15 Costly Mistakes That Leave People Broke in Retirement
Retirement should feel like a long, well-earned vacation—not a financial free fall. But all too often, minor slip-ups snowball into bank-draining disasters. Some treat retirement as a finish line and forget it’s a whole new race. This list walks through the missteps that quietly chip away at savings and leave far too many scrambling instead of relaxing.
Claiming Social Security Too Early
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Grabbing Social Security at 62 can shrink monthly checks by 30%. Waiting until full retirement age—or better yet, 70—can seriously boost your payout. Early claims might feel like a safety net, but they often shortchange the future and leave folks stretched thin by their 70s.
Underestimating Healthcare Costs
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Medicare isn’t a free-for-all, and plenty of retirees learn that the hard way. Premiums, copays, prescriptions, dental visits, and hearing aids all add up fast. Skipping this reality shreds a budget in no time. Planning for these expenses upfront helps keep your savings intact, and your future doctor visits a lot less stressful.
Failing to Budget for Inflation
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Gas, groceries, golf—everything gets pricier over time. Inflation’s quiet but relentless. What cost $1 in 1994 costs nearly $2 today. That doesn’t sound wild until you stretch it across 20+ retirement years. Savings lose power if your income doesn’t grow while prices do.
Ignoring Long-Term Care Expenses
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No one wants to picture it, but around 70% of those turning 65 will need various forms of long-term care, and it isn’t cheap. A private room in a nursing home averages over $100,000 per year. Medicare doesn’t cover extended stays; so many retirees burn through savings trying to stay comfortable and cared for without a plan.
Relying Only on One Source of Income
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Retirement lasts decades, and relying on one income stream makes you vulnerable to market swings, policy changes, and plain old bad luck. A mix of savings, investments, and side income adds stability. Backup plans matter when there’s no paycheck waiting at the end of the month.
Overestimating Investment Returns
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Average long-term returns are closer to 7%, and that’s before taxes or inflation. Counting on considerable growth can lead to overspending early on. A bad year or two, especially at the beginning of retirement, can set off a chain reaction of losses that’s tough to recover from.
Carrying Debt Into Retirement
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Monthly payments don’t retire when you do. Credit cards, car loans, and mortgages eat into fixed incomes and limit flexibility. Going into retirement debt-free, or at least close to it, is a game changer for peace of mind and cash flow.
Helping Adult Kids Too Much Financially
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Parents often mean well, but repeated handouts to grown kids can wreck retirement plans. Covering rent, paying off student loans, or bailing them out of bad decisions might feel generous, but it can quietly drain savings meant to last decades. It’s okay to say no—or at least set some firm limits.
Not Downsizing When It Makes Sense
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Holding onto a big house might feel comforting, but it can quietly drain retirement funds through taxes, maintenance, and utilities. Downsizing can free up equity and reduce physical strain. Many retirees find smaller homes bring bigger peace of mind and more cash for travel, hobbies, or grandkid spoiling.
Avoiding Professional Financial Advice
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Trying to figure out retirement finances alone feels like walking a tightrope without a safety net. A certified financial planner helps map income strategies, minimize taxes, and avoid expensive missteps. The advice doesn’t have to cost a fortune, but not getting any could.
Falling Victim to Scams and Fraud
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Older adults lose billions to scams yearly—everything from fake IRS calls to too-good-to-be-true investments. Fraudsters often target retirees because they usually have savings and time. The FBI warns that retirement scams are getting more sophisticated. Double-checking before giving out personal info or money is a must.
Making Big, Unplanned Purchases
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A luxury car, vacation home, or kitchen remodel might feel like a reward—but they can seriously dent retirement savings. It’s harder to recover without a steady income to replace those dollars. Impulse purchases that once made sense on a full salary might become money traps.
Assuming You’ll Keep Working Forever
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Many people plan to work into their 70s—but reality doesn’t always cooperate. Health issues, layoffs, or caregiving duties often cut plans short. According to the Employee Benefit Research Institute, nearly half of retirees stop working earlier than expected. It is better to prepare as if retirement will come earlier and treat extra income as a bonus.
Treating Retirement Like a Spending Spree
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The first year of retirement feels like a victory lap—and often, the spending matches it. But treating it like an extended vacation can blow through savings meant to last decades. That shiny RV or month in Europe might be fun now, but leave little for later.
Skipping a Clear Retirement Budget
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No budget means no boundaries. Retirement comes with a fixed income, yet too many retirees wing it. That’s risky business. Without tracking spending, it’s easy to burn through cash too quickly or miss major expenses like insurance premiums and property taxes. It’s freedom with a safety net—something every retiree needs.