6 Cash Flow Mistakes Boomers Are Making With Retirement Savings

Retirement should be a time to enjoy financial security and not stress over cash flow. That said, some common money mistakes may be putting boomers at risk.

Contents

Not Timing Your IRA Tax Withdrawals Not Thinking Through Tax Strategies Playing Safe Yet Losing Anyway Thinking It’s Too Late To Save Not Accounting for Longevity Not Investing In Income-Generating Assets

Be Aware: Avoid This Retirement Savings Mistake That’s Costing Americans Up To $300K

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Even those who have diligently saved for decades can run into trouble if they’re not managing their withdrawals, spending habits or investment strategies wisely.

From underestimating inflation to relying too heavily on Social Security, certain missteps can drain savings faster than expected. Here are some cash flow mistakes boomers are making with their retirement savings — and how to avoid them.

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Not Timing Your IRA Tax Withdrawals

A common mistake retirees make is not taking IRA withdrawals in low tax years, according to Matt Hylland, a financial planner at Arnold and Mote Wealth Management.

“If a majority of your savings is in a traditional IRA, your tax liability will likely increase as you age. This is because of RMDs (required minimum distributions) and the onset of other income, like Social Security.”

While withdrawals from IRAs are taxed as income, retirees with no other sources of income can very likely take out withdrawals at very low tax rates, Hylland pointed out.

“For example, in 2025 a 65-year-old married couple with no other income could take out $130,000 from IRAs and still remain in the 12% federal tax bracket.”

Waiting to withdraw from your IRA until you start claiming Social Security benefits can incur tens of thousands of dollars in additional tax liability each year, Hylland said.

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Not Thinking Through Tax Strategies

Waiting until you reach retirement to start figuring out your tax strategy may put you in jeopardy, Hylland said. “Many retirees have spent decades trying to defer taxes as long as they can with their 401(k)s. But once you enter retirement, your optimal strategy may very well be to prioritize IRA withdrawals, and purposely pay some taxes.”

He said retirees often use cash savings, brokerage accounts or even Roths early in retirement to keep a very low tax bill. “While that may save them some money in the short term, it can be very costly in the long term.”

The reasons are that delaying RMDs can lead to higher taxes later by pushing retirees into a higher tax bracket. Additionally, if retirees keep their taxable income too low early in retirement, they could miss the chance to convert pretax retirement savings into a Roth IRA at a lower tax rate. Lastly, Social Security benefits become taxable if the total income exceeds certain thresholds.

Playing Safe Yet Losing Anyway

Another problem is when retirees act too conservatively and fail to consider the tremendous impact of inflation in the first five to seven years of their retirements, according to Myles McHale, an adjunct professor at Cannon Financial Institute.

“High inflation early in their retirement journey will force higher withdrawals from their retirement portfolio,” he said.

Thinking It’s Too Late To Save

Another mistake is thinking that if you didn’t save enough for retirement, and now are at least 55 or older and staring at retirement directly in the face, that you don’t have any options, McHale said.

However, retirees in this position can still make headway by working longer, increasing their saving rate and delaying claiming Social Security benefits for as long as possible.

Not Accounting for Longevity

McHale said many boomers don’t realize that they could spend more years in retirement than they did working.

“Longevity will be the biggest factor impacting boomer retirees,” he said. He recommended they start working with advisors who can build holistic strategic plans, no matter what stage of retirement they’re at, a process his institute refers to as “aging with grace.”

He explained that a plan of that kind can cover such important elements as:

Applying financial wellness principles to develop comprehensive transition plans for aging.
Identifying and addressing key risk factors, including diminished capacity, elder abuse and family dynamics.
Demonstrating effective communication techniques for conducting difficult conversations with family members.
Developing and implementing practical solutions for housing, transportation and safety needs.

Not Investing In Income-Generating Assets

While it’s all well and good to save money for retirement, it’s even better in the long run to invest in income-generating assets that can provide a steady stream of income, according to Jared Hubbard, the fintech product manager at investing app Plynk.

“This may include dividend-paying stocks, money market funds or bonds. When in doubt, do your research,” he said.

Financial education tools can help determine what may be the best level of risk for your financial plan and ensure your investments seek to align with your retirement goals.

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