The 3 Worst Retirement Mistakes I See All the Time

Think your tax bill disappears in retirement? Think again. It may drop for a few quiet years, until RMDs, Social Security taxation, and Medicare IRMAA kick in. That “low-tax retirement” dream can close fast.

Learn the retirement tax arc and how targeted Roth conversions during low-income years can cut lifetime taxes by six figures, reduce future RMDs, and give you more control over when you realize income.

In this episode, you'll learn to tackle the silent retirement killer: underspending. Fear of running out is real, and it often steals your best years. See how a living financial plan with projections, guardrails, and ongoing adjustments turns anxiety into informed choices. That way, you can say yes to travel, family, and experiences without second-guessing every swipe.

It's important that you remember to reframe your portfolio design for withdrawals. Growth still matters to beat inflation, but it needs partners. A practical three-bucket strategy blends long-term growth, stable reserves for downturns, and steady ballast to limit sequence-of-returns risk while protecting purchasing power.

This episode shows a practical path you can use now to align your tax planning, retirement spending, and investment strategy with the life you actually want. 

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Episode Transcript

SPEAKER_00 (00:00):
In my work as a financial advisor, I've worked
with hundreds of retirees, andthere are three common mistakes
I see over and over and overagain.
So in today's video, I'm goingto share with you what those
three mistakes are, quantify foryou how much this might be
costing you, and then show youbetter ways to approach this so
that you can make the most ofyour retirement years.
So if you're nearing or in yourretirement years already,
avoiding these mistakes can helpto save you money, stress, and

(00:24):
even a tremendous amount ofregret.
So let's jump right in.
The first mistake I see peoplemake is ignoring the impact of
taxes in their retirement years.
So many people assume that theyretire, their income goes down,
what they need to live on goesdown.
So taxes just magically go downwith it.
Now the problem is for the firstfew years of retirement, this
belief is confirmed.
They do drop into a lower taxbracket, but let me actually

(00:46):
show you what that looks like.
Because if all you're focused onis the first two years and what
things look like there, youmight be neglecting a potential
tax bomb that's waiting for youif you don't take the correct
steps today.
So let's take a look at Lorireal quick.
Lori is 61 years old today.
Lori's a sample client toillustrate this purpose.
She has about a million dollarsin her portfolio and she's
looking to retire in a fewyears.
If we jump right to her taxstrategy here, I want to start

(01:09):
by understanding what is Loriexpected to pay in taxes if
there's no tax strategy that'sexecuted upon.
What it's going to show you is acommon trap that people fall
into when they retire.
So if I go right to this pagehere, Lori's tax strategies and
take a look at the details ofwhat's the expected amount that
she's going to pay in taxes, Ican see her total taxable income
today.
So her taxable income today isher actual gross income minus

(01:31):
any deductions that she has.
Then what we can see is what'sthe total federal tax liability
that she's expected to have eachyear.
So in her working years, you cansee that that's the number right
here about 25,000 or so offederal taxes paid.
And then that number drops nextto nothing.
Why is that?
Well, it's because she has agood amount in her brokerage
account.
She's living on Social Securityon top of that.

(01:51):
So when she retires, there's nota lot of tax liability that she
has.
So this lures people intothinking that wow, I'm retired.
I don't have to worry abouttaxes as much.
And then what happens is thisthere's a few years of very low
and even nothing in taxes.
And then what happens is thatnumber jumps up and it starts to
creep back up a little bit andthen required a minimum
distribution start.

(02:12):
You can see that her federal taxliability jumps right back to
where it was in our workingyears and even starts to grow
beyond that.
So what can you do here?
Well, number one, the firstthing that you can do is
recognize that your tax bill inretirement is not guaranteed to
be lower than your tax bill inyour working years.
There's a lot of potential taxtraps.
Now, part of this is some normaland basic things, things like

(02:33):
your federal income taxliability or state income tax
liability.
But then there's othercomponents that aren't so basic
or aren't so expected.
Things like taxes on SocialSecurity based upon your
provisional income, things likeIrma surcharges or Medicare
taxes that you'll pay if you'renot careful about how much
income you're realizing yearafter year.
So let's go right back to Lori'splan and see what she could do.
It's a relatively simple thingthat she could do to

(02:55):
dramatically reduce the amountof taxes she needs to pay in
retirement.
So if we go back here, what Iwant to see is how much is she
expected to pay in federaltaxes?
If she doesn't do anything, thisis just a reflection of what we
just looked at.
She's paying about 25,000 or soin taxes today.
She retires and she's in a 0%tax bracket.
That feels really good.
But before too long, requireddistributions kick back in and

