6 financial mistakes to avoid in retirement planning

The biggest financial mistakes in retirement include not having a plan, paying unnecessary tax, taking too much investment risk and overlooking future care costs. Knowing what these pitfalls are - and how to avoid them - can help you make your retirement savings last and give you greater peace of mind.

Retirement can be a rewarding and restful phase in life, but it usually requires a bit of financial planning to help you transition into this new chapter with your best financial foot forward.

In this article, we outline some of the most common money mistakes made in the lead-up to or during retirement, and what you can do to avoid them. By taking a few steps to avoid these pitfalls - such as careful tax planning and claiming benefits you're entitled to - you should be all set to enjoy a secure and worry-free retirement.

Mistake #1. Not having a plan

Having a concrete financial plan is the most important thing you can do in the run-up to retirement. It can seem far away when you’re caught up in the day to day, but when it's time to officially retire, you’ll want to know if you've got enough savings to live off and how long they will last you.

But retirement planning isn’t solely about saving up either. It's also about envisioning the kind of lifestyle you want and creating a framework to help you achieve it. Do you see yourself mainly home-based, spending time with family and friends? Or are you itching for adventure, like lavish holidays or a luxury cruise?

Without a plan, you might not be able to afford your retirement goals. You run the risk of running out of money – or not having enough in the first place. So although it can be tempting to put off retirement planning until the last minute, it’s crucial to start early to make sure you understand what you’re on track for and what you can do to improve if you’re falling by the wayside.

Ultimately, having a robust plan in place means you can sleep better at night knowing it’s all sorted. This can make a world of difference to your mental health as well as your financial security - whether you’re years away from retiring or it's right around the corner.

So how do you plan for retirement? The answer depends on where you stand in your retirement journey...

💰 If you're still saving up

You’ll need to think about what your ideal retirement looks like so you know how much money you’ll need. Use our retirement income calculator to assess your current savings and see how far they'll get you. Find out if you're on track, if you've still got some gaps to fill, and what you can do to match your money to your mission. You can also read our five top tips if you're just starting to save for retirement.

📆 If you're nearing retirement

If retirement is on the horizon (within, say, the next 10 years), it’s time to start making concrete arrangements. It's generally recommended to get professional financial advice during this phase to ensure you're on the right track, you're making the right decisions with large amounts of money, and to get a helping hand with all the paperwork! You can also check out our expert pointers to help you prepare for retirement.

Mistake #2. Not claiming benefits you're entitled to

Next up, another common financial mistake in retirement is not claiming any/all benefits that you’re entitled to. Numerous benefits exist for retirees, ranging from Council Tax reductions to healthcare support. Failing to claim these entitlements can mean you miss out on opportunities for financial help and could even reduce your quality of life in retirement. 

This is not an exhaustive list and there are many more which retirees may be eligible for. Some benefits are age-related, meaning your eligibility is based on your age and you will need to meet the minimum threshold to qualify. Others, however, are means-tested – such as Pension Credit – which stipulate that your income must be below a certain amount in order to be eligible.

To find out more about benefits for the retired, whether or not you may qualify and how to apply, make sure you read our article ‘What can you claim after you retire? 13 UK benefits explained’ for a full breakdown. Just click the link below to dig in.

Mistake #3. Not adjusting your risk level

At retirement, many people shift their investment goals from generating growth (to grow their pot) to preserving their wealth and generating a consistent income. After all, once you leave work for good, you’re relying on your savings and investments to keep you going – so it makes sense that you want to keep this money safe and stable.

The level of risk

in your investment portfolio is one of the most pivotal factors in determining how reliable your retirement income is. Your ‘risk level’ refers to the amount of uncertainty or potential for financial loss associated with your investments.

When it comes to your retirement savings, the goal is typically to strike a balance between keeping your savings safe and ensuring you have a steady income while minimising the risk of substantial losses. A portfolio with too many volatile

– 'high risk' - investments could see its value move up and down significantly or at short notice, which isn’t ideal if you’re relying on it to keep the lights on!

Taking care to adjust your portfolio’s risk level is an important step in making sure you keep your retirement savings safe, both from the potential for stock market loss and the eroding power of inflation

.

But how do you do this? For many people, it’s a sensible idea to consult with a professional adviser in the run-up to or during your retirement to get expert advice. They will be able to guide you towards the right blend of investments to meet your financial goals and ensure you minimise the risk of losing large amounts of money.

You can opt to contact a financial adviser the traditional way, working alongside them to craft the perfect retirement portfolio. Or you can make use of the newer, fixed-fee packages which are designed to help you prep your portfolio for retirement for a one-off charge. Either way, making any significant changes to your investment portfolio can have a meaningful impact on its value, so it’s always a good idea to contact an expert before doing so.

