At REAP Financial, our team of fiduciary advisers gives guidance every day. Over time, we have seen what works and what can create problems in retirement.
Today, I want to walk you through five things we would never recommend as you approach retirement.
Contents
One of the biggest mistakes is claiming Social Security without a clear plan.
You have options. You can take benefits early, delay them, or coordinate timing with your spouse. Each choice impacts your long-term income.
Over a lifetime, Social Security can pay out hundreds of thousands of dollars, and in some cases more than a million for married couples. Timing matters. Taking benefits too early can permanently reduce your income. Waiting too long without a plan can also create inefficiencies.
Many people make emotional decisions. Some take it early because they do not trust the system. Others simply follow what they see on their statement.
This is not a one-size-fits-all decision. A coordinated strategy based on your assets, income needs, and longevity can make a significant difference.
2. Ignoring Medicare IRMAA Surcharges
Medicare is not as simple as most people think.
Your premiums can be based in part on your income, not your net worth. This is where IRMAA surcharges come into play. These are additional costs that can increase your Medicare Part B and Part D premiums if your income crosses certain thresholds.
Some retirees pay more than others for the same parts of Medicare coverage because of income-related surcharges.
Income events such as selling investments, doing Roth conversions, or generating additional taxable income can push you into higher premium brackets. Without planning, these costs can add up quickly.
A proper strategy may help you manage income and reduce unnecessary Medicare expenses over time.
3. Withdrawing From Only One Type of Account
Another mistake is relying on a single source for retirement income, especially tax-deferred accounts like IRAs and 401(k)s.
A successful retirement income plan usually includes a mix of:
- Tax-deferred accounts
- Roth accounts
- Brokerage accounts
- Cash or money market funds
Each type of account is taxed differently. Pulling from only one source can create unnecessary tax burdens and reduce flexibility later in life.
A coordinated withdrawal strategy allows you to manage taxes, preserve assets, and support the longevity of your portfolio.
4. Failing to Plan for Taxes in Retirement
Taxes are often one of the largest expenses retirees underestimate.
Even after your paycheck stops, taxes do not go away. In many cases, they become more complex.
Consider the following:
- Up to 85 percent of Social Security benefits may be taxable
- Required Minimum Distributions from pre-tax accounts are generally taxable
- Selling investments or property can create taxable events
- Rental income can add to your tax burden
Many retirees assume they will be in a lower tax bracket. In reality, some move into higher brackets later in life due to Required Minimum Distributions and accumulated savings.
Without a long-term tax strategy, you could end up paying more than necessary.
5. Making Decisions Without a Long-Term Plan
The biggest mistake is making retirement decisions without a clear, forward-looking plan.
Decisions such as:
- When to take Social Security
- How much to convert to Roth accounts
- How much to withdraw each year
- How to manage taxes
All have long-term consequences.
A decision that looks harmless today can create problems 10 or 15 years down the road. Some of these outcomes are difficult or impossible to reverse.
A personalized retirement plan provides clarity. It allows you to see how today’s decisions may impact your future so you can act with confidence.
Final Thoughts
Retirement is not just about having enough money. It is about making thoughtful decisions with the money you have.
Avoiding these five mistakes can help you:
- Support your retirement income
- Reduce unnecessary taxes
- Control healthcare costs
- Preserve your wealth over time
For more on related topics, see How to Master the Art of Social Security Timing, All About Required Minimum Distributions (RMD), 4 Big Retirement Tax Ambushes, How to Avoid Them, and How to Create a Sustainable Retirement Cash Flow.
Build a Retirement Plan Around the Decisions That Matter
If you want to understand how these factors may apply to your situation, a financial adviser Austin families turn to may be available to help you explore your options. REAP Financial can support retirement planning with guidance around Social Security timing, Medicare costs, tax planning, and retirement income.
Contact REAP Financial
Phone: (512) 249-7300
Email: admin@reapfinancial.com
Our Main Office Address
REAP Financial
9414 Anderson Mill Rd #100
Austin, TX 78729
Chris Heerlein, a Texas native, is the CEO of REAP Financial and founder of REAP Private Client Group (RPCG), specializing in wealth creation, preservation, and growth for affluent individuals, business owners, and executives. RPCG provides financial and investment advice, advanced tax strategies, business succession planning, and excellent client service. Chris is a trusted financial advisor, author of Divorce With Dignity (2019) and Money Won’t Buy Happiness But Time to Find It (2017).
Chris also hosts Wealth Radio on NewsRadio KLBJ, Retire Ready TV on KXAN and YouTube and is a sought-after speaker. Based in Austin, Texas, he lives with his wife, Hannah, and their three children and actively supports charitable causes.
