Retirement Withdrawals: 6 Mistakes That Can Make a ‘Safe’ Plan Feel Tight

Many Americans spend years building a portfolio designed to last decades in retirement.

Yet once retirement begins, even a plan that looks solid on paper can feel tight based on key decisions. Retirement experts explained the mistakes that lead to depleting your retirement accounts more quickly than you planned.

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One of the most common mistakes retirees make is withdrawing money without a coordinated strategy.

Christopher Stroup, certified financial planner (CFP) and owner of Silicon Beach Financial, said many retirees underestimate how strategic withdrawals need to be. “Withdrawals aren’t just cash flow decisions, they’re tax and longevity decisions.”

Stroup explained that trying to withdraw evenly across accounts without considering tax brackets, long-term planning or Roth conversion opportunities can create unnecessary tax pressure and limit flexibility later.

Part of strategy includes determining “where the money is coming from,” said Doug Greenberg, president of Pinnacle Wealth Advisory. “The math may show the rate works but pull from the wrong accounts at the wrong time and taxes quietly erode the plan.”

Withdrawal order also makes a big difference in the lifetime tax burden on retirement income. “If you pull too heavily from pretax accounts early, you may trigger higher marginal brackets, Medicare premium surcharges or reduce future Roth conversion opportunities,” Stroup explained.

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Required minimum distributions (RMDs) are designed to ensure the government eventually collects taxes on retirement accounts. But some retirees don’t think about taxes on these until they’re actually claiming them.

“Waiting until RMD age to think about taxes often forces larger, less flexible withdrawals later,” Stroup said. Those distributions can push retirees into higher brackets and increase Medicare premiums.

“[Once RMDs begin,] you lose control. Withdrawals are required whether you need the money or not,” Greenberg added. As with many of the pieces of retirement, getting financial advice from a professional in advance can help stave off tax problems.

Strong market performance can increase account balances but also create a false sense of financial security. Raising spending permanently during these periods can create problems once markets return to normal volatility.

Stroup reminded retirees that market highs can be temporary and it’s smarter to stay frugal in your discretionary spending. When markets drop, that’s the time to use cash reserves strategically and “rebalance thoughtfully,” Stroup said.

In addition to drawing on cash in downturns, Greenberg prefers to draw on short-term bonds rather than selling stocks at a bad time. “I also avoid relying on equities for periodic income so clients are never forced to sell when markets are down,” he added.

Ironically, some retirees experience the opposite problem: They withdraw too little out of fear of running out of money.

“The result? A growing portfolio and shrinking life experiences,” Stroup said. While financial safety is important, so is living well. “A plan should support enjoyment, not create artificial scarcity,” he added.

Greenberg said often it’s just part of an emotional attitude that it can be hard to shake off. “The math may show they can spend more, but emotionally they’re still in saving mode. That’s not a portfolio problem — it’s a confidence problem.”

One of the biggest mistakes retirees make is underestimating healthcare and long-term care expenses, thus not withdrawing appropriately to cover them.

“Healthcare expenses don’t rise evenly,” Stroup said. “Without modeling for premiums, out-of-pocket costs and potential long-term care needs, retirees either overspend early or feel blindsided later.”

Social Security is one of the few guaranteed and inflation-adjusted income streams available in retirement. While claiming early can increase pressure on portfolio withdrawals, claiming too early can lock in a lower benefit for life.

Thus, Stroup said, early claims “often make retirees feel dependent on market performance.”

A retirement plan that looks safe on paper can still feel restrictive if withdrawals are poorly structured. Retirees should always consult with a financial or retirement planner to factor in taxes, market cycles and timing decisions.

“A ‘safe’ plan shouldn’t feel restrictive. If it does, the issue is often structure not math. Thoughtful withdrawal sequencing, tax-aware planning and proactive adjustments can turn a rigid plan into a dynamic one,” Stroup said.

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This article originally appeared on GOBankingRates.com: Retirement Withdrawals: 6 Mistakes That Can Make a ‘Safe’ Plan Feel Tight