20 Common Financial Mistakes That Will Force You to Work Past Retirement Age
Many people aim to retire by 65, but that’s often not how it plays out. Nearly one in five Americans aged 65 and older is still working, according to the U.S. Census Bureau. The biggest setbacks are often the small financial choices that add up over time. Missed savings, rising costs, and overly hopeful assumptions can push retirement further out.
What feels manageable in midlife can turn into a serious gap later. These mistakes are easy to overlook until it’s too late, but spotting them early can help you retire when you want to, not when you have to.
Relying Solely on a 401(k) for Retirement
Credit: Getty Images
Withdrawals from a 401(k) before age 59½ typically incur a 10% penalty plus income tax. If this is your only savings vehicle, you may have no access to funds in early retirement without penalties. Diversifying into Roth IRAs and taxable accounts allows more control over the timing and tax impact of withdrawals.
Leaving Retirement Contributions in Cash
Credit: Getty Images
Uninvested cash in retirement accounts creates a drag on long-term performance. According to Vanguard, a fully invested portfolio has historically outperformed a cash-heavy one by a wide margin over the course of decades. Allowing contributions to sit in money market funds delays compounding and weakens the growth necessary for future withdrawals.
Delaying Retirement Saving Until Midlife
Credit: pexels
A person saving $300 per month from age 25 could accumulate over $500,000 by age 65 with a 7% annual return. Starting at 40 would require more than $800 monthly to reach the same amount. Compounding favors early savers; waiting compresses the timeline and significantly increases the burden on later earnings.
Letting Lifestyle Inflation Outpace Savings
Credit: Getty Images
Spending tends to rise with income, but if your savings rate stays flat while expenses increase, long-term goals suffer. Consistently raising your savings rate after raises, even by a few percentage points, improves long-term outcomes.
Carrying Credit Card Balances Long-Term
Credit: Canva
The average credit card APR in 2025 exceeds 22%, according to the Federal Reserve. Paying only the minimum causes debt to grow faster than it can be repaid. Over time, interest costs consume money that could have supported investments or paid down lower-interest obligations.
Spending Bonuses and Tax Refunds Impulsively
Credit: Canva
People treat windfall income differently from regular pay. A study in the Journal of Economic Psychology found that tax refunds and bonuses are often spent more freely due to mental accounting biases. Without deliberate planning, these sums rarely contribute to long-term savings or debt reduction, despite their potential impact.
Using Retirement Funds for Short-Term Needs
Credit: pixelshot
Early withdrawals from retirement accounts trigger penalties and tax liability. The lost opportunity for compounded returns over decades can also derail retirement timelines. Merrill Lynch reports that 79% of parents support adult children financially. While generous, this support often comes at the cost of long-term financial independence.
Failing to Prepare for Medical Expenses
Credit: pexels
Medicare doesn’t cover dental, vision, hearing aids, or long-term care. These gaps create significant out-of-pocket costs. According to Fidelity’s 2025 Retiree Health Care Cost Estimate, a 65-year-old needs $172,500 in after-tax savings for healthcare in retirement.
Underestimating How Much Retirement Will Cost
Credit: pexels
Many people expect their spending to drop after they retire, but it often rises instead. The first few years bring extra costs from travel, home projects, and health care. Many retirees spend more than planned early on, only to adjust later. Underestimating that initial surge can leave savings stretched before the steady years begin.
Overlooking Recurring Monthly Charges
Credit: Getty Images
Many people lose track of how much they spend on subscriptions. A 2023 C+R Research report found the average American pays for about a dozen, costing roughly $180 a month—or more than $2,000 a year. If left unchecked, those quiet charges can drain nearly $50,000 over 20 years and eat into long-term savings.
Reducing Contributions During Market Declines
Credit: Elnur
Fidelity found that investors who kept contributing during the 2008 crisis recovered faster and held higher balances five years later than those who stopped. Pausing retirement contributions during downturns may feel safe, but it reduces the benefit of dollar-cost averaging. Staying the course improves outcomes over time.
Holding an Overly Conservative Portfolio for Your Age
Credit: Getty Images
Excessive conservatism in midlife portfolios limits growth. For investors in their 30s through 50s, avoiding equities during accumulation years results in lower long-term balances, increasing the likelihood of working longer than intended.
Relying on Social Security to Cover Most Expenses
Credit: Getty Images
In August 2025, the average Social Security monthly check for retired workers was $2,008.31. For many, that’s less than half their working income. Treating it as a primary retirement strategy can lead to significant lifestyle reductions or require ongoing part-time work to close the gap.
Using Retirement Funds to Support Adult Children
Credit: studioroman
A 2023 Merrill Lynch study reports that 79% of parents with adult children provide some form of financial support. While often necessary, this practice can slow retirement savings or even reverse progress. Few parents track the cumulative impact, which can add years of additional work to recover.
Relying Too Heavily on Employer Benefits
Credit: Getty Images
Company-sponsored pensions, healthcare, or stock options are not guaranteed. Employers frequently revise or cut benefits. Building a retirement plan around these perks without additional savings creates risk if company policies or your employment status change.
Overlooking Tax Efficiency in Retirement Withdrawals
Credit: Getty Images
The IRS requires minimum distributions from tax-deferred accounts starting at age 73. Poor planning around taxable, tax-deferred, and Roth withdrawals can result in higher tax bills and increased Medicare premiums. Strategic withdrawal sequencing, especially before RMD age, can reduce overall tax burden and extend portfolio longevity.
Assuming You’ll Work as Long as You Want
Credit: Pressmaster
Nearly half of retirees stop working earlier than planned, often because of health issues or layoffs. Relying on the idea of working “just a few more years” leaves little room for surprise setbacks. A solid plan needs flexibility, not just optimism about future employment.
Failing to Update Savings Targets Over Time
Credit Aflo Images
A stagnant plan can’t meet changing realities. Sticking to savings goals set a decade ago can result in underfunding. As income, family needs, and inflation evolve, savings rates must adjust. Without periodic updates, assumptions made in your 30s may no longer support a desired retirement lifestyle by your 50s.
Not Accounting for Increased Longevity
Credit: Getty Images
The Society of Actuaries reports that a 65-year-old today has a 50% chance of living to age 90. Planning based on average life expectancy risks outliving savings. Retirement plans that fail to account for 25 to 30 years of post-work life can result in late-life financial shortfalls that are difficult to rectify.
Basing Retirement Plans on Best-Case Scenarios
Credit: pexels
Many projections assume consistent job income, strong market returns, and no major disruptions. But job loss, poor returns, or family emergencies can occur at any time. Building contingency into your retirement plan, such as conservative return estimates and buffer savings, makes it more durable under real-life conditions.