Retirement is supposed to be your reward. Years of hard work, finally behind you. Time to breathe, travel, enjoy the grandkids.
But for some Americans, those later years bring real financial hardship. Poor planning, unexpected expenses, or a few costly assumptions can quietly drain what took decades to build.
GOBankingRates asked two financial advisors, Joseph F. Myer, a certified financial planner (CFP) and president of Courser Capital Management LLC, and Michael Ryan, a financial advisor and owner of the financial literacy website Michael Ryan Money, to share what goes wrong. Here is what they said.
No Financial Buffer for the Unexpected
According to Myer, the single biggest contributor to financial trouble in later life is not having a cushion for surprises. “The unexpected is a broad term,” he said. “Some of the things I’ve seen over my career include severe market disruptions and recessions, large housing repair expenses, or adult children who become financially dependent.”
Without a margin of safety, one bad break can set off a chain reaction that is hard to recover from.
Trusting That Experts Can Predict the Market
Myer warned that many people assume Wall Street professionals can tell you what the market will do next year. That assumption can be costly.
He pointed to research from Paul Hickey of Bespoke Investment Group, highlighted in a 2020 New York Times article by Jeff Sommer. Each December from 2000 onward, the median forecast among experts never predicted a stock market decline for the coming year. And yet the market lost money in six of those years.
Overconfidence about future market performance, Myer said, creates real financial vulnerability.
The Wrong Pension Election
Choosing how to take your pension is a bigger decision than it might seem. Myer pointed out that the highest payout option is always the one based on a single retiree’s life expectancy. That sounds appealing until one spouse dies early.
“If the husband or wife who has earned the pension dies prematurely,” he said, “a major pillar for a couple’s cash flow goes away if they choose to take the highest payout option.” A smaller monthly check that continues for a surviving spouse can protect the household far better in the long run.
Having Too Much Wealth Tied Up in Your Home
A paid-off home feels like a victory. And it can be. But Myer noted that a home does not produce income; it consumes it. Taxes, insurance, maintenance, and repairs all demand cash flow year after year.
If you focused so hard on paying off the mortgage that you did not save enough in other assets, the home works against you in retirement. As Myer put it, it will detract from your finances until you sell it and then you have to move somewhere else.
No Comprehensive Financial Plan
Ryan said the most common root cause of late-life poverty is simply never doing serious long-term planning. “Many rely on quick estimates or simple projections without fully modeling out their needs over decades,” he said. “They fail to account for how much savings is required to maintain their lifestyle over potentially 30-plus years in retirement.”
Real financial planning, he explained, looks at all your assets and income sources together and gets revisited regularly as your situation changes.
Underestimating Inflation
Healthcare, housing, food. These costs do not stay flat. Ryan said many retirees look at their total savings and feel comfortable, without realizing how much inflation will shrink that number over time.
Someone who has saved close to $1 million today, he pointed out, will find it worth far less in 25 years. “Modeling different inflation scenarios makes clear how devastating it can be.”
Overly Optimistic Investment Returns
Ryan also cautioned against assuming your portfolio will grow at 10 to 12 percent per year. “Average returns are generally lower over time, often 6 to 8 percent depending on asset mix,” he said. And as you age and shift to more conservative investments, those returns tend to drop further.
When your projections are built on overly rosy numbers, the whole plan can unravel.
Ryan was clear that retirement security is within reach for most people, but it takes honest planning and realistic assumptions. “There are no short-cuts when planning for 30 years of retirement,” he said. Working with a knowledgeable advisor who can model your situation over decades makes a real difference.
The good news: knowing these pitfalls is half the battle. Avoid them, and you give yourself a much better shot at the retirement you worked so hard to reach.
