24 Life-Altering Mistakes Americans Make During Retirement and How To Fix Them

Many of us dream of retirement. But as all too many retirees can attest to, spending one’s golden years office-free isn’t always as great as we picture it to be.

Information about how to prepare financially before retirement abounds. But what about the retirees who have uh-oh moments after they’ve already stopped working?

Mindfully American studied statistics and advice from finance professionals to determine some of the biggest mistakes Americans make during their retirement. We offer suggestions on how to fix them, though we’re not promising they’ll be easy or pleasant.

If you’re a retiree who’s found yourself in a rut, the information here can serve as a guide for how you might be able to get out of it. However, the information we share doesn’t replace the advice of a certified financial planner (CFP) or therapist. Every situation is unique, so consult with a specialist about your circumstances.

1: Retiring Too Soon

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You may have heard through the grapevine about former coworkers who retired early only to find themselves strapped financially, becoming a greeter at Walmart within months or years. Looking at your seemingly well-padded bank account, you may have thought, That’ll never happen to me.

But here’s the thing: Whether you retire at 65 or 35, retiring too soon and falling into financial hard times can happen to anyone. By retiring early, you have to wait longer to enjoy the perks of tax and retirement withdrawal benefits. Some Americans underestimate just how harmful that can be to their retirement savings, as it halts the benefits of compound interest on the money they withdraw.

The Fix: It depends on your situation, but a combination of getting a part-time or full-time job and reducing extra expenses as much as possible can help plug the financial drain created by an early retirement.

2: Not Paying Off Debt

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You’re not alone if you retire with debt; Approximately 60% of Americans 65 years and older owe money to a lender. Among retired households, the number of retirees holding debt has almost doubled in just 30 years.

While debt isn’t always devastating to a retiree’s finances and sometimes it even makes financial sense to have it, high-interest debt such as credit cards can hinder how much (if any) spare money one has at the end of each month.

The Fix: Pay off high-interest debt as fast as possible. While it’s easy to be tempted by minimum payments, the monthly interest you’ll accumulate hinders your ability to live a debt-free life faster. Some experts suggest that paying off debt upfront with retirement savings can be beneficial. It’s best to speak with a CFP before making such a move.

3: Taking Out Debt

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What’s arguably worse than carrying debt into retirement? Taking out debt.

As a rule of thumb, if you can’t pay for something you want with the monthly money you allot yourself during retirement, it’s best to save leftover money after expenses each month until you can buy it.

There are exceptions for emergencies, of course, with healthcare costs being among them.

The Fix: Save post-living expenses money until you can buy the item you want. In the case of a medical emergency, it’s often possible to work out a payment plan with the medical provider so you don’t have to take out debt.

4: Withdrawing Social Security Early

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Withdrawing Social Security early can be a smart move in certain cases. But often, Americans eager to call themselves a retiree quit their job and start taking Social Security at age 62.

The problem with taking Social Security at age 62 instead of, say, age 67 is that the Social Security Administration (SSA) reduces your benefit by 30%. Furthermore, the SSA adds 8% to one’s Social Security benefit for every year they don’t take Social Security beyond their full retirement age.

The Fix: If you’re regretting withdrawing Social Security early and you’ve been receiving benefits for under 12 months, you’re in luck. The SSA may be able to honor your claim withdrawal. That said, you’ll need to meet a series of requirements and repay the benefits you already received from them.

5: Spending Too Much on Family

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Grandkids — and grownup children, for that matter — are meant to be spoiled, right? You may have always dreamed of helping your kids pay for college and buying the latest toys for your grandkids.

The problem is that some retirees throw caution to the wind when it comes to spending money on their kids and grandkids. Family becomes an exception to otherwise careful retirement budgeting, and it can wreak financial havoc for some retirees.

The Fix: Learn to say “no.” Kindly, of course. If your family members are accustomed to you spending generously on them, explain your situation. By taking care of you, you’re indirectly taking care of them so they don’t have to financially support you someday.

6: Underestimating Living Expenses

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You’ve likely heard that living expenses often decrease during retirement. Experts say that retirees typically spend between 55% and 80% of the annual income they used to make.

Unfortunately, such news prompts some Americans to retire earlier than they normally would have because they underestimated how much money it would take to cover their cost of living.

The Fix: There’s no one solution for all. If you underestimated your living expenses by a little, it might simply be a matter of cutting down on your “wants” spending. Yes, that includes family splurges. If you’re among those who thought you could live off 55% of your previous income, you might need to pick up a side job.

7: Failing To Account for Inflation

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The word “inflation” has been trending for the past few years. But in reality, small degrees of inflation are normal year over year. For example, the inflation rate was 3% in 2013 and 2.10% in 2016.

What does this mean for retirees? Those who didn’t account for inflation in their retirement planning often find their otherwise reasonable living expenses are on track to outpace their savings.

The Fix: Working with a CFP is a good first step. They’ll be able to look at where you’re keeping your money and spot potential opportunities to move it to a place that may earn more interest, helping to reduce the impact of inflation.

