Financial Advisors Say These 10 Retirement Moves Sound Smart (But Could Cost You Thousands)

When making your retirement plan, you may have encountered advice that seemed reasonable: pay off debt, avoid taxes, and play it safe with investments. Yet, according to financial advisors, some of these "responsible" moves can backfire and cost you tens or even thousands of dollars.

We talked with Steve Sexton, CEO of Sexton Advisory Group; Matthew Barnard, CFP, a financial planning adjunct professor at UIUC; Brian Nguyen, CFP, Private Wealth Advisor at Twin Peaks Wealth Advisory; and Eric Croak, CFP, President at Croak Capital, to get insights into the riskiest financial moves during retirement.

Here are the 10 retirement strategies the experts say you should avoid.

Claiming Social Security the moment they become eligible

If you file for Social Security at 62, your monthly benefits are permanently reduced by as much as 30% compared to waiting until full retirement age. While it's necessary if you have health concerns or immediate income needs, you must consider that your lifetime checks could become unsustainable, especially if you live well into your eighties or nineties.

Brian Nguyen advises "clients with longevity in their family or strong health" to delay benefits, since it "can significantly improve long-term retirement cash flow and increase survivor benefits for a spouse."

Aggressively paying off low-interest debt

Steve Sexton understands the emotional toll of debt, saying, "Emotionally, I totally get it. People want peace of mind and the feeling of entering retirement debt-free. But I've seen retirees drain a large portion of their savings or investments to wipe out a mortgage with a 2-3% interest rate."

The problem with eliminating low-interest debt is becoming cash-poor in the future. Inflation and investment returns could outpace the cost of debt. "Sometimes, preserving cash and flexibility is the safer move," Sexton concludes.

Selling the family home immediately

Downsizing is a great way to reduce expenses, but housing markets fluctuate, moving expenses aren't negligible, and many retirees underestimate the emotional adjustment of selling their family home.

Nguyen says the issue is common: "We have seen situations where retirees move away from family, friends, community, or familiarity in an effort to save money, only to realize later that the lifestyle tradeoff was not worth it."

Moving every investment into cash

Fear of market volatility can drive many seniors to shift their entire portfolio into cash and savings accounts. This move is risky because they still need growth-oriented investments if their retirement lasts 20 to 30 years.

Says Sexton: "If your money completely stops growing, inflation quietly erodes purchasing power year after year. There's a real risk in being too conservative for too long."

Pouring money into adult children's needs

It's common to help adult children with housing, debt, or emergencies, but prioritizing your adult children's finances shouldn't come at the expense of your own security. Unlike working-age adults, you have limited opportunities to rebuild your savings.

Eric Croak offers a sobering example: "Giving $50,000 to your kid to help with a down payment sounds nice. However, it takes that money away from your portfolio for the next 30+ years. Second, it robs you of almost $107,000 in compounded growth at a 6% annual return over 15 years. Do this three or four times, and you've cost yourself close to $600,000 in future retirement wealth."

Delaying retirement distributions to avoid taxes

Postponing withdrawals from retirement accounts is one way to minimize taxes. However, delaying too much may lead to larger required minimum distributions later, pushing retirees into higher tax brackets and increasing Medicare-related costs.

Rather than dealing with this wealth depletion in your seventies or eighties, Sexton suggests "strategic withdrawals earlier in retirement to actually create a healthier long-term outcome."

Spending that's too restrictive

Restrictive spending may seem like a smart move since you no longer have guaranteed monthly paychecks. Still, it often reduces the quality of life unnecessarily and prevents you from enjoying the fabled golden years you spent decades saving for.

Instead, spend in moderation. "A good retirement plan should create confidence to spend responsibly, not guilt every time you book a trip or take your grandkids to dinner," explains Sexton.

Becoming a buy-and-hold investor

Being a "buy-and-hold" investor feels "incredibly responsible," says Matthew Barnard. However, seniors who never adjust their company equity portfolio expose themselves to unnecessary risk. An allocation that makes sense at 50 may not make sense at 70, especially when withdrawals begin.

"By holding the stock to 'avoid taxes' or 'be a long-term investor,' [you] accidentally take on massive concentration risk. I have seen professionals lose 30% to 40% of their net worth right before their target retirement date because their sector took a hit, and their portfolio wasn't diversified," warns Barnard.

Having too much cash in retirement

Too much cash in retirement sounds like a good thing, right? Not really. As Croak explains, it's a recipe for losing wealth.

If you "keep $300,000 or more in cash and it earns you 4%, while inflation runs 3%, you're getting a positive return, but losing buying power by about $3,000 per year. Over a 25-year retirement, that $300,000 in cash is worth about $143,000. If you factor in the opportunity cost of [it] not being invested in a balanced 60/40 portfolio earning 7%, we're talking about $400,000 to $600,000 lost!"

Moving required minimum distributions into a taxable investment account

You may assume that reinvesting required minimum distributions into a taxable account is the best move if you don't immediately need the money.

While this allows the funds to grow, Croak warns against this "zero-sum game that taxes away your retirement." Interest, dividends, and capital gains generated inside the taxable account may create ongoing annual tax bills that wouldn't apply inside a tax-advantaged retirement account. Instead, Croak advises retirees to start "Roth IRA conversions at age 60 to 65 to save $150,000 to $300,000 in taxes over your lifetime."

Bottom line

Retirement decisions are rarely simple. In many cases, conservative or "responsible" advice can create unintended financial consequences later. Financial advisors say the key is understanding how taxes, longevity, inflation, and income planning work together before making major retirement choices.

To avoid wasting money before making a big move, run the numbers through a long-term retirement income plan rather than focusing only on short-term savings or emotional comfort. What feels smart today could become expensive over the next 20 years.