9 Ways You’re Blowing Your Retirement Savings

3. Upsizing instead of downsizing

​Some people go into retirement with the intention of downsizing to a smaller home but then end up doing the opposite. Instead of saving on housing, they spend more.

“They think they will downsize and will have all this equity from the house, so they buy a little condo up north and a little condo down south to do the snowbird thing. And all of sudden they didn’t downsize, they changed the situation,” says Kuderna.​

How to fix it: Don’t treat the equity in your home as a windfall. Count it as an income stream you can tap in retirement.

4. No long-term care plan to speak of

​Close to 70 percent of Americans 65 and older will need long-term care in their lifetime, according to the Urban Institute and the U.S. Department of Health and Human Services. Some have family members to rely on, but close to half will need to pay for long-term care on their own, and many have no plan to do so. “It’s a pretty expensive proposition to need a full-time nursing home or at-home care,” says Curfman. “If you do nothing and something happens, you’ll have to pay for it somehow.”

How to fix it: Build long-term care costs into your retirement savings plan. Depending on your situation, that might mean setting aside money, getting a long-term care insurance policy, opening a health savings account or something else. If you can, work with a financial adviser to devise the most tax-efficient strategy.

5. You have a lot of debt

​Lingering or new debt can be a big blow to your retirement savings. It may have been easy to manage when you were collecting a paycheck, but it can hurt your cash flow and lifestyle when you’re on a fixed income.

How to fix it: Try not to carry a big debt load with you into retirement. If you do, work on paying it off and resist accruing new debt.

6. You’re living on pretax income

​Taxes are a big consideration when you begin withdrawing money from your retirement savings account. If it’s a traditional 401(k) or IRA, withdrawals are taxed as ordinary income. “It has a ripple effect on your overall tax situation and cash flow,” says Kuderna. “That $1 million is suddenly $700,000. It’s not going to last as long.”

How to fix it: Move some of your retirement savings into a Roth IRA or convert your traditional 401(k) into a Roth 401(k). With Roth accounts, you don’t pay taxes on withdrawals once you’ve had the account for five years and are 59½ or older. Keep in mind, though, that the conversion is a taxable event.

7. Investments aren’t keeping up with inflation

​The great wealth-eroding factor has always been inflation. That’s better now (the Consumer Price Index, the government’s main inflation gauge, was up 2.6 percent year-on-year in October 2024, compared to a 9.1 percent at its pandemic peak in June 2022), but over the length of a 20- or 30-year retirement, it still adds up. And it isn’t just purchasing power that diminishes — your investments have to work harder to hold their value over the long haul.

“People entering retirement at 65 think they should be all cash or fixed income,” says Kuderna. “That money is for when they are 80. It can be in the markets and keeping pace with inflation.”

How to fix it: Check up on your portfolio, especially when inflation is running hot. You want a diverse allocation of investments with just the right amount of risk so that rising prices don’t outpace your returns..

8. You aren’t paying attention to interest rates

In 2022 and 2023, the Federal Reserve repeatedly raised interest rates in an effort to tame inflation. For many retirees, it’s been a nonevent, especially if they haven’t been looking to purchase a home or take out a loan. But ignoring rising interest rates could mean you are leaving potential gains on the table, especially if your money is in a checking account or stashed under the mattress.

“Many clients have gotten complacent, leaving money in checking and savings even as interest rates go up,” says Kuderna. 

How to fix it: If your money is languishing in a low-interest-bearing bank account, Kuderna says to consider moving it into a fixed annuity, treasury or certificate of deposit (CD) — while the Fed has stopped raising rates, CDs are still getting a 4 percent to 5 percent return. “All three are guaranteed products as long as you hold it for the duration,” Kuderna says. 

9. You sell your home without a plan 

Property values soared during the pandemic, prompting lots of retirees to cash out. The problem arises when they sell their home and have no plan for where to live next. Sure, they are flush with cash, but with mortgage rates still high, purchasing a new abode may no longer be affordable. “Either they get stuck with renting with really high rates or they don’t know where to go,” says Kuderna. Some retirees may even be forced to move in with their children. “What was a windfall now isn’t,” he says.

How to fix it: Retirees need to have a plan beyond putting their home on the market. Ask yourself: Where do you intend to go? Can you rent for a short time while you look for a new place? And how do you feel about paying extra given current interest rates? “Selling at a high is good, but buying high cancels that out,” says Kuderna.