15 Retirement Account Mistakes That Cost Boomers $340,000 (Financial Advisors Finally Speaking Out)

Financial advisors are speaking out about a single, devastating planning gap. Fidelity’s 2025 data shows it could cost the average 65-year-old couple $345,000.

That number isn’t a stock market loss. It’s the estimated cost of healthcare in retirement.

Underestimating this one expense is just the tip of the iceberg. For Baby Boomers, the “golden years” are threatened by a minefield of retirement account mistakes, complex tax laws, and stubborn inflation.

We’ve cut through the noise. This article pulls together data from 2025, advice from top experts, and the warnings financial advisors are giving their clients.

We will expose the 15 most costly 401k IRA errors and provide the actionable, no-nonsense guide to fixing them.

1. Ignoring Your “Tax Time Bomb” (Pre-Tax IRAs/401ks)

Many retirees see their $1 million 401(k) or IRA balance and think they have $1 million. The hard truth is, you don’t. You have a large IOU to the IRS, and every dollar you pull out will be taxed as ordinary income. IRA Expert Ed Slott famously calls this a “ticking tax time bomb” because you have deferred the tax, not avoided it.

Failing to plan for this tax bill means a huge, unexpected portion of your savings will go to the government instead of to you, wrecking your retirement budget before it even starts.

• Identify your “golden window”: This is the period after you retire (and your income drops) but before RMDs start at age 73.
• Plan strategic Roth conversions: Use these lower-income years to convert portions of your traditional IRA to a Roth IRA.
• Pay taxes now, not later: You’ll pay taxes on the converted amount now, likely at a much lower tax bracket than you’ll be in once RMDs force you into a higher bracket.
• Create tax-free income: All future withdrawals from that converted Roth IRA money will be 100% tax-free, including the growth.

2. Misunderstanding 2025 RMD Rules

The rules for Required Minimum Distributions (RMDs) are not just suggestions; they are federal law. Following the SECURE Act 2.0, the age to start RMDs is now 73. The penalty for failing to take your full distribution is a steep 25% of the amount you should have withdrawn.

As IRA expert Ed Slott notes, the rules got even more complex in 2025, especially for some inherited IRAs. Simply forgetting or miscalculating your RMD is one of the fastest ways to give a huge chunk of your savings directly to the IRS for no reason.

• Know your deadline: Your RMD must be taken by December 31st each year (after your first one).
• Calculate the amount now: Don’t wait until the last minute. Use the IRS worksheet or your account provider’s calculator.
• Set an automated withdrawal: The safest move is to set up an automatic RMD withdrawal with your IRA provider for sometime in November.
• Check inherited accounts: If you have an inherited IRA, double-check the 2025 rules for it, as they are different and very complex.

3. Accidentally Triggering an “IRMAA” Medicare Spike

It is a nasty surprise that hits retirees two years after the fact. You decide to take a large, one-time withdrawal from your IRA to buy a new car, pay for a wedding, or take a big vacation. That withdrawal spikes your income for that one year.

This triggers the Income Related Monthly Adjustment Amount, or IRMAA. The government then uses that high-income year to set your Medicare premiums, and your Part B and Part D costs can skyrocket two years later, costing you thousands.

• Plan large purchases: Never take a large IRA withdrawal without considering the tax and Medicare impact.
• Spread withdrawals: If possible, spread a large withdrawal across two separate tax years (e.g., December and January) to keep your income lower in both.
• Use different “buckets”: If you have money in a Roth IRA or a regular (taxable) brokerage account, use that for the large purchase, as it won’t raise your “income” for IRMAA purposes.
• Know the brackets: Look up the 2025 IRMAA income brackets to see exactly what income level triggers the higher premiums.

4. Claiming Social Security Too Early

Claiming your Social Security at age 62 “just because you can” is a permanent pay cut for the rest of your life. Data from Morgan Stanley and others is clear: claiming at 62 (instead of your Full Retirement Age) means a permanent 30% reduction in your benefits. But if you wait until age 70, you get a 32% boost.

That’s a massive difference in your lifetime income. For many, this is the best and only “guaranteed” investment return they can get, and they give it up for a few extra years of smaller checks.

• Know your exact numbers: Log in to your personal account at ssa.gov/myaccount. It will show you your benefit at age 62, your Full Retirement Age (like 67), and age 70.
• Calculate your “break-even” point: See how long you’d have to live for the larger, delayed check to be worth more than the smaller, earlier checks.
• Plan as a couple: The decision is even more important for married couples. The higher-earning spouse waiting to claim can maximize the “survivor benefit” for the other.
• Don’t claim “just because”: Have a real reason, like poor health or a need to let your own investments grow, not just because the money is available.

5. Having No Spousal/Survivor Plan

Many couples plan their finances together, budgeting for two Social Security checks and a pension. But they often fail to plan for what happens when one of them dies. The income change can be shocking and immediate. Advisors list this as a top planning gap.

