you would with clean eating a healthy lifestyle and removing toxic chemicals from your body.

There are minimum 401k withdrawals. Credit: Shutterstock

3. Failing to Take Required Minimum 401K Distributions 

Believe it or not, there is a minimum amount of 401k withdrawals you need to make every year during your retirement. A lot of people make the mistake of taking less than the minimum, hoping that it will extend into future years. But if you snooze, you lose. According to the IRS, you must start taking money out of your 401k when you are 70-and-a-half years old. A Roth IRA does not require any withdrawal until after the death of the owner. At that point, whoever is listed as their next-of-kin will need to take out that retirement money. To learn more about this, visit the IRS website, where they have a list of frequently asked questions.

Make sure not to spend all of your retirement savings when you are still in your 60’s. Credit: Shutterstock

2. Overspending In Your 60’s

Most people get excited about freedom and living their life they way they have always dreamed during retirement. And for people who finally have the ability to withdraw funds out of their 401K that was automatically deducted from their paychecks for decades, it can suddenly feel like you have won the lottery. Because of this, there are unfortunately a lot of people out there who make the mistake of overspending in their 60s. They might start to go on vacations, buy a new car, boat, or house. Instead of overspending in your 60’s, try to be as frugal as humanly possible. Look ahead and budget for the coming years.

You never know if you will live to be 100 years old. Credit: Shutterstock

1. Underestimating Your Life Expectancy 

There are some people out there who will assume that they will live to a certain age because their parents and grandparents had that same life expectancy. However, with new medical breakthroughs happening every year, you never know if a cure is around the corner for something that will extend your life. What if you live to be a hundred and fifteen years old? You might actually live so much longer than you would ever imagine. Try to plan ahead until you are 100 years old instead of only 75 or 80. This way, if you save more money than is actually necessary, this is actually a good thing. Excess savings will never be a problem, because you have a lot of money to help you in case of emergency. It will also mean that your loved ones may have something left behind to help pay for your funeral.