Retirement is supposed to be the reward. Decades of work, careful saving, and delayed gratification are meant to add up to something solid. Most people arrive at 68 feeling reasonably prepared, maybe even a little proud of themselves. The nest egg is real, the plan seems sound, and the hard part feels finished.
What nobody tells you clearly enough is that the decisions you make in the first few years of retirement can quietly unravel what took a lifetime to build. The choices that feel safe, obvious, or even smart in the moment often carry consequences that only become visible later, when the account statements start telling a different story. Here’s a close look at the decisions that matter most and why they tend to go wrong.
Claiming Social Security Too Early and Locking In a Permanent Reduction
Claiming Social Security Too Early and Locking In a Permanent Reduction (Image Credits: Pexels)
The idea of turning on Social Security at 68 rather than waiting until 70 seems reasonable on the surface. The money is there, after all, and waiting feels like a gamble on how long you'll live. While early access may feel like a win, it permanently reduces your monthly benefit, and in many cases, claiming early can cut payments by up to 30% for life. That permanent reduction compounds quietly over a long retirement.
For each year you wait past your full retirement age, your benefit can grow by about 8% until age 70, and over time this can add up to tens of thousands of extra dollars. The math is genuinely striking when you run it over a 20 or 25 year horizon. Claiming Social Security early remains a top regret among retirees because people aren't always clear on how the system works and how long they are likely to live.
Misreading What Medicare Actually Covers
Misreading What Medicare Actually Covers (Image Credits: Pexels)
Even with Medicare coverage, out-of-pocket costs remain substantial. Parts A and B do not cover certain common health needs, including hearing aids, dental care, and vision services. Most people entering retirement genuinely underestimate how large these gaps are. You enroll in Medicare expecting broad protection, then discover that several of the expenses you encounter most often sit entirely outside the coverage net.
The average 65-year-old retiring in 2025 can expect to spend about $172,500 on health care and medical expenses during retirement, not including potentially catastrophic long-term care costs, according to an annual survey by Fidelity. That number rises every year. Medical care prices have risen faster than overall consumer prices for more than two decades, increasing roughly 121% from 2000 to mid-2024, compared to an 86% rise in all goods and services.
Ignoring the Long-Term Care Timebomb
Ignoring the Long-Term Care Timebomb (Image Credits: Pexels)
Long-term care, including nursing homes, assisted living, and extended in-home support, is often the single largest uncovered expense in retirement, and nearly 70% of retirees will require some form of long-term assistance, but Medicare covers very little of the cost. This is one of those facts that most people know in the abstract but don't plan for in concrete terms. It stays in the mental category of "something I'll deal with later."
A 2024 study by Genworth Financial found that a home health aide cost an average of roughly $78,000 a year, while the average cost of a semiprivate room in a nursing home was roughly $111,000. The median retirement savings of 65 to 74-year-olds is around $200,000, according to Federal Reserve data, meaning an unplanned long-term stay in a nursing home will eat up those savings within a couple of years. The timeline from comfortable retiree to financially depleted can be shockingly short.
Withdrawing From Retirement Accounts Without Thinking About Taxes
Withdrawing From Retirement Accounts Without Thinking About Taxes (Image Credits: Unsplash)
One of the most common retirement planning mistakes is withdrawing from retirement accounts without considering taxes. Withdrawals from traditional 401(k)s and IRAs are taxed as ordinary income, which can push you into a higher tax bracket. At 68, many retirees are drawing from multiple sources simultaneously, and the combined income can trigger tax consequences they never anticipated. The gross amount in the account and the amount you actually take home can look very different.
Many retirees assume Social Security is tax-free or minimally taxed, only to be surprised by how withdrawals and Medicare premiums interact once benefits begin. Rising income from IRA withdrawals can also trigger Medicare premium surcharges, a rule known as IRMAA, that can push Part B costs significantly higher. These interactions between income sources, tax brackets, and premium adjustments are rarely explained clearly before retirement begins.
Getting Blindsided by Required Minimum Distributions
Getting Blindsided by Required Minimum Distributions (Image Credits: Unsplash)
At 68, Required Minimum Distributions aren't yet mandatory, but for many retirees it's the years leading up to RMD age where poor planning sets the trap. Required Minimum Distributions are minimum amounts that IRA and retirement plan account owners must withdraw annually starting with the year they reach age 73. Retirement plan account owners can delay taking their RMDs until the year in which they retire, unless they are a 5% owner, but owners of traditional IRA and SEP and SIMPLE IRA accounts must begin taking RMDs once the account holder is age 73, even if they're retired.