The higher of your two Social Security benefits remains, but the lower one disappears. The same can happen to pensions if you chose a “single-life” option. Suddenly, the household income can be cut in half, leaving the surviving spouse in a terrible financial position.

• Review pension options: Before you retire, review your pension’s “survivor benefit” options (e.g., “joint-life” vs. “single-life”).
• Optimize Social Security: As mentioned, plan your Social Security strategy around the higher-earning spouse. Their benefit is the one that will last for the survivor.
• Check life insurance: Ensure you have enough life insurance to cover any income gap that would be left if one spouse passes away.
• Organize all accounts: Make sure both spouses know where all the accounts, passwords, and legal documents are.

6. Being Too Conservative (Losing to Inflation)

When the market gets choppy, it’s tempting to flee to the “safety” of cash, money markets, or CDs. But this isn’t safe at all. Your money’s purchasing power is actively eroding every single day. A 3% inflation rate, which is the historical average, will cut the value of your money in half in just 24 years.

Your “safe” money is actually guaranteed to lose value over time. You are protecting yourself from a market loss but guaranteeing a loss to inflation.

• Keep 1-2 years in cash: It’s smart to have your near-term expenses (12-24 months) in cash so you never have to sell stocks in a down market.
• Invest the rest: The rest of your money must be invested to at least pace, and hopefully beat, inflation.
• Include inflation-hedges: Consider assets that tend to do well with inflation, like stocks (which can raise prices) and TIPS (Treasury Inflation-Protected Securities).
• Think in “purchasing power”: Don’t ask, “Is my $500,000 safe?” Ask, “Will my $500,000 be able to buy as much in 10 years as it does today?”

7. Being Too Aggressive (Facing “Sequence of Return Risk”)

Being too conservative is one ditch; this is the other. Many Boomers are still holding 80% or 90% in stocks, just as they did in their 40s. This is incredibly dangerous at the start of retirement. Retiring into a bear market while holding this much risk can be a portfolio-ending catastrophe.

Planning expert Michael Kitces calls this the “Sequence of Return Risk.” The danger is the combination of bad returns in your first few years plus withdrawals at the same time. This combination can cripple a portfolio permanently, even if the market rebounds later.

• “Bucket” your money: This is a key strategy. Work with an advisor to set up “buckets” for your money.
• Bucket 1 (Short-term): 1-3 years of your living expenses in cash or ultra-safe bonds.
• Bucket 2 (Mid-term): 4-10 years of expenses in a balanced mix of bonds and some stocks.
• Bucket 3 (Long-term): Money you won’t need for 10+ years, which can be more aggressively invested in stocks for growth.

8. Paying High & Hidden Investment Fees

A “small” 1% management fee from your advisor or mutual fund doesn’t sound like much. But it is a guaranteed loss that compounds against you every single year. This is not a 1% fee on your gains; it’s 1% of your entire balance.

Let’s use real numbers: the median Boomer has $270,000 saved, according to the Transamerica Institute. A 1% fee on that (versus a low-cost 0.1% fee) will cost you over $60,000 in 20 years. You are giving away a huge part of your nest egg for no reason.

• Find your fees: Use a free online fee analyzer tool or check your account statements for the “expense ratio” of your funds.
• Switch to low-cost index funds: You can buy ETFs or mutual funds that track the S&P 500 or total stock market for as little as 0.03%.
• Understand advisor fees: If you use a human advisor, know how they are paid. A “fee-only” fiduciary is legally bound to act in your best interest.
• Cut the “AUM” fee: An “Assets Under Management” (AUM) fee of 1% is very high. Challenge it or find a new advisor.

9. Ignoring Inflation in Your Plan

Many people build a “perfect” retirement plan where they live on $5,000 a month. They test it against market crashes, but they forget the most certain risk of all: inflation.

Your $5,000-a-month budget will feel like $2,500 a month in 20 years. Look at the Genworth 2025 Cost of Care data: a $5,900/month assisted living facility today will cost an estimated $10,660/month in 20 years, assuming 3% inflation. Your plan will break.

• Build in an “inflator”: Your retirement plan must include an inflation adjuster of at least 3% for all of your expenses.
• Stress-test your plan: Ask, “What if inflation runs at 5% for three years? Does my plan still work?”
• Invest for growth: This is another reason (see Mistake 6) why you can’t just be in cash. Your investments must grow faster than inflation.
• Adjust your withdrawal rate: A “4% rule” that doesn’t account for high inflation years will fail.

10. Not Rebalancing Your Portfolio

You were smart and set a “balanced” 60/40 portfolio (60% stocks, 40% bonds) back in 2015. But after a long bull market, your stocks have grown much faster than your bonds. Your portfolio is now “accidentally” 80% stocks and 20% bonds. This is called “allocation drift.”

It means you are taking on far more risk than you intended. You have become a high-risk investor without even knowing it, making you a prime target for “Sequence of Return Risk” (Mistake 7).

