Difficulty
Most of the mistakes we make when leaving work for retirement do not stem from carelessness or ignorance, but from caution, habit, and lack of planning. For almost our entire working lives, things simply “got done on their own.” The paycheck arrived every month, contributions and retirement savings payments were made automatically, and the future seemed far away. In retirement, though, the routine we had grown used to all this time comes to an end.
We are left with money and with a question: how do we make sure it comfortably lasts for the rest of our lives?
In practice, the biggest problem in retirement is a handful of recurring mistakes that we make almost automatically, often in good faith and out of a need for security. Here are the five most common ones:
1. Seeing Retirement as the End of Financial Planning
For many people, retirement means there is no longer any need to calculate anything. Yet it is from this moment on that every financial decision carries more weight than it used to, because mistakes can no longer be easily made up for by working or earning more.
The most common problem is that we barely even think about drafting a retirement plan before retiring. As a result:
We’re unaware of our real monthly expenses.
We fail to realize that we may easily spend over 20 years in retirement.
We manage our money from month to month, which is practically living paycheck to paycheck, just as we did during our working years.
A missing plan usually goes hand in hand with a missing emergency fund for possible unexpected scenarios. We rarely plan for retirement with the idea that our life situation may change, that we may be left on our own, that living costs may rise faster than we expected, or that our health may start to demand higher expenses. The lack of a plan B then means that a financial situation that looks stable today can be disrupted very quickly in the future.
Retirement is not the finish line, but a new stage of life and of managing money, one that requires a starting point and a clear plan.
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2. Withdrawing Everything at Once, “to Have Certainty and Peace of Mind”
One of the most common steps at the start of retirement is a lump-sum withdrawal of all the funds from the European Pension (PEPP), the third pillar, or the second pillar, and putting the money straight into the bank. The logic behind it is simple: a sense of control, a feeling of safety, and the desire to finally get done with the obligation to endlessly save.
With all that, it is easy to forget that not all money serves the same purpose. Part of the funds, often a significant part, still has 15, 20, or even 25 years ahead of it. This money should keep working, otherwise we run the risk that in the second half of retirement its real value will be significantly lower than we originally expected.
When we withdraw all funds from the second or third pillar at once:
- We interrupt the long-term growth of our assets.
- We are left with a large sum, but without a plan.
It is true that in some EU countries, withdrawing part of the savings as a lump sum is the more tax-advantageous option, often saving you a huge amount of money. If that is the case, it is important to include this in your financial planning.
The second and third pillars were both designed as a long-term supplement to retirement income, not as a one-time cash injection. Gradual payouts (phased drawdown) provide significantly more flexibility and security.
We are pleased that, at least declaratively, it is precisely this option that prevails among our clients. Up to two-thirds of clients with a European Pension account state that in retirement they plan to draw down their savings through monthly payments from the account.
3. Thinking of a Savings Account or Term Deposit as a Synonym for Security
Many retirees today hold most, or even all, of their savings in cash, in bank accounts, and in term deposits. At first glance this seems reasonable to many: the balance doesn’t fluctuate, and the money is close at hand. But in practice, inflation slowly erodes its real value.
The consequences of this mistake are the most insidious ones. The fact that the value of money doesn’t fluctuate is calming and gives a sense of certainty, all while inflation reduces the purchasing power of our money year after year.
Cash is great in the short term, for everyday living, and as an emergency fund in case of unexpected twists and turns. But if someone still has 15 to 25 years of life ahead of them, stopping investing entirely means a real financial risk in the future.
That is precisely why, paradoxically, investing can’t be avoided entirely even in retirement. It is not about chasing returns, but about defending against inflation. Without at least partial investing, money loses real value, which means a decline in living standards, just spread over time and less visible.
4. Not Planning for Longevity or Changes Along the Way
Even people who do have some kind of plan at the start of retirement often tend to think too short-term. Planning “for now,” for a year, two, or five, is not enough when retirement increasingly lasts 20 to 30