If you delay your first RMD until April 1, you will take two RMDs in the same tax year, which could push you into a higher tax bracket. That's a surprise many retirees don't see coming. If an account owner fails to withdraw the full amount of the RMD by the due date, the amount not withdrawn may be subject to an excise tax of 25%. Failing to plan for these forced withdrawals from age 73 onward means both penalties and tax surprises can compound on top of an already strained budget.
Underestimating How Long Retirement Actually Lasts
Underestimating How Long Retirement Actually Lasts (Image Credits: Pexels)
Many people underestimate their life expectancy. Statistics show that a healthy person at age 65 could live well into their late 80s or even early 90s. Planning as though retirement will last 15 to 20 years, when it might run 25 to 30, is one of the most consequential misjudgments a retiree can make. The budget gets calibrated for a shorter run, and the savings evaporate before the finish line arrives.
Many people make claiming and spending decisions based on short-term thinking instead of long-term reality. If you live into your 80s or beyond, delaying benefits often results in higher lifetime payouts, yet people frequently underestimate their life expectancy and claim too early. The same logic applies to withdrawal rates. Spending down savings at a pace comfortable for a 15-year retirement becomes a genuine crisis in year 22.
Carrying Too Much Investment Risk or Too Little
Carrying Too Much Investment Risk or Too Little (Image Credits: Unsplash)
When younger, you could invest more aggressively because you had time to recoup any losses. As you approach retirement, however, the game changes, and you may want to consider adjusting the level of risk you take, since you need the assets you've accumulated for day-to-day expenses, which may cost more due to inflation, and you no longer have the luxury of time. Swinging too aggressively in either direction creates real problems. Too much risk exposes savings to market drops at the worst possible time. Too little risk means inflation quietly erodes purchasing power over two or three decades.
A 2024 fee study found that active US equity funds had asset-weighted average fees of 0.60% versus 0.11% for passive funds, and higher fees eat into earnings over time, with often little reason to overpay in an era where fees can be almost microscopic. High investment fees during a long retirement can siphon away a meaningful percentage of savings, especially when compounded over 20-plus years. Retirees who never closely examined their fund expense ratios while working often discover the cost only after the damage accumulates.
Relying Too Heavily on Social Security as the Primary Income Source
Relying Too Heavily on Social Security as the Primary Income Source (Senator Mark Warner, Flickr, <a href="https://creativecommons.org/licenses/by/2.0/" target="_blank" rel="noopener">CC BY 2.0</a>)
Many people assume Social Security will cover most of their retirement expenses, but the reality is quite different. The average Social Security benefit in 2024 was around $1,900 per month, which likely isn't enough to maintain a current lifestyle. For those who made smaller contributions over their working years, or who spent time out of the workforce, that figure can be even lower. Social Security was designed as a supplement, not a full replacement for working income.
A large number of Americans rely on Social Security income for the overwhelming majority of their expenses, which can lead to problems down the road, especially during high-inflation years that are particularly difficult for those on a fixed income. When most of your monthly budget depends on one fixed source, any unexpected expense, a car repair, a medical bill, a home maintenance issue, can push savings into freefall. Diversifying retirement income across multiple sources is not a luxury. It's structural protection.
Skipping a Formal Retirement Income Plan Entirely
Skipping a Formal Retirement Income Plan Entirely (Image Credits: Pexels)
How you plan your finances in retirement may be just as important as the process of saving for retirement. Yet a surprising number of people arrive at 68 with substantial savings and no structured plan for drawing them down efficiently. The absence of a coordinated strategy, one that accounts for tax sequencing, Social Security timing, healthcare costs, and longevity, leaves too much to chance. Every unplanned withdrawal, every tax surprise, every missed optimization quietly shortens how long the money lasts.
Recent Fidelity research shows roughly one in five Americans say they have never considered health care needs during retirement, a figure that rises to one in four among Gen X, and across all generations, 17% have taken no action at all when it comes to planning for health expenses in retirement. A formal, updated plan isn't just paperwork. It's the difference between discovering a problem while there's still time to adjust and discovering it when the options have narrowed considerably. The retirees who tend to fare best aren't necessarily the ones who saved the most. They're often the ones who planned most carefully for what came after the saving stopped.