Most retirement advice focuses on one thing: save as much as you can. Many estimates show you may need close to $1 million to retire comfortably in many states, and as much as $2 million in more expensive places like Hawaii (1).
But here’s the problem: most Americans aren’t close to those numbers. Fidelity data shows the average person nearing retirement (aged 55 to 64) has around $200,000 saved — far less than experts say is needed. Younger workers are even further behind, with the under-35 group averaging just about $45,000 in retirement accounts (2).
And even if you do manage to build a solid nest egg, saving enough is only half the equation. What happens after you retire can matter just as much. Here are six mistakes that many Americans make with their retirement savings.
Even well-prepared retirees can unintentionally burn through savings too fast. The biggest missteps can be costly indeed, so here’s a breakdown of what they are, and how you can avoid them:
It’s easy to assume that if you retire with $1 million or $2 million saved, you have enough to “take what you need.” But random withdrawals add up quickly. Say you retire with $1 million and decide to take out money as expenses pop up: $4,000 for a vacation, $2,000 for home repairs, $1,000 for gifts.
If you average $2,000 per month in sporadic withdrawals, that’s an extra $24,000 a year, or 2.4% of your portfolio. Those withdrawals pile on top of regular living expenses, so you could still end up drawing far more than planned — especially in years with big surprise costs.
When the market dips, selling to fund withdrawals means you’re locking in losses. If your portfolio drops 20% and you pull out $50,000 to cover living expenses, that money has no chance to recover when the market rebounds.
Experts often suggest keeping one to two years of expenses in cash so downturns don’t force bad-timing decisions. Without that buffer, retirees may unintentionally shrink their portfolio at the worst possible time.
Shifting to safer investments in retirement is reasonable, but going 100% conservative can backfire. A conservative portfolio earning just 2% per year will struggle to keep up with inflation. Instead, a portfolio that keeps 30% to 60% in stocks, as financial planners often recommend, may offer better long-term growth and help preserve purchasing power.
Filing at 62 permanently reduces benefits often by around 25% to 30% (3). That smaller monthly check means you’ll need to take larger withdrawals from retirement savings to fill the gap. For instance, if you would have received $2,000 per month at 67, claiming at 62 might shrink that to around $1,400. Over 20 years, that’s a $144,000 difference, and that money has to come from your investments instead.
Health care is one of the largest retirement expenses, with costs projected to hit $172,500 per retiree over the course of their later life (4). If you don’t review Medicare plans each year, you may end up paying more than necessary for premiums or prescriptions.
Plan formularies and pricing shift annually, and what was best last year may no longer be the most cost-effective option.
Many retirees assume their budget will stay flat. But travel, gifts, family support, and rising health costs can gradually inflate spending. If expenses increase by even $500 a month, that’s $6,000 a year, equivalent to an extra $150,000 withdrawn over a 25-year retirement.
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The mistakes above may seem small, but the impact can add up fast. The right habits, however, can just as quickly put you back on solid ground. Here’s what to do to stay on track:
A withdrawal plan can help your money last. Whether it’s the 4% rule or a more flexible approach, the key is consistency, not guesswork. Consider working with a financial advisor to plan your annual withdrawal limit.
Budgeting may not be fun, but knowing exactly where your money goes helps you avoid overspending. If you find that your monthly spending is creeping up, adjust early rather than waiting for a financial shock.
One to two years of living expenses in cash in your emergency fund can help you ride out market downturns without touching your investments at the wrong time.
Both programs can shape your retirement budget for decades. Use online calculators or speak with a financial planner to understand how timing affects your benefits.
Whether you’re 30, 50, or 65, retirement planning isn’t “set it and forget it.” Track your savings rate, rebalance your investments, and review your target number annually.
If you avoid these common mistakes and stay proactive with your planning, you’ll give yourself a far better chance of enjoying retirement the way it was meant to be: with less stress, more freedom, and confidence that your money will last.
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CNBC (1); Fidelity (2); Social Security Administration (SSA) (3); Fidelity (4).
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
