7 Financial Mistakes to Avoid Within 10 Years of Retirement

We’ve worked with clients at all stages of retirement planning, and we can tell you that the last decade before retirement is one of the most critical—and often the most stressful—periods in a person’s financial life. Here are seven mistakes we see people make as they approach retirement:

1. Tightening Up the Budget Too Much

We’ve seen it too many times—people spend their final decade before retirement living in increasing fear, tightening their belts unnecessarily. They’ve spent 30 years saving, and the idea of depleting that hard-earned nest egg is terrifying. It’s a scary reality, but the answer isn’t to live like a hermit. Instead, a well-defined plan can put you at ease, allowing you to live abundantly rather than anxiously.

Think of it this way: you’ve saved all these years to buy yourself freedom. Don’t trade that freedom for a prison of financial anxiety. This doesn’t mean spending recklessly, but it does mean allowing yourself the flexibility to enjoy the fruits of your labor. Build a realistic retirement budget that accounts for both necessary expenses and the things that make life worth living, like travel, hobbies, and family gatherings. A good plan allows you to spend confidently, without the constant fear of running out of money.

2. Worrying About the Wrong Things

The latest headline screams that Social Security is running out, and panic sets in. But here’s the truth: Social Security was never meant to be a full retirement income—it’s a supplement. That’s why you’ve been hammering money into your 401(k) all these years. Pensions started disappearing around the 90s, which is also when national pension trust fund (OASI) started to look like it couldn’t keep up with its long-term obligations, and that’s when personal retirement savings really took off. Focus on what you can control, like your savings rate and investment strategy, rather than fretting over what you can’t.

If you’ve spent decades building a diversified retirement portfolio, it’s probably your largest source of income, and the one you have the most control over. Yes, Social Security will be a part of your retirement income, but it’s just one piece of the puzzle. The real question is how you’ve positioned your investments to generate income, reduce taxes, and protect against market downturns.

3. Panic Selling During Market Volatility

It’s never a good idea to panic sell, but it’s particularly dangerous as you near retirement. Doing so locks in losses and leaves your portfolio unable to recover, a phenomenon known as sequence of returns risk. This can be devastating when you’re just a few years from needing those assets for income. Instead, a diversified portfolio with a risk-adjusted approach can help you weather market storms without upending your long-term plan.

Think back to 2008 or even the COVID-19 crash of 2020. The market plummeted, and plenty of investors sold out at the bottom, only to watch the market recover and reach new highs in the following years. Near and in retirement, the stakes are even higher. You don’t have decades to make up for a panic-induced loss. Stick to your plan, keep a long-term perspective, and remember why you invested in the first place.

4. Overextending on Real Estate

We’ve met plenty of retirees who thought real estate was their ticket to a secure retirement, only to find themselves burned out from tenants, toilets, and trash. We’re investment guys, so we’re biased, but it’s much easier to generate the income you need passively through a well-built portfolio than by playing landlord. If you’re determined to hang onto your properties, that’s fine, just make sure you have a clear divesting strategy or a plan for professional management. After all, you can’t sell a door to buy a week of groceries.

Real estate can be a powerful wealth builder, but it’s also a liquidity trap. It’s great for appreciation, but lousy for flexibility. As you near retirement, you might need to shift your focus from building wealth to generating steady, reliable income. Make sure your real estate holdings fit into that strategy, or consider selling while prices are high and investing the proceeds in more liquid, income-generating assets.

5. Ignoring Inflation

Retirees often assume their expenses will drop dramatically in retirement, but that’s not always the case. Healthcare, travel, and lifestyle spending can all push your costs higher. Worse, even moderate inflation can erode your purchasing power over a 20-30 year retirement. Building a portfolio that can outpace inflation is essential for maintaining your lifestyle.

Consider this: At just 3% inflation, the cost of living doubles roughly every 24 years. That means a comfortable $70,000 retirement lifestyle today could require nearly $140,000 by the time you’re in your 80s. Ignoring this reality can turn a well-funded retirement into a financially constrained one. To combat this, you need a growth-oriented investment strategy, even in retirement, to keep your purchasing power intact.

6. Over-Insuring or Under-Insuring for Long-Term Care

This one is a slow burn. You might already have a long-term care (LTC) policy, and you’re seeing those frustrating premium hikes. Or maybe you’re hoping the need for care will just work itself out. Either approach can be a mistake. If you’ve saved diligently, you might be self-insured, meaning your liquid assets can cover the average $70k per year per person cost of care, which typically lasts about two years. If you do have a policy, nearing retirement is the perfect time to review it carefully to ensure it’s still worth the cost.

7. Failing to Revisit Your Estate Plan

Life changes quickly, and outdated estate plans can create unintended consequences for your heirs. Beneficiary designations, wills, and trust documents should be reviewed regularly to ensure they reflect your current wishes and family dynamics. This is especially critical as you near retirement, when your legacy planning often becomes a more central part of your overall strategy.