• Set a rebalancing date: Choose one day each year like your birthday or New Year’s Day to check your allocations.
• Sell high, buy low: Rebalancing forces you to do what you’re supposed to do: sell some of the (stock) assets that have grown and buy more of the (bond) assets that haven’t.
• Use auto-rebalance: Many 401(k)s and robo-advisors offer an “auto-rebalance” feature that does this for you.
• Don’t “time the market”: This is not market timing. It’s a disciplined, non-emotional strategy to return your portfolio to its original risk level.

11. The $345,000 Mistake: Underestimating Healthcare

It is the anchor mistake that can sink an entire plan. Many people assume Medicare is free or that it will cover all their health costs. It is not, and it does not. Fidelity’s 2025 Retiree Health Care Cost Estimate is $345,000.

That is the staggering amount a 65-year-old couple will need just for their premiums, co-pays, and deductibles during retirement. This number does not even include most dental, vision, hearing, or any long-term care. Ignoring this number is not a strategy; it’s a financial time bomb.

• Have a dedicated “healthcare” bucket: You must have savings earmarked specifically for these costs.
• Use an HSA (if eligible): If you are still working and have a high-deductible health plan, a Health Savings Account (HSA) is the best tool, offering a triple tax advantage.
• Budget for premiums: Even if you’re healthy, you will pay premiums for Medicare Part B and Part D (or an Advantage plan).
• Plan for the gaps: Remember to budget separately for dental, vision, and hearing aids, as Medicare does not cover these.

12. Assuming Medicare Covers Long-Term Care

It is the single biggest financial risk for most Boomers, and the misunderstanding is total. Let’s be perfectly clear: Medicare does not pay for long-term care. It does not cover an assisted living facility or a long-term nursing home stay.

The Genworth/CareScout 2025 data shows a private room in a nursing home costs a national median of $10,646 per month. That is over $127,000 per year. An extended stay will drain a multi-million dollar estate in just a few short years, wiping out a lifetime of savings.

• Have “the talk” now: You must have a conversation with your spouse and your children about what you want and what your plan is.
• Research modern LTC insurance: The old policies were expensive. New “hybrid” life/long-term care policies are more flexible and popular.
• Consult an elder law attorney: They can discuss asset-protection strategies, but you must do this years before you need care.
• Do not “hope it won’t happen”: Hope is not a strategy. This is the one risk that can bankrupt an entire family.

13. Carrying Debt into Retirement

A mortgage payment, a car loan, and credit card balances are a massive burden in retirement. They are a fixed expense on a fixed income. Every dollar you spend on interest is a dollar you can’t spend on travel, healthcare, or your grandkids.

Advisors on sites like Nasdaq list this as one of the top regrets for new retirees. A variable-rate credit card debt combined with a fixed income and rising inflation is a recipe for stress and financial failure.

• Create a “debt elimination” plan: In the 3-5 years before you retire, make it your primary goal to pay off all debt, starting with high-interest credit cards.
• Pay off the mortgage (if possible): While mortgage rates can be low, the psychological and cash-flow benefit of eliminating your house payment is enormous.
• Stop borrowing: Make a rule to not take on any new debt (like a car loan) in the five years leading up to retirement. Pay cash or wait.
• Reduce your “fixed” costs: Retiring debt-free is the single best way to lower your monthly expenses, making your nest egg last decades longer.

14. Not Updating Your Beneficiaries

It is the simplest, most common, and most devastating administrative error an advisor sees. You might have an ex-spouse from 30 years ago still listed on your 401(k), or a child who has since passed away. Here is the critical, non-negotiable legal fact: A beneficiary form overrides your will.

It does not matter what your will or trust says. The money in that account will go directly to the person named on that form, which can lead to legal nightmares and disinherit the people you love.

• Do this right now: Stop reading and log in to your accounts. This is a 5-minute fix that can save your family years of pain.
• Check all accounts: This includes your 401(k), IRAs, life insurance policies, and even some bank accounts (POD/TOD).
• Review both primary and contingent: Your primary beneficiary gets the money first. The contingent (or “secondary”) beneficiary gets it if the primary is already deceased.
• Update after life events: Make this part of your checklist after any major life event: a death, a birth, a marriage, or a divorce.

15. Having No Written Plan at All

You have “a feeling” you have enough money. You have some numbers in your head and a general idea of your accounts. But you do not have a written plan. This one mistake is the root cause of all the others.

A 2024/2025 Transamerica Institute study found that only 27% of Baby Boomers have a written financial strategy for retirement. Without a written plan, you are just guessing about your fees, your withdrawal rate, your healthcare costs, and your tax bill.

• Start with a simple budget: A plan doesn’t have to be 100 pages. Start by writing down your expected monthly expenses.
• List your income sources: Write down your Social Security, any pensions, and what you plan to withdraw from your savings.
• See if they match: This simple “income vs. expenses” check is the first step to a real plan.
• Get a professional review: Take your simple plan to a fee-only, fiduciary financial advisor. They can “stress test” it and help you fix the 14 other mistakes on this list.