(03:16):
she's right back where shestarted, and that number even
begins growing again.
So what can she do?
Well, what she can do is takeadvantage of these years right
here.
Take advantage of lower incomeyears to say, how can we start
to shift some of the moneythat's in pre-tax accounts and
shift that via Roth conversionsinto Roth accounts?
So, for example, if all I didwas says, what if every year

(03:36):
that Lori was underneath the 12%marginal tax bracket?
What if she converted justenough from her IRA into her
Roth IRA to pay taxes at a 12%rate on the top marginal dollar?
Well, if she did that, what youcan see here is right off the
bat, that's going to result inover 145,000 fewer dollars being
paid in federal income taxes.

(03:57):
If we look before, this is whather taxes look like in terms of
amounts paid year by year.
Now, this is what that lookslike.
So, yes, she's prepaying some ofthose in some ways, but she's
prepaying at a 12% rate asopposed to paying at a 22 or 24%
or even higher rate in thefuture.
So this is a relativelystraightforward tax strategy,

(04:18):
but so many people fail toappreciate it, and they fail to
appreciate it because thosefirst few years of retirement,
they might be in a much lowertax bracket.
And what they're not realizingis if you're not looking long
term, you could be stuck whenyou do turn 73 or you do turn
75, stuck with a much higher taxbill.
And at that point, it might betoo late.
So this is the first mistake Isee people make.

(04:38):
Sometimes it's related to Rothconversions, sometimes it's
related to other tax strategy.
But when you fail to appreciatethe impact of taxes, you might
overpay a dramatic amount intaxes than you otherwise would
have if you had the right taxstrategy.
The second mistake I see peoplemake in their retirement years
is spending too little.
Now, this is ironic becauseanytime we survey retirees,

(04:58):
anytime we look for feedback,people's greatest fear is
spending too much and runningout of money.
Now that makes sense.
There's no coming back for that.
If in your late 80s or 90s yourun out of money, you're in a
very difficult spot.
So it's natural that that wouldbe our greatest fear.
But the greatest and most commonthing we actually see is people
who have more money than they'veever had at any point in their
lives still living as if they'regoing to run out.

(05:21):
And what that leads to,practically speaking, isn't just
a safe financial plan.
What that leads to is a lessthan ideal retirement.
Because practically speaking,what that means is you're saying
no to vacations, you're sayingno to lifestyle, you're saying
no to things you could be doingwith your money that would
enhance your overall retirementexperience because you are stuck
in the scarcity in thisfear-based mindset.

(05:43):
Now, that scarcity and thatfear-based mindset, totally
normal, totally common.
But if we don't take steps tomove out of that, all the saving
we've done, all the investingwe've done, all the planning
we've done in some ways is fornot.
Maybe you don't run out ofmoney, but you never really
live.
So what's the risk of that?
The risk of that is you're notable to actually do with your

(06:03):
money the things it was intendedfor.
How do you get around that?
Well, that's why we plan.
That's why we create a financialplan.
This is why we do what we do atRoot Financial.
And by the way, you saw thatprojection software we use for
the tax stuff.
If you want access to that, ifyou want to use that to run your
own retirement strategies, youcan get that.
The link is in the notes below,the Retirement Planning Academy.
But this is why you put afinancial plan in place.

(06:26):
This is why you model and youproject and you run numbers on
what might the future look likebecause we don't know.
We don't know for certain, butif all we're doing is going into
retirement with a scarcity-basedmindset, it's going to lead us
to naturally just spending lessthan we otherwise should have.
We spend less, we spend lownumbers, we don't actually use
our portfolio.
And sure we don't run out ofmoney, but we never get around

(06:47):
to living lives.
So a big mistake I see is peopledon't plan for what their
portfolio can do for them, forwhat their financial resources
can do for them.
And because of that, theirretirement suffer because they
don't get around to doing thethings they wanted to do in
retirement.
And then finally, the thirdmistake I see over and over
again in retirement is peoplepursuing the wrong investment
strategy.

(07:08):
Why do they pursue the wronginvestment strategy?
Well, there's this sense thatthis is what succeeded in
getting me here.
People had success in investingin certain types of things or
taking a certain approach to getto retirement, and they think
that by default, that just meansit's the right approach
throughout retirement.
Well, the things that got youhere are not the things that are
going to get you there.
The approach in retirement needsto shift from your approach

(07:28):
leading up to retirement.
That doesn't mean that theassets you own, the specific
investments you own need tochange wholesale pre-retirement
to post-retirement.
There's probably a good portionof them that might still be the
right things to own.
But the strategy that you takeand the mindset that you take
needs to change.
Now, high level, here's thethree things you need to think
about when it comes to yourinvestments.

