The First Five Years of Retirement Decide the Next Twenty
Wade Pfau's research shows the first 10 years of retirement drive about 77 percent of the final outcome. Sequence of returns risk is the most underestimated threat retirees face.
Imagine spending decades saving and building wealth, only to realize too late that your plan cannot actually carry you through retirement. It happens more often than most people think.
The same critical retirement planning mistakes come up over and over again. The good news is that every one of them is avoidable once you know what to watch for.
The 10 Mistakes That Derail Retirement Plans
1. Underestimating how much you will need. Many people assume spending drops in retirement. Often it does not. Travel, healthcare, helping adult children, and simply maintaining your lifestyle can keep costs high. A 65 year old today could need well over $1 million to sustain a $75,000 annual lifestyle for 30 plus years.
2. Retiring too early without a clear plan. Hitting 62 or 65 does not automatically mean you are ready. Work backward from the retirement you want and confirm your portfolio, income streams, and cash flow actually support it.
3. Relying too much on Social Security. Social Security was never designed to be your sole income source. With a 2.5% COLA for 2026, benefits help, but they typically replace only 30% to 40% of pre-retirement income. Treat them as a bonus, not a foundation.
4. Ignoring inflation. Even modest 2% to 3% inflation means you could need nearly double the income in 25 to 30 years. Use real return estimates when projecting.
5. Investing too conservatively too soon. Going "all bonds and cash" at 65 ignores the fact that retirement can last 30 years or more. A well-structured allocation still includes equities for long-term growth.
6. Not having a withdrawal strategy. Which accounts come first: taxable, Roth, or your 401(k)? A coordinated withdrawal strategy can save six figures in taxes over a retirement and reduce sequence of returns risk.
7. Underestimating healthcare costs. Medicare is not free. In 2026, Part B alone is $194.50 per month. Add premiums, deductibles, prescriptions, and potential long-term care, and a couple can easily face $300,000 to $400,000 or more in total healthcare spending.
8. Failing to account for taxes. Traditional 401(k) and IRA withdrawals are taxed as ordinary income. Required minimum distributions starting at age 73 can push you into higher brackets. Proactive strategies like Roth conversions and smart RMD management make a real difference.
9. Not stress-testing your plan. A "perfect world" projection with steady 7% returns tells you very little. What if the market drops 30% in your first three years? What if you live to 100? Testing bad scenarios builds real confidence.
10. Procrastinating estate planning. Wills, trusts, powers of attorney, and healthcare directives protect your family and your wishes. With the federal estate exemption at $13.99 million in 2026, most households will not owe estate tax, but documents still need to be current and beneficiaries reviewed.
The Right Retirement Plan starts with education. If you want to see where your plan stands, take the free Retire Ready Score.
