Don't Make This Common Retirement Mistake: As Life Changes, So Should Your Strategy

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One of the biggest retirement planning mistakes people make is trying to use the same strategy throughout every stage of life.

The reality is, what works in your 40s likely won't work in your 60s. As life changes, your retirement planning approach should, too.

Breaking retirement planning into four distinct phases can help bring clarity to what matters most — and when.

1. The accumulation phase

This phase is all about building. You're working, earning income and setting money aside for the future.

But here's where many people fall short: They either aren't saving enough, or they're putting everything into one bucket — usually a traditional 401(k).

While 401(k)s are a great tool, relying on them alone can create challenges later, especially since withdrawals are fully taxable. Many employers now offer a Roth 401(k) option, which allows you to contribute after-tax dollars and take tax-free withdrawals in retirement.

Having a mix of pretax and after-tax savings can give you much more flexibility when it comes time to create income.

You can also consider additional vehicles like Roth IRAs or brokerage accounts to further diversify your tax exposure.

If you're self-employed, you may have even more opportunities — like SEP IRAs, solo 401(k)s or defined benefit plans.

The key in this phase isn't just how much you save — it's where you save it.

2. The planning and preservation phase

As you get closer to retirement, the focus starts to shift. Now it's not just about building wealth — it's about protecting it.

Too many people ride the market roller coaster right up to retirement, hoping things work out. But a major downturn in the final years before retirement can significantly impact your future.

This is where risk management becomes critical.

But preservation isn't just about reducing risk — it's also about building a plan.

That includes:

• Creating a year-by-year income strategy
• Planning for taxes and inflation
• Preparing for health care costs
• Accounting for required minimum distributions (RMDs)
• Setting aside funds for unexpected expenses

It's also the time to consider protection strategies for long-term care and ensuring a surviving spouse is financially secure.

3. The distribution phase

This is retirement — the phase you have been saving your whole life for. Now the focus shifts to turning your savings into a reliable income stream.

At this stage, continuing to manage risk is important, but so is how you withdraw your money.

You don't want to be forced to pull funds from market-based accounts during a downturn. That's why having a portion of your assets in more stable vehicles can make a big difference.

These funds can act as a buffer for unexpected expenses or market volatility.

The goal here is simple: Create a steady, dependable "paycheck" in retirement — without unnecessary risk.

4. The legacy phase

For many people, leaving something behind for your family is important — but it shouldn't come at the expense of your own security.

Your first priority should always be making sure you don't run out of money.

That said, how you leave money matters.

For example, traditional IRA assets passed to non-spouse beneficiaries can create a tax burden. On the other hand, Roth IRAs can offer tax-free distributions if certain conditions are met.

Other tools — like annuities, stocks with a step-up in basis or life insurance — can also play a role, each with different advantages, depending on your goals.

The key is being intentional. A well-structured plan can help you leave a meaningful legacy without creating unnecessary complications for your loved ones.

Dan Dunkin contributed to this article.

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