3 Retirement Mistakes That Can Cost You Thousands and How to Avoid Them

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After nearly 30 years helping others with investment and retirement planning, I have met thousands of people with unique financial stories and goals. Some are self-made entrepreneurs, some are trust-fund beneficiaries, and many are hardworking American families building their futures through dedication and discipline. I have also worked with professionals from every field, including engineers, teachers, healthcare workers, lawyers, judges, and business owners. This diversity of experience has given me a deep understanding of how financial decisions shape lives at every stage of life and income level.

When it comes to retirement planning, I approach every client with the same philosophy: long-term success is not about chasing returns; it is about maintaining balance, discipline, and emotional awareness. No matter how different people’s backgrounds or income levels are, most face the same three challenges that can quietly derail their financial security.

1. Short-Term Thinking: Fear and Greed in Disguise

The biggest causes of short-term mistakes are emotions, fear when markets fall, and greed when they rise. Many investors sell because they are afraid or buy because they are chasing returns, often without understanding how much risk they can truly take based on their own financial situation.

Benjamin Graham once said, “The investor’s chief problem and even his worst enemy is likely to be himself.” Emotional reactions can turn normal market movements into permanent losses or missed opportunities.

In my practice, I help clients replace reaction with process. Successful investing is about rebalancing, securing gains, and staying positioned for future growth on purpose, not on impulse. It means understanding your risk capacity, what you can afford to lose, your risk tolerance, what you can stand to lose, and your risk need, what return you actually require.

In real terms, that means taking profits after strong run-ups, harvesting losses to offset gains, and keeping enough cash on hand so you never have to sell at the wrong time. Investing with discipline rather than emotion turns uncertainty into opportunity over time.

2. Claiming Social Security Too Early

Many people claim Social Security as soon as they are eligible, often out of fear that benefits might run out or because they want to access the money now. But claiming early can cost thousands in lifetime income and make it harder to keep up with inflation later on.

When you delay benefits, your monthly income increases by about 8 percent for each year you wait past full retirement age, up to age 70. That higher base continues for life and helps offset rising costs.

Here is a simple example. Suppose you claim Social Security now and can easily pay your sewer and garbage bill of $100 a month. Five years later, your kids are grown and you are throwing out less trash, but the same bill is now $150 a month. Your Social Security check might only rise 2.8 percent a year with the cost-of-living adjustment, while your real expenses rise much faster.

In some cases, people who claim benefits too early also have not maximized their retirement contributions, leaving them short on savings and stressed about cash flow. This combination of lower Social Security income and limited savings can make retirement more restrictive than it needs to be.

Of course, some exceptions apply. For those facing serious health issues or terminal illness, claiming early may be the right decision. Financial planning should always reflect personal circumstances, not a one-size-fits-all rule.

As Franklin D. Roosevelt said when Social Security was first created, “We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection.” That protection works best when you give it time to grow.

Delaying Social Security while continuing to contribute to retirement accounts builds a stronger foundation that keeps pace with inflation, reduces stress, and gives you more freedom in retirement.

3. Carrying Too Much Debt into Retirement

Many retirees enter retirement with more debt than they realize, such as real estate leverage, auto loans, margin borrowing, or personal loans. Debt that feels manageable while working can become stressful once income becomes fixed.

Leverage itself is not always bad. Strategic borrowing for deductible purposes, such as real estate or business investments, can build wealth when managed wisely. The real problem lies with non-deductible debt like credit cards, car loans, and personal loans, which offer no tax benefit and often charge high interest rates. At the same time, paying for everything in cash is not always ideal either. It may feel safe, but it can reduce flexibility and liquidity, especially when unexpected expenses or inflation arise. Balance is key. Too much leverage creates anxiety, but too little liquidity can limit opportunity.

Over the years, I have seen many retirees appear comfortable on paper while still feeling uneasy. Their assets were high, but so were their liabilities. It is not about what you have, it is about what you get to keep.

That is why I review a net worth statement annually with my clients. It provides a clear view of financial health and highlights where reducing non-deductible interest can improve long-term stability. Managing debt intentionally helps simplify finances, lower stress, and build confidence.

One of my favorite quotes from Warren Buffett is, “You only find out who has been swimming naked when the tide goes out.” Managing leverage with foresight ensures that when the tide changes, as it always does, you remain secure and prepared.

At KW Wealth, I believe retirement planning is about balance, between growth and protection, emotion and discipline, short-term needs and long-term vision. Whether you built your wealth from scratch, inherited it, or earned it through years of professional work, the same core principles apply. Think long-term, make informed choices, and understand that today’s decisions shape tomorrow’s freedom. Avoid short-term thinking, be strategic about Social Security, and manage debt with intention. Doing so helps create a retirement that is financially stable, flexible, and truly aligned with the life you have worked hard to build.

Kimmy Wan

Founder and CEO of KW Wealth Management

Blog Disclaimer:

The perspectives shared in this article reflect my professional philosophy: thoughtful planning, disciplined execution, and lifelong learning. This material is for informational purposes only and should not be construed as tax or legal advice. Past performance is not a guarantee of future results. While KW Wealth Management strives to provide accurate and up-to-date information, market conditions and financial regulations may change, which may impact the relevance or accuracy of the data. Readers are encouraged to conduct their own research or consult with a qualified financial advisor before making any investment decisions. All investments involve risk, including the potential loss of principal, and past performance is not indicative of future results. KW Wealth Management is not responsible for any losses or damages resulting from the use of this information. Please contact us directly if you have questions about your individual circumstances or would like advice tailored to your personal financial situation.