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Retire With Confidence is the podcast designed to help you move beyond the fear of the complexity of finances so you can be financially free to achieve personal significance. Tune in with Josh Duncan each week to turn fear into fuel that drives you into Freedom & Significance.
Are you worried you might be making a retirement mistake that could cost you tens of thousands of dollars or even threaten your long term financial independence? If so, you're not alone. I meet with a lot of smart, motivated people who are doing their best to prepare for retirement, but even they sometimes fall into traps they never saw coming. And the frustrating part is that most of these pitfalls are completely avoidable once you know what to look for. So in today's video, I'm gonna walk you through the top five retirement planning pitfalls I see over and over again.
Josh:First, not knowing your true retirement spending number. Second, retiring too early without a distribution plan. Third, underestimating longevity risk and how it magnifies all the other risks in retirement. Fourth, ignoring tax planning, especially across all your household accounts. And fifth, entering retirement without a clear sense of purpose and what you want your next chapter to look like.
Josh:By the time you finish this video, you will know what these pitfalls are, but also how to avoid them so you can retire with confidence and clarity. We've got a lot to cover, so let's get started. The first major pitfall is going into retirement without knowing your retirement number. Now, I don't mean some magical dollar amount that applies to everyone. I mean your number, what it actually costs for you and your household to live the life you want.
Josh:One of the most common mistakes I see is people planning based on guesses. They'll say something like, I think we probably need about this much, or we heard the rule of thumb is about this percentage of our income. But rules of thumb don't pay the bills. Your retirement number is built on your actual spending. That's things like housing, food, transportation, travel, charitable giving, healthcare, and all the personal touches that make your life meaningful.
Josh:And here's the thing, this is easy to underestimate by a lot. Why? Because it's easy to forget about the irregular expenses, the home upgrades, the vacations, the big gifts, the medical surprises, and the lifestyle choices that really matter to them. Let me give you an example. Imagine someone spends about $8,000 a month during their working years.
Josh:They assume they'll spend much less in retirement because they're no longer commuting, paying for work clothes, or saving for retirement. But when we actually look at the numbers, they still want to travel twice a year, remodel the kitchen, help adult children, and stay active with hobbies. Suddenly, that $8,000 a month is still very much the reality. Without a clear understanding of your household spending, you're building on hope instead of planning. And hope is not a retirement strategy.
Josh:The fix is simple. Get clarity around your spending today. Not perfection, just clarity. Build a realistic spending plan and adjust it as life evolves. When you know your number, everything else becomes much easier.
Josh:Your savings targets, your asset allocation, your withdrawal strategies, and your peace of mind. The second pitfall is retiring too early without a distribution plan. And this one surprises a lot of people because they think the hard part is building their nest egg. But the harder part by far is turning that nest egg into income that lasts. You see, in your working years, you have a paycheck every two weeks or every month.
Josh:It's consistent, predictable, emotionally comforting. But once you retire, the paychecks stop. And now it's up to you to create your own paycheck out of your investments, savings, and Social Security. This is where many people get tripped up. They focus on the day they can stop working, but they don't think enough about the day their savings need to start working.
Josh:Let's say you retire at 60. That means your retirement portfolio might need to last thirty years or more. That can be longer than your entire career. And without a thoughtful distribution plan, it's easy to withdraw too much too soon, especially in the early years. And here's where calendar structure and household level planning really matter.
Josh:Different accounts have different tax consequences. For example, pulling from a tax deferred account in your early sixties can spike your taxes, but letting everything sit until required minimum distributions begin can also create a massive tax bomb later. Or consider healthcare. Retiring before Medicare begins means you have to navigate the Affordable Care Act, which has its own income thresholds. Withdraw too much from the wrong account, and you lose your premium tax credits.
Josh:Withdraw too little, and you fall short of your spending needs. The solution is to build a coordinated household level distribution strategy. This might mean drawing from taxable accounts first to manage taxes or strategically converting assets to Roth accounts during low income years to reduce future RMDs, or pairing Social Security timing with your investment withdrawals so that you smooth out your lifetime tax burden. The point is retiring isn't just about having assets, It's about having the plan that determines how and when you use them. The third pitfall is underestimating longevity risk, also known as the risk of living longer than your money.
Josh:Now living a long life is a blessing, but it also creates a real financial pressure if you haven't planned for it. When I run projections, the number one reason plans fail is that longevity magnifies all the other risks, overspending and portfolios that are invested too conservatively to keep up with inflation. Longevity itself isn't the enemy. But when you combine a long retirement with withdrawals, rising costs, and market volatility, that's where plans begin to break down. And that's why we have to plan for a long life.
