Apr 13, 2026
The typical retirement lasts 18.6 years (1); however, like all long journeys, the first few steps are absolutely critical.
The first five years of your retirement can either set the course for a comfortable golden period or put you in an uncomfortable financial position that may be difficult to recover from. The good news is that with a little bit of planning and preparation, you can greatly reduce the risk of going off-course in the first phase of your retirement.
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Here are the crucial mistakes that you should watch for and avoid whenever possible.
Mistake #1: Claiming Social Security at the wrong time
The timing of your Social Security claim is absolutely pivotal. Most people born after 1960 can claim benefits as early as age 62, but doing so reduces their benefits by up to 30% (2). Waiting until Full Retirement Age (FRA) helps you receive 100% of the monthly benefit you’re entitled to.
Delaying further, to age 70, can boost your benefits by another 24% through delayed retirement credits (3).
You only get one shot at this, so carefully consider your household budget, longevity expectations, and overall retirement plan before claiming this lifelong stream of monthly income.
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Mistake #2: Poor tax planning
The first five years of retirement can be a critical tax-planning window, especially if you retire early and delay claiming Social Security benefits.
A few years in a lower tax bracket can allow you to convert some of your 401(k) or traditional IRA savings into a Roth IRA — a strategy known as Roth conversions. (4) Done strategically, this can reduce your lifetime tax bill and lower the impact of required minimum distributions (RMDs) in your 70s.
Ignoring these opportunities or failing to plan taxes carefully in early retirement can create ripple effects that increase your tax burden later in retirement.
Mistake #3: Squandered healthy years
It’s highly likely that the first few years of your retirement will also be your healthiest.
The average American's health-adjusted life expectancy (HALE) at birth is approximately 63.9 years, according to the World Health Organization (WHO)(5). That means if you retire at age 60, you might have less than four years in full health.
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If you’re planning to kayak in Australia or bungee jump in Mexico, it may make sense to tackle these bucket-list experiences in your early 60s rather than waiting until your 70s or 80s. In other words, don’t delay the activities that require the most physical ability.
Read More: Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
Mistake #4: Not planning for medical costs and long-term care
Long-term care and medical costs can be significant, and many retirees’ plans for covering these expenses don’t align with reality. That’s according to a study by the Center on Retirement Research at Boston College.
For households with at least $100,000 in assets, some expect to qualify for Medicaid after spending down their savings. However, the data suggests only about 15% of these households actually qualify for Medicaid after age 65, and many ultimately rely on home equity or other assets to cover care costs later in life (6).
This means significant life changes and financial stress in your 70s and 80s. A more prudent approach is to create a realistic plan for medical and long-term care needs, potentially with the help of a financial professional.
Mistake #5: Neglecting sequence-of-return risks
Everyone knows markets can be volatile. But a market downturn early in retirement can have lasting consequences. This is called sequence-of-returns risk, and it’s often a major threat to retirement portfolios.
Fortunately, there are ways to mitigate the risk. U.S. Bank suggests creating separate “buckets” for different stages of retirement (7). For example, you might keep several years of spending in cash or low-risk assets, allowing the rest of your portfolio time to recover from market downturns without needing to sell investments at a loss.
Bottom line: the first five years of your retirement can set the tone for the decades that follow. Planning ahead and making thoughtful financial decisions can help reduce risks before you enter this crucial phase.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Guardian Life (1) ; Social Security Administration (SSA) (2,3) Fidelity (4); World Health Organization (WHO) (5); Center for Retirement Research at Boston College (6); U.S. Bank (7)
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
