When you retire, you’ve worked your whole life to build that nest egg — but how you withdraw that money can make or break your retirement.
Unfortunately, many retirees make the same avoidable mistakes that lead to tax penalties, lost growth, and even running out of money too soon.
Let’s go over the top mistakes — and how to avoid them — so you can enjoy a stress-free, guaranteed income for life.
Need help choosing the best annuity for your unique situation? Have questions about getting an annuity? If so, it’s best to speak with an annuity specialist. Watch this short video to see how I can help you do this (at no cost to you!)
Tip: See how much an annuity could pay you using our annuity calculator.
Taking Money Out Too Early
If you withdraw from an IRA or 401(k) before age 59½, you’ll usually pay a 10% early withdrawal penalty — on top of income taxes.
💡 Pro Tip: If you leave your 401(k) with your employer, you may be able to withdraw starting at age 55 penalty-free. But once you roll it over, that option disappears.
👉 Want guaranteed income options that don’t lock you in until 59½? Schedule a free consultation call
Borrowing from Your 401(k) Without a Repayment Plan
During tough times — like 2008 or COVID-19 — many people borrowed from their 401(k)s but never paid it back.
When you fail to repay, it becomes a taxable distribution and can derail your long-term goals.
Even small loans add up and can seriously cut into your retirement income later.
Following the “4% Rule” Blindly
The old “4% safe withdrawal rate” rule worked decades ago — but not anymore.
Markets have changed, inflation has risen, and lifespans are longer. Many financial experts now say the safe rate is closer to 2–3%.
But let’s be honest — most retirees can’t live on that.
✅ A better option: Fixed indexed annuities can provide guaranteed lifetime income with effective withdrawal rates of 5–7% or more, depending on your age and deferral period.
Ignoring the Sequence-of-Returns Risk
If you start withdrawing during a market downturn, your portfolio can shrink faster than expected — even if the market later recovers.
This is called sequence-of-returns risk, and it’s one of the biggest threats to retirees today.
An annuity helps remove that risk by guaranteeing income no matter what the market does.
Forgetting About Inflation
Even if you plan carefully, inflation quietly erodes your spending power every year.
If your income stays the same while prices rise 2–3% annually, you’ll feel the squeeze within just a few years.
💡 Pro Tip: Consider splitting your assets — use part for guaranteed income (like annuities) and keep part invested for growth to help offset inflation.
Poorly Timed Roth Conversions
Roth conversions can be powerful — but mistimed, they can trigger big tax bills and long “five-year rule” waiting periods before you can touch the money tax-free.
Sometimes the break-even age doesn’t make sense if you need income sooner rather than later. Always run the numbers first.
👉 Want to know if a Roth conversion works with your annuity plan? Click here to book a strategy call.
Ignoring Required Minimum Distributions (RMDs)
Many retirees don’t realize that the IRS forces withdrawals from 401(k)s and IRAs once you hit your early 70s (currently age 73).
If you miss one, the penalty can be 25% of the amount you should’ve withdrawn.
That’s a costly mistake that’s easy to avoid with proper planning.
Underestimating Longevity Risk
The biggest unknown in retirement? How long you’ll live.
Outliving your money is a real risk — and it’s happening more often as people live into their 90s and beyond.
That’s where annuities shine. They’re the only financial product that can guarantee income for life, even if you live to 110.
Guaranteed Income from a $600,000 Annuity
Let’s say a married couple, both age 60, invests $600,000 into an annuity and defers income until age 65.
- After 5 years, their guaranteed income base grows to $1,000,000.
- Their lifetime income payout rate could reach 5.95%, meaning they’d receive around $62,000 per year — guaranteed for both of their lives.
That’s a far better and safer outcome than withdrawing 4% from a volatile portfolio.
Conclusion
Retirement isn’t about guessing — it’s about creating a plan that removes the guesswork.
If you want to:
✅ Avoid costly withdrawal mistakes
✅ Protect your income from inflation and market risk
✅ And enjoy guaranteed income for life
Your retirement shouldn’t be stressful — it should be guaranteed.
Need help with finding the best annuity for your retirement?
Click here to schedule a call with me.
On the call, I can help you:
- Determine what type of annuity is best for you
- Find the highest paying annuities for your unique situation
- Answer any other questions you may have
Answer any other questions you may haves