Mistake #4. Making knee-jerk decisions

It’s easy to feel stressed about money in today's political environment. From frozen allowances to CGT cuts to upcoming Inheritance Tax tweaks, it seems like every few months, the government is changing its own policies and making it even harder to see the wood for the trees.

But reacting impulsively to rumours or news of policy change - like moving large chunks of money out of your pension, cashing in early, or drastically reshuffling your investments - can backfire badly.

Nevertheless, many Brits have been moving their money around in anticipation of upcoming changes (and some that haven't even been confirmed) ahead of the Autumn Budget.

The FCA reported that pension withdrawals increased by 36% in the last year alone, amid concerns over IHT kicking in on pensions from 2027 and rumours of a change to the 25% tax-free lump sum. The overall amount withdrawn from UK pension pots increased to £70.1bn in 2024-25, up significantly from £52.2bn in 2023-24.[1]

This uncertainty around the impact of government policy on peoples' finances is widespread and growing. In fact, Boring Money found it is the third most common trigger for seeking financial advice (behind retirement planning and deciding on how to access your pension) and is an especially common dilemma for those looking for a one-off, fixed-fee advice service.[2]

If you're concerned you need to change your pension and/or retirement plans as a result of upcoming changes - or even rumours of what may be in store - it's crucial to seek professional finance advice. After all, you've spent a lifetime saving it up, so it's essential to protect your pot and make informed decisions about your money.

Mistake #5. Not planning for tax

As mentioned above, one of the most important elements of retirement planning is tax. Ignoring tax and its implications can lead to significant financial setbacks – and when you’re already retired and living off your savings, you don’t want to be paying large amounts to the taxman that you didn’t actually need to.

During your working years, you might have saved money into various accounts like personal pensions (also called ‘SIPPs’), workplace pensions, ISAs, or other savings and investment accounts. Each of these may have different tax implications when you come to withdraw your cash.

Tax can be a notoriously tricky (and ever-changing) topic, so here’s a brief summary of three of the main taxes you should know about if you’re nearing or already retired.

Income Tax

Income Tax is one of the primary taxes that you still have to pay after you’re retired. For example, after an initial 25% tax-free lump sum, withdrawals from a SIPP once you’ve retired are subject to Income Tax. This is also the case for annuities. In addition to this, although ISAs can shield your cash interest and/or investment returns from tax, the contributions you make are taken from your taxable income so will still count towards your Income Tax liability.

Capital Gains Tax

This often-overlooked tax still applies to your investments even if you’re retired. Anyone investing outside of a tax-efficient investment account, such as an ISA, may be liable to pay Capital Gains Tax (CGT) if their returns exceed the annual threshold – which is £3,000 for the 2025-26 tax year. CGT is charged at different rates depending on your usual tax bracket, but can be as high as 24% for higher rate taxpayers investing in shares. The easiest way to reduce this is to invest through an ISA, where you can tuck away up to £20,000 every year without paying any tax on earned returns or dividends.

Inheritance Tax

Another costly and poorly-understood tax is Inheritance Tax (IHT). This one isn't actually paid by you, but by your family or loved ones when they inherit your possessions after you die. However, the bill can be as high as 40% on qualifying assets (!).

The good news is that there are some things you can do to reduce your IHT bill or ensure that you don't need to pay it at all. This involves reducing the size of your estate

below the qualifying threshold and/or gifting assets to your loved ones up until the 7 years preceding your death.

Mistake #6. Not accounting for care costs

Finally, another money mistake to avoid in retirement is not accounting for care costs. We’re all living longer these days and many of us develop chronic health conditions along the way, which may eventually require some form of nursing or residential care.

Planning for this care and its associated costs is seldom a cheerful conversation, but it's often a very necessary one. Healthcare costs tend to rise with age, and long-term care expenses can drain your retirement savings quickly.

The average cost of a care home in the UK in 2025 is around £1,291 a week. This increases to roughly £1,545 per week if nursing care is required.[3] However, these are only average figures and the real costs can differ widely depending on where in the UK you are and the level of care you need.

Average weekly care costs by region

Source: carehome.co.uk, June 2025.

Incorporating provisions for care costs into your retirement plan is a sensible step to make sure you’ve got enough set aside to pay for it if necessary. This can be discussed as part of a tailored retirement plan with a financial adviser, taking into account factors such as how much you have in savings and the likelihood that your health could deteriorate during your retirement. There are also dedicated charities that can assist you with planning for care costs, including Age UK and Independent Age.

Remember though, you can get a head start by incorporating care costs into your retirement plan and have a qualified financial adviser guide you through the best way to do this for your unique circumstances.

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[1] FCA, September 2025

[2] Boring Money, September 2024

[3] carehome.co.uk, August 2025