After a 45-year career, this is the summer of John! Your first summer of freedom since you were a college student.
I know you've got a long bucket list with faraway destinations begging to be crossed off. You've got a home that's desperate for upgrades and a fresh coat of paint. Your grass is finally going to be greener than Bill's next door. Seven Saturdays, baby!
Take a minute. Breathe.
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It's easy to make mistakes early on that will have negative impacts far down the line, both financially and emotionally.
The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.
These are the five mistakes I frequently see people making in their first year of retirement.
1. Large lifestyle purchases
In the past 16 years, I have seen thousands of people through the retirement transition. I have thousands more, who are not clients, using our financial planning software.
What I have seen again and again is the desire to make a big purchase immediately after retirement. Maybe it's an RV to drive across the country. Maybe it's that red Corvette. Maybe it's a home renovation.
The problem is that this increases the threat of "sequence of return risk." In plain English, that's timing risk. What if you retire into a down market? What if you do that, plus you take a big withdrawal to fund your big purchase?
If the RV is nonnegotiable, try to move the purchase up into your working years so you can pay for at least a chunk of it from your income.
2. Tapping retirement accounts, including Social Security
The timing risk I just mentioned is a factor in tapping retirement accounts, but here, I am mostly approaching this from a tax perspective. If you can delay tapping your retirement accounts and Social Security for the first few years of retirement, your tax rates will fall off a cliff.
In my most recent trip to Costco, Spindrift was on sale. This wouldn't excite the average person, but as someone with three young kids who consume this on a delicious sparkling water on a daily basis, I was very excited and stocked up.
Just as it makes sense to stock up on goods when they go on sale, it also likely makes sense to prepay those taxes when they go on sale.
Think of the first few years of retirement as a tax sale. You can pay now at lower rates than you likely will later. You do this via Roth conversions or recognizing capital gains at lower rates.
We use a financial planning software to run a tax projection for all prospective and current clients. This helps us determine if rates actually are lower today than they will be tomorrow. It also tells us which accounts to tap when.
You can access a free version of that software online.
3. Sticking with the same investment strategy
In 2019, I ran a marathon. In 2025, I threw out my back after three days of a 30-day burpee challenge. Many things need to be adjusted as we age. Your investment strategy is one of them.
Most people will tell you that investments should get more conservative as you age. That idea is why there's a massive number of retirement investors (I'm looking at you) in target-date funds.
Those are the mutual funds in your 401(k) that get more conservative as you get closer to the target date. Research supports this for the first part of your retirement but actually shows you should get more aggressive after the first five to 10 years of retirement.
Whether you can stomach increasing the volatility in your portfolio at 80 is a different question.
I believe that all retirees should be more focused on an income plan than an investment plan. That looks more like this:
- I am going to tap this bucket of money for the first two years of retirement and therefore it should not have market exposure.
- I am going to tap this bucket to cover expenses between retirement and Social Security. That period is seven years, so I am going to invest this way for that bucket.
- This money will cover expenses beyond what I get from Social Security. That's more than seven years, so I am going to take a bit more risk here.
This seems like common sense, but I can count on two hands how many people I have seen with an income plan in the last 16 years. In a forthcoming column, I'll walk you through how to build your own income plan.
4. Not maintaining relationships
I spent six years at my first firm. Eight years at my second. Despite the 40-plus hours I spent with my colleague at each, the easiest thing to do would have been to just lose touch. They are continuing their lives, and I am on to something new.
To keep those relationships takes effort. I have always found it to be worthwhile.
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The same thing happens when you retire, but on a further diverging path. Those colleagues are most likely still working and still occupied from nine to five.
Multiple studies have shown relationships and health to be the top two drivers of happiness in retirement. So, plan lunches, plan happy hours. Get together on the weekends. You don't want to miss out on that work drama!
5. Not creating a daily routine
When you talk to anyone who just got back from that bucket-list trip, the story is always the same. "It was the trip of a lifetime, but it feels really good to be home." Why? Humans need routine and structure to thrive.
Work gives us relationships, identity and structure. When you reach a senior position, that structure is largely created for us as team members fill our calendars. You now have that power. Make sure you fill it with things that bring you joy.
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