(07:48):
Number one, you need to havethat growth engine.
Too often people get tooconcerned about market downturns
in retirement and it leads themto being far too conservative.
They put money in things thatisn't going to grow, and they
think that that's going toprotect them.
Well, keep this in mind.
If you have a 30-year retirementand inflation averages just 3%
per year, then your expensesthroughout retirement are going

(08:09):
to increase by about 150%.
Meaning if it costs you$100,000today to live, that same exact
lifestyle will cost closer to$250,000 by the end of your
retirement.
And that's not because you'reenhancing your lifestyle, it's
just to maintain your lifestyleas the value of the dollar
continues to decline, even witha relatively modest inflation
rate of 3%.

(08:29):
If inflation's higher, all thatis going to be even exaggerated.
So what can you do?
Well, number one, you need toensure you have investments that
are growing for you.
And just because you have threeor four great high-tech growth
investments that have donereally well over the last 10
years, doesn't mean that's theright thing for you going
forward.
So how do you build this growthengine that's going to outpace
inflation to ensure you can keepup, your purchasing power can

(08:50):
keep up over time?
You need to have the rightamount in your growth engine.
So that's bucket number one.
Bucket number two is you needsome stable reserves.
Long term, this growth engine,if we use the SP 500 as a proxy
or as a benchmark, it's going byabout 10% per year.
If you could get 10% per yearlong term from that growth
bucket, that's a very strongreturn.
But there's never a consistentschedule on which that 10%

(09:13):
return happens.
Meaning you're not getting 10%this year and 10% next year and
10% the following year.
You might get 30% this year, butthen lose 30% the following
year.
So those returns are sporadic.
And while that's fine in yourworking years because you just
keep putting money into your401k, you keep putting money
into investments, that's not agood formula for success if
that's how you're pulling moneyout, or if that's fully how

(09:34):
you're invested in yourretirement years.
Because when the market's down30, 40% and you're taking 5% or
so to live on, that's not theright way to make your money
last throughout retirement.
So that's why, in addition tothe growth engine, you need some
stable reserves.
You need money that you can liveon.
Think of it almost like theemergency fund for your
portfolio, so that if and whenthere's a prolonged downturn in

(09:55):
the growth engine, you havereserves that you can draw from.
These aren't going to be theinvestments that grow a whole
lot over time, but it's thething that allows you to
continue meeting your incomeneeds without having to withdraw
the principal, without having tosell your growth engine when
those investments are down.
Then third, the third bucket orsleeve that you might want to
own is more of that ballast,more of that type of investment

(10:16):
that's not necessarily there forstable reserves, it's not there
for the growth engine, but ithelps to balance everything out.
And this is one of thoseinvestment categories that's
there on an if needed basis.
If needed, meaning if you're notas comfortable with having too
much money or a big portion ofyour money in the growth engine,
which turns out to be in mostcases the stock market, you
might need to have somethingelse, helps to balance that a

(10:37):
little bit.
So this is more of a piece whereit's a know thyself.
How do you do when markets arevolatile, when markets are up
and down?
And how do you combine thesethree pieces to design the right
portfolio for you in yourretirement years?
That may look similar to whatyour portfolio looked like in
your working years, or it maylook completely different.
But a mistake I see over andover and over again is people

(10:57):
who look at their returns overthe last five to 10 years and
say this portfolio worked then,it must work over the next 20 to
30 years.
That is a surefire way to putyour retirement at unnecessary
risk, to subject yourself to therisk of having to go back to
work or having to depend uponsomeone else if your investments
aren't doing what they need todo.

(11:18):
So these are the three mistakesI see far too often.
Number one, ignoring taxes.
Number two, not spending enough.
And number three, investing thesame way in your retirement
years as you do leading up toyour retirement years.
If you address these threethings, if you create a plan for
these three things, your oddsare you're gonna have a much
more successful retirementoutcome than you would if you
didn't do any of these.

(11:38):
Now, if you're looking at thisand you're saying, where do I
start with all this?
Start by reaching out to afinancial advisor.
If you don't know where to go,root financial.
This is exactly what we do.
You can see our website in thelink below.
We help people all day, everyday with things just like that.
So if you're looking forguidance and you're looking for
help, reach out to an advisor.
If that's root, great.
If it's someone else, great.
But make sure that you have aplan in place to avoid these

(12:00):
mistakes so that you can livethe best possible retirement.