8: Not Taking Senior Discounts

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No matter how young you feel, many people consider 62 to 65 years old the time when an American transitions to the “senior citizen” category. That’s because these are the ages when one can start collecting Medicare and Social Security, respectively.

The good news? Many businesses offer senior citizen discounts. In fact, some offer discounts to people well under 62 years old. McDonald’s is one such example, with many stores honoring discounted beverages for people 55 years and older.

The Fix: Ask about senior discounts at check-out. You could end up saving big!

9: Not Picturing Spouse Life

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You’ve lived with your spouse your whole life, or so you thought, until you retired. Whether your spouse is also retired or works from home, retirement often means that you’re suddenly around them a whole lot more than you used to be.

Some people love spending so much extra time with their partner during retirement. Others crave the personal space they used to get from them when they went to the office.

The Fix: Be open with your spouse about how you’re feeling. Doing so under the guidance of a couple’s therapist may be helpful. Get involved in hobbies, make friends outside of your couple’s social circle, and know that wanting space doesn’t mean you don’t care about your partner.

10: Underestimating Healthcare

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No matter how healthy you feel when you retire, the cold hard truth is that, statistically, our chances of health issues increase with age.

According to a Nationwide Institute survey, 66% of participants stated that they worry they won’t be able to afford health care when they retire. Many current retirees likely feel their pain, for the amount of money Americans spend on health care is almost triple what the average person estimates it to be.

The Fix: If you’re within three months of turning 65, you can apply for Medicare’s Initial Enrollment Period, which can significantly reduce healthcare burdens on your monthly retirement expenses. You can also try negotiating your medical bills.

11: Overcommitting

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Some retirees view retirement as a time to relax. Others see it as a time to do more of the things they love that they never had time for. There’s no right or wrong approach, but be prepared for this: You may find your schedule unintentionally super full of overcommitments.

The reason? Once you no longer spend 40+ hours per week at a job, you may get family and friends asking for favors and wanting to hang out more frequently. You can only watch your grandkids for so long, go on so many friend lunch dates each week, and take on extra hours where you volunteer before you start feeling burned out.

The Fix: Build free time into your calendar and stick with it. The amount of free time one needs to feel happy and fulfilled will vary depending on the person.

12: Spending Too Much on Hobbies

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We’re not about to recommend not doing the hobbies you love during retirement. But depending on the type of hobbies you’re interested in, you might need to do them in moderation to avoid spending over your monthly retirement budget.

According to Yahoo! Finance, golfing, boating/sailing, horseback riding, and car restoration/collecting are the most expensive hobbies retirees have. Golfing alone can cost $5,000 – $10,000 per year.

The Fix: Budget your expensive hobbies to determine how frequently you can do them without hurting your retirement account. Give relatively inexpensive hobbies a try such as drawing, gardening, birdwatching, and photography.

13: Working After Early Social Security Claim

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If the idea of claiming Social Security early and working at the same time seems like a financially sound decision to you, be careful. According to the Social Security Administration, “If you are younger than full retirement age and make more than the yearly earnings limit, we will reduce your benefits.”

The limit one can earn before deductions from Social Security occur is $22,320. After that point, the SSA will deduct $1 from your Social Security benefits for every $2 you earn after $22,320.

The Fix: Try to wait to work until you reach full retirement age. In that case, the SSA won’t deduct money from your monthly benefit no matter how much money you earn.

14: Failing To Build Friend Group

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If you’re like many Americans, work is more than a job; it’s also a place where your friends are. No matter how good of intentions you and your coworker friends have of staying in touch after you retire, the reality is often more difficult: You have 40+ hours of time on your hands, and they don’t.

Studies show that depression is more common in older people. A lack of a social circle can contribute to depression. The good news? Scientists have found that depression isn’t a normal part of aging and that despite older people often having more illnesses and physical limitations than younger people, they tend to feel satisfied with their lives.

The Fix: Start building a friend group outside the office before retiring. If you’re already retired, there’s no better time than now to pick up a (hopefully inexpensive) hobby and start making friends.

15: Keeping High-Risk Investments

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While there may be times when small amounts of higher-risk investments make sense during retirement, the general rule of thumb is that you should adjust your retirement portfolio to contain lower-risk investments.

Stocks are typically more volatile than bonds. For this reason, experts at Charles Schwab recommend that people in their 60s allocate around 35% of their retirement investments in bonds. Once a person reaches their 70s, they recommend bumping up one’s bond allocation to 50%.

The Fix: Speak with a financial advisor to determine just how much or little risk makes sense for your retirement portfolio.

16: No Investment Diversification

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Depending on risk tolerance, some Americans are inclined to put all their retirement in stocks with the hope of faster growth, whereas others want to put all of their money in bonds to reduce the chance of losses. However, most financial experts agree that diversifying one’s retirement savings is the smartest approach.

For example, in the 25-year period through 2022, a retirement portfolio with 50% stock and 50% bonds had positive returns in 19 of those years. Only one of the six negative years had a double-digit loss of more than 10%. While past performance doesn’t guarantee future results, this example demonstrates the power of having a diversified retirement portfolio.

