Retirement is one of life’s biggest milestones, and preparing for it requires foresight, discipline and adaptability. Yet many individuals fall into avoidable traps that can jeopardize their financial security.
In fact, nearly half of Americans expect to retire with less than $500,000, according to the Schroders 2025 U.S. Retirement Survey, despite estimating they’ll need about $1.28 million for a comfortable retirement. This gap underscores the critical importance of thoughtful financial planning.
These are five common retirement planning traps you can fall into — along with practical ways to help avoid them and keep your savings on track.
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Kiplinger’s Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.
1. Not having a retirement plan
The mistake: Entering retirement without a clear financial plan. Many underestimate how much they’ll need, overlook inflation, or fail to account for rising health-care costs.
Why it’s harmful: Without a plan, you increase the risk of outliving your savings or facing unnecessary financial stress during your later years.
Alarmingly, 47% of Americans don’t have a written financial plan, according to research from Allianz — and confidence in meeting long-term financial goals has dropped to 70%, down from 83% in 2020. Without a plan to follow, even diligent savers can fall behind.
Ways to avoid it:
- Start planning early. Use a retirement calculator to estimate future needs
- Put it in writing. Outline income sources, expenses, goals and contingencies
- Work with a certified financial planner® professional to refine your strategy and monitor your plan over time
2. Spending instead of rolling over retirement accounts
The mistake: Taking a payout from a 401(k) or other account when changing jobs, instead of rolling the funds into a new plan.
Why it’s harmful: Cashing out early can result in steep tax penalties and derail your long-term growth. If you’re under 59.5, you may only keep 70% of the funds after taxes and penalties.
Ways to avoid it:
- It’s generally prudent to opt for a direct rollover into an IRA or your new employer’s retirement plan
- Avoid having the funds sent directly to you — this generally triggers withholding
- Consult a financial adviser to help ensure the rollover is completed properly
3. Over-reliance on tax-deferred accounts
The mistake: Saving almost exclusively in tax-deferred accounts such as traditional IRAs and 401(k)s.
Why it’s harmful: While these accounts offer tax advantages during accumulation, withdrawals in retirement are taxed as ordinary income. This can result in higher tax bills and limit flexibility once you’re retired.
Ways to avoid it:
- Diversify your tax exposure by contributing to Roth IRAs and taxable brokerage accounts
- Consider Roth conversions during low-income years in an effort to reduce potential future liabilities
- Work with a tax professional to develop a long-term strategy
4. Failing to diversify investments
The mistake: Concentrating too much on one asset class or leaning heavily on market-sensitive investments.
Why it’s harmful: A lack of diversification increases risk. Market downturns can severely impact retirement income, especially if you need to make withdrawals when values are down.
Ways to avoid it:
- Diversify across asset classes, including stocks, bonds, real estate and alternative investments
- Use horizontal diversification — spread investments across different types of assets, not just different accounts
- Rebalance your portfolio regularly to keep your portfolio aligned with your risk tolerance
5. Being complacent or resistant to change
The mistake: Sticking with outdated strategies or avoiding making necessary adjustments out of fear or inertia.
Why it’s harmful: Retirement is a transition from building wealth to generating income. Failing to adapt can lead to inefficient withdrawals, missed opportunities and financial stress.
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Nearly 25% of pre-retirees are already contemplating delaying retirement, and some retirees are considering returning to work, according to F&G’s third annual retirement survey — clear signs that failing to adjust can have real-life consequences.
Ways to avoid it:
- Review your plan annually and adjust based on market conditions, health and lifestyle changes
- Stay informed on new financial tools, tax laws and investment options
- Don’t hesitate to seek professional guidance when facing complex decisions
Help secure your future
Avoiding these common pitfalls can help improve your financial circumstances in retirement. The key is to be proactive, informed and flexible.
Whether you’re just starting to save or are already enjoying retirement, it’s never too late to refine your strategy.
Most importantly, having a financial professional in your corner to help guide you every step of the way can help alleviate any fears or stress.
