The Biggest Money Mistakes Retirees Make—And How to Avoid Them
Posted on February 26, 2025 by Louise Love, One of Thousands of Money and Finance Coaches on Noomii.
Discover the key money mistakes that drain savings fast and how to build a sustainable plan that lets you enjoy retirement without financial stress.
Retirement should be a time of freedom and enjoyment, but for many retirees, money stress doesn’t stop when work does. Whether you’re newly retired or preparing for the transition, you might worry:
• Will my savings last?
• Am I withdrawing too much—or not enough?
• What if unexpected expenses throw off my plan?
These concerns are common, but retirement money stress isn’t inevitable. By avoiding a few key mistakes, you can create a plan that allows you to enjoy your golden years—without financial fear.
Mistake #1: Not Having a Clear Spending Plan
Many retirees start withdrawing from their savings without a solid plan, leading to overspending early on or extreme frugality out of fear.
How to Avoid It:
• Create a flexible spending plan using YNAB (You Need a Budget) to track where your money is going and adjust as needed.
• Prioritize essential expenses first, then fun spending, so you can enjoy retirement without running out of money.
Mistake #2: Underestimating Taxes on Retirement Income
Just because you’re retired doesn’t mean you’re done with taxes. Many retirees are surprised by how much they owe on Social Security, pension withdrawals, and required minimum distributions (RMDs).
How to Avoid It:
• Estimate your tax burden each year and set aside funds in a tax-holding account.
• Work with a tax professional or financial coach to strategize withdrawals and minimize your tax liability.
Mistake #3: Taking Social Security Too Early
Many retirees claim Social Security as soon as they’re eligible (age 62), but this reduces their monthly benefit for life. Waiting until full retirement age (or later) can mean thousands more per year.
How to Avoid It:
• If possible, delay Social Security until at least full retirement age to receive your maximum benefit.
• If you need income earlier, withdraw from other retirement accounts first while letting Social Security grow.
Mistake #4: Not Planning for Healthcare & Long-Term Care Costs
Healthcare is one of the biggest expenses in retirement, and Medicare doesn’t cover everything. Many retirees underestimate costs for long-term care, dental, vision, and out-of-pocket expenses.
How to Avoid It:
• Plan for rising healthcare costs by factoring them into your budget early.
• Consider long-term care insurance or a savings fund for future care needs.
Mistake #5: Keeping the Same Budget as When You Were Working
Retirement spending looks different than when you had a steady paycheck. Some costs (like commuting) go down, but other expenses (like travel, hobbies, and medical bills) may go up.
How to Avoid It:
• Review and adjust your budget regularly based on your actual retirement lifestyle.
• Use a system like YNAB to ensure your spending aligns with your new financial reality.
Mistake #6: Not Preparing for Market Fluctuations
If all your retirement savings are in investments, market downturns can dramatically impact your withdrawals. Many retirees panic and sell during market dips, locking in losses.
How to Avoid It:
• Keep at least 1-2 years of expenses in cash or low-risk accounts to avoid selling investments at a loss.
• Work with a financial planner or coach to create a withdrawal strategy that protects your long-term security.
Mistake #7: Ignoring Required Minimum Distributions (RMDs)
Once you turn 73 (as of 2023), you must start taking Required Minimum Distributions (RMDs) from tax-deferred accounts like 401(k)s and IRAs—or face hefty penalties.
How to Avoid It:
• Know your RMD start date and withdrawal amounts to avoid penalties.
• Plan withdrawals strategically to reduce your overall tax burden.
The Bottom Line: A Retirement Plan That Works for You
Retirement doesn’t have to be filled with financial uncertainty. By avoiding these common mistakes and creating a spending plan that adapts to your needs, you can enjoy retirement with confidence.
As a YNAB Certified Coach, I help retirees create realistic, flexible financial plans so they can feel secure, spend wisely, and truly enjoy their hard-earned retirement.
Want to make sure your money works for you through every stage of retirement? Let’s connect—I’d love to help!
