The Biggest Retirement Planning Mistakes (and How to Avoid Them)

By Samuel Mather-Holgate

Are You Making These Common Retirement Planning Mistakes?

Retirement should be a time to enjoy life without money worries—but for many people, that’s not the reality. The earlier you start planning for retirement, the better your outcomes will be. But even if you’ve already started saving, it’s easy to fall into common traps that could leave you short later on.

In this post, we’ll cover some of the biggest retirement planning mistakes we see time and again—and what you can do to avoid them.

1. Underestimating How Much You’ll Need

Many people assume their expenses will drop dramatically in retirement—but that’s not always the case. Yes, you may no longer be commuting or paying into a pension, but you’ll still have to cover essentials, plus hobbies, holidays, and possibly care costs later in life.

Example:
Graham, 62, thought he’d be fine with £20,000 a year in retirement. But after factoring in his mortgage, rising energy costs, and helping out his grandchildren, his actual spending was closer to £28,000 per year. That shortfall meant dipping into his savings earlier than expected.

Avoid it:
Use retirement calculators to estimate your income needs realistically. Factor in inflation, healthcare, and lifestyle goals—not just the basics.

2. Relying Too Heavily on the State Pension

The full UK State Pension is currently around £11,500 per year (as of 2024–25). While it’s a valuable foundation, for most people it’s not enough to live comfortably on its own.

Example:
Jenny, a single retiree, was shocked when she realised her State Pension would only just cover her monthly bills. Without a private pension or savings, she had to delay retirement by five years and reduce her hours gradually instead.

Avoid it:
Think of the State Pension as your base layer. Build on it with workplace pensions, personal pensions (like SIPPs), ISAs, or other savings.

3. Starting Too Late

The power of compounding means the earlier you start saving, the easier it is to build a strong retirement pot. Waiting until your 40s or 50s can mean you have to save much more each month to catch up.

Example:
Tom starts saving £250 a month at age 30. Sarah starts saving the same amount at 45. By 67, Tom has over £250,000. Sarah ends up with just under £100,000—less than half, despite saving the same each month.

Avoid it:
Start as early as you can, even if you can only afford small contributions. It’s about building good habits and letting time do the heavy lifting.

4. Not Knowing What You’ve Got (or Where It Is)

Most people change jobs multiple times during their career, and it’s easy to lose track of pensions from previous employers. Some people also don’t know how much they’ve saved or how it’s performing.

Example:
Natalie had four different workplace pensions. When she finally reviewed them at age 58, she found one was in a high-fee fund and another was invested too cautiously for her retirement goals. She consolidated her pensions and switched to a lower-cost, growth-oriented strategy that better matched her timeline.

Avoid it:
Get a clear view of all your pension pots and savings. Consider combining old pensions where appropriate, and regularly review your investments with a professional to ensure they match your goals and risk level.

5. Ignoring Inflation and Rising Costs

If your money isn’t growing faster than inflation, you’re effectively losing purchasing power. Some people keep their pensions in cash or very low-risk investments that don’t keep up with the cost of living.

Example:
Keith was proud of his cautious approach, keeping most of his pension in a cash fund. But over 10 years, inflation eroded the real value of his savings—meaning he could afford less in retirement than he’d planned.

Avoid it:
Don’t be too cautious too early. If you’re 10+ years from retirement, growth-focused investments (like equities) can offer better long-term returns. Balance risk with reward—but don’t stand still.

6. Forgetting About Tax

How you take your pension and savings can have a big impact on how much tax you pay. Many people don’t realise that taking large lump sums can push them into higher tax brackets or affect benefits.

Example:
Sandra withdrew £50,000 from her pension to buy a holiday home, but didn’t realise it would be added to her annual income for tax purposes. The result? A surprise tax bill of over £10,000.

Avoid it:
Plan your withdrawals carefully. Use your tax-free personal allowance, pension tax-free lump sum, ISAs, and allowances to draw income as efficiently as possible.

7. Not Having a Plan for Retirement Itself

Retirement isn’t just about money—it’s also about lifestyle. Some people retire without a clear idea of what they’ll do, and end up feeling bored, isolated, or unfulfilled.

Example:
Brian retired at 60 with a healthy pension pot but hadn’t thought about how he’d spend his time. Within a year, he was back working part-time—not for the money, but because he missed the structure and social side of work.

Avoid it:
Think about what retirement means to you. Travel? Volunteering? Hobbies? Grandkids? Make sure your financial plan supports your life plan.

Start Smart, Plan Ahead, Stay on Track. Need Help with Your Retirement Plan?

Retirement planning isn’t just for the wealthy—it’s for everyone. Whether you’re in your 30s or your 60s, taking action now can mean a more comfortable, confident future.

Avoiding these common retirement planning mistakes could make the difference between just getting by—and truly enjoying your later years.

We can help you take control of your future. Get in touch with us today for a no-obligation chat about your goals, your savings, and how to make your retirement work for you.