Josh:Think about this. A 65 year old couple today has a very good chance that one spouse will live well into their nineties. That's three decades of retirement, thirty years of needing income, thirty years of inflation, thirty years of market ups and downs, and that brings up a misconception I hear frequently. Once I retire, I should move everything into safe investments. Not so fast.
Josh:If you're retired for three decades, you need growth. Not reckless growth, not speculative growth, but steady long term disciplined growth that helps your portfolio keep up with inflation. The cost of living doubles rough roughly every couple of decades. So if you need, let's say, $80,000 a year today, you might need $160,000 in twenty years just to maintain the same lifestyle. Without exposure to growth assets like stocks, your purchasing power erodes quietly but significantly.
Josh:Another mistake people make around longevity risk is assuming they'll naturally spend less as they age. That's partially true, but medical costs often increase inflation compounds, and some lifestyle expenses remain surprisingly sticky. Longevity risk is not solved with guesswork. It's solved through planning. This means running retirement projections with realistic life expectancies, stress testing those projections against market volatility, and building a portfolio that balances safety with growth based on your timeline, not your emotions.
Josh:The fix, a well diversified portfolio across asset classes combined with a disciplined withdrawal strategy. The fourth pitfall and one of the most overlooked is often failing to plan strategically for taxes and retirement. Many people mistakenly believe that once they retire, their taxes automatically decline. That's not always the case. In fact, some retirees end up in higher tax brackets because of required minimum distributions, Social Security taxation, and capital gains.
Josh:One of the biggest issues I see is that people don't coordinate withdrawals across all their accounts. They focus on one account at a time instead of viewing everything at the household level. Here's an example. Suppose you have a taxable brokerage account, a Roth IRA, and a traditional IRA. Each one has different rules, different tax consequences, different opportunities.
Josh:If you only pull from your taxable account because you wanna keep your taxes low, you might accidentally allow your traditional IRA to grow so large that when required minimum distributions kick in in your seventies, you suddenly have a giant tax bill. Now on the flip side, if you pull too heavily from tax deferred accounts early in retirement, you may trigger higher taxes on Social Security benefits or bump yourself into a higher Medicare premium tax bracket. This is why tax diversification matters, not just diversification of investments, but diversification of account types. It's also why strategic Roth conversions can be so powerful. Converting during low income years means you're essentially prepaying taxes at a lower rate today to avoid paying them later at a potentially higher rate.
Josh:Another important angle is capital gains management. In some years, your income might be low enough that long term capital gains are taxed at 0%. That creates a unique window for harvesting gains, repositioning your portfolio, and reducing future tax exposure. The key takeaway, taxes in retirement don't just happen to you. You can plan for them.
Josh:You can manage them. You can often reduce your lifetime tax bill dramatically with the right long term strategy. The fifth pitfall is one that surprises a lot of people because it has nothing to do with math, investments, or tax strategy. It's retiring without a clear sense of purpose. Now I know that sounds soft or philosophical, but I can tell you as a planner who has walked many people through retirement, this is one of the biggest differentiators between a fulfilling retirement and a frustrating one.
Josh:When you retire, you don't just leave a job, you leave structure, you leave routine, you leave identity, and you leave behind a sense of contribution that you may not have realized matters as much as it did. I've seen clients retire financially prepared, but emotionally unprepared. And within a year, they feel bored, restless, or even depressed. They're financially free, but personally adrift. A great retirement isn't only about the absence of work, It's about the presence of purpose, whether that means volunteering, spending more time with family, mentoring others, traveling, deepening your faith, or exploring hobbies that bring you joy.
Josh:Purpose matters. Purpose also influences your financial plan. If you wanna travel more, that affects your spending. If you wanna volunteer regularly, that affects your schedule. If you wanna start a passion project or work part time, that affects your income streams and budgeting.
Josh:Retirement planning must include both the numbers and meaning because you're not just planning to fund a retirement, you're planning to live one. Let's pull everything together. Today, we cover the top five retirement planning pitfalls I see most often. First, not knowing your retirement number. Second, retiring too early without a distribution plan.
Josh:Third, under appreciating longevity risk. Fourth, overlooking tax planning. And fifth, stepping into retirement without a sense of purpose. Avoiding these pitfalls doesn't require perfection. It requires clarity, discipline, and a household level plan that integrates your investments, spending, taxes, and life goals.
Josh:That's exactly what we help families do every day, build a plan that supports financial freedom for personal significance. I'm Josh Duncan, partner at F5 Financial Planning. If you would like to learn more about how we help our clients achieve financial freedom for personal significance, please visit our website at www.f5fp.com. Thanks for watching, and I'll see you in the next video.