Retirement Retired Life

9 Things Almost Every Retiree Gets Wrong With Their Retirement Accounts

Even well-prepared retirees often make costly mistakes with their 401(k)s, IRAs, and other accounts.

By Kristin Hitchcock

Edited by Amanda Machado

Updated Jan. 27, 2026

For many people, retirement is the first time in decades that they stop focusing on building wealth and start focusing on using it. That shift sounds simple, but in practice, it's where a lot of smart, careful savers get tripped up. The rules change, the stakes feel higher, and small misunderstandings can quietly turn into expensive mistakes. That's why many people who did a great job planning for retirement can still make avoidable missteps once they start living off their accounts.

Below are some of the most common ways retirees misunderstand or misuse their 401(k)s, IRAs, and other retirement accounts, and why each one can matter more than it seems.

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Being too conservative too soon

It's natural to want to protect your savings once you stop working. Many retirees move almost everything into cash or bonds as soon as they retire. The problem is that retirement might last 20 or even 30 years. If your money barely grows, inflation can slowly eat away at your purchasing power.

Staying invested doesn't mean taking wild risks. It usually means keeping a balanced mix that still has some growth potential. Being too cautious can be just as risky as being too aggressive.

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Ignoring the impact of fees

Fees don't feel painful because they're often invisible. A fraction of a percent here, a small expense ratio there, it doesn't seem like much. Over time, though, those costs compound in the wrong direction.

Many retirees stay in the same funds they picked years ago without checking what they're paying. Even a 1% difference in fees can quietly shave tens of thousands of dollars off a portfolio over a long retirement. It's worth reviewing what you're paying and what you're getting in return.

Taking withdrawals without a tax plan

Not all retirement dollars are taxed the same way. Money from a traditional IRA or 401(k) is usually taxed as ordinary income. Roth withdrawals are typically tax-free. Brokerage accounts have their own rules.

A common mistake is pulling money from whichever account feels most convenient. That can push you into a higher tax bracket or increase the taxes on your Social Security benefits. Coordinating withdrawals across accounts can help smooth out taxes over time instead of creating expensive spikes.

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Misunderstanding required minimum distributions (RMDs)

Once you reach 73, when required minimum distributions apply, the IRS starts telling you when you must take money out of certain accounts. Many retirees either forget about RMDs or underestimate how much they'll have to withdraw.

Missing an RMD can trigger steep penalties. Even when you remember, the extra income can affect your taxes, Medicare premiums, or both. RMDs are a rule you need to plan around, not just react to each year.

Assuming a pension or Social Security covers "most of it"

Some retirees mentally treat their retirement accounts as backup money because they expect their pension or Social Security to handle the basics. That can lead to underestimating how much they'll actually need from their savings.

Health care costs, home repairs, travel, and long-term care often show up later and bigger than expected. Your retirement accounts are usually a core part of the plan, not just a side fund.

Forgetting about inflation

Inflation doesn't make headlines every year, but it's always working steadily in the background. Over 20 or 25 years, even moderate inflation can cut your purchasing power dramatically.

Many retirement plans are built using today's dollars and today's expenses. If your investments don't at least partially keep up with rising costs, you might feel financially comfortable at 65 and much tighter at 80, even if your spending habits haven't changed much.

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Treating all accounts as one big pot

A 401(k), a traditional IRA, a Roth IRA, and a taxable brokerage account may all show up on the same net worth spreadsheet, but they behave very differently.

Each has different tax rules, withdrawal rules, and planning opportunities. When retirees lump everything together mentally, they often miss chances to be more tax-efficient or more flexible with their income.

Not updating beneficiaries and estate plans

Life changes, but beneficiary forms don't update themselves. It's surprisingly common for retirement accounts to still list an ex-spouse, a deceased relative, or an outdated trust.

Retirement accounts usually pass by beneficiary form, not by your will. That means an old form can override your current wishes. This is one of those boring tasks that only takes a few minutes and can prevent enormous problems later.

Being afraid to spend the money at all

Some retirees underspend out of fear. They worry about running out, so they barely touch the savings they worked decades to build.

Caution is healthy, but extreme hesitation can lead to a retirement that's far more constrained than it needs to be. A realistic spending plan can give you permission to actually use your money while still staying within sensible limits.

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Bottom line

Managing retirement accounts is not a "set it and forget it" job. Small decisions about fees, taxes, withdrawals, and investments can quietly add up over time, which is why avoiding these common mistakes can make a meaningful difference in how long your money lasts and how comfortably you live.

Fidelity estimates many people will spend roughly $172,500 on health care in retirement, a cost that often isn't fully reflected in early projections. Taking time to check up on your retirement readiness and stress-test your plan against expenses like this can help you spot gaps before they turn into problems.

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