The Fix: Work with a CFP for recommendations on how to diversify your portfolio. Your ideal asset allocation will depend on your age and retirement goals.

17: No Will

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Most of us prefer to view retirement as a new lease on life, having more time to do the things we love. However, no one lives forever, and not having a will arranged can mean your hard-earned belongings and retirement money go to people you’d rather not have them.

The reason is that when a person doesn’t have a will, a local court is responsible for divvying out your property according to state laws. Although it can cost money to arrange a will, you’ll be able to rest easy knowing your money and belongings went to whom you wanted them to.

The Fix: Choose an executor to handle your estate and then either write a will yourself or work with a lawyer.

18: Not Downsizing

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“Upsizing” is trending among retirees, according to a Merrill Lynch report. A massive 49% of retirees are either choosing to stay in their homes or selling their homes for a larger space. That goes against common sense and what many financial experts recommend, though.

By staying in one’s current larger home or buying a larger place, retirees will incur more maintenance work and associated costs. And, of course, they often end up paying more for a larger house instead of saving money by downsizing to a smaller home.

The Fix: Be as objective as possible when assessing your housing situation. Do you have more home than you use? Would the extra money you could get by downsizing help with your less-than-ideal-funded retirement account? If so, it might be time to talk with a realtor.

19: Spending Emergency Fund

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Despite what some Americans seem to believe, retirement savings isn’t the same as an emergency fund. If you’re among those who end up spending their emergency fund on fun things upon retiring or a true emergency without trying to rebuild your balance, there’s no better time to change your ways than now.

The issue with spending your emergency fund on non-emergencies during retirement or not rebuilding it after an emergency is that it could cause you to sell your retirement investments when the market is down. That’s money that you wouldn’t have otherwise had to touch, and it can take a significant toll on your long-term retirement finances.

The Fix: Experts recommend having a minimum of three to six months’ worth of expenses in an emergency fund. Retirees may even want to consider having 6+ months’ worth of savings.

20: Paying for Extras

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Unless you’ve saved significantly more money for retirement than you realistically need to live, retirement isn’t the time to continue paying for or picking up extra expenses.

For example, downsizing your home but paying for a storage unit for the items you can’t bear to part with can be a bad move. Storage units frequently raise their fees; that $40 unit you initially signed up for will likely cost much more several years from now.

The Fix: Weed out all expenses in your life that aren’t necessary. Then, with the extra money you have in your monthly budget, decide how you want to spend it. You’d probably prefer to splurge on your hobby or travel rather than a storage unit.

21: Falling Victim to Scams

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“That’ll never be me” might be your reaction upon reading this. However, the truth is that younger or older, all of us are capable of falling victim to a scam.

The Federal Trade Commission received 2.6 million fraud reports in 2023. Of them, imposter scams were the most popular, with people impersonating businesses and governments. However, retirees have an extra hurdle to overcome, for some scammers specifically target older people.

The Fix: Only answer the phone and emails when it’s a number/email address you know. Be suspicious if someone asks you to pay them via cryptocurrency, a money order, wire transfer, or essentially any other payment method that isn’t a credit card.

22: Underestimating Life Expectancy

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No one lives forever, but many of us live longer than the current U.S. average. The average life expectancy in the U.S. is 77.5 years, with women’s life expectancy (80.2 years) significantly higher than men’s (74.8 years).

Even though the U.S. experienced a 1.8-year drop in life expectancy in 2020 and a 0.9 drop in 2021, it’s far better to overestimate rather than underestimate your life expectancy. Unfortunately, some retirees don’t correctly account for how long they could live and risk running out of money during retirement.

The Fix: Work with a finance professional to determine how much money you should withdraw from your retirement each month to make it last for the duration of your life, no matter how long that ends up being.

23: Adjusting Retirement Plan

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You may have adjusted your retirement plan pre-retirement. But some Americans make the mistake of thinking retirement planning ends once they retire. That shouldn’t be so.

For example, an expensive illness may force you to pull more money from your retirement savings than you expected. If you have a partner and they pass away, your Social Security benefit might be adjusted. The amount of money one person needs to live versus two people also changes. Furthermore, you might inherit money or property from a loved one.

The Fix: Whenever you have a major life change that impacts your finances, contact your CFP to see if you need to adjust your retirement plan.

24: Going At It Alone

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On the surface, it may seem like you’ll save money by not hiring a financial expert to help with your finances before and after retirement. However, provided you do your due diligence to pick a reputable individual, they could help you save money in the long run.

The Fix: If you don’t already have a certified financial planner you’re happy with, research your options. Free first consultations are common.

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Are you looking for a new city to move to during retirement? These are the top cities to retire in America, according to U.S. News.

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11 Things That Disappear When You Retire

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A survey by Lincoln Financial Group says 60% of retirees would go back in time if they could and change how they planned their retirement during their working years. Whether for better or worse, these are some of the things that disappear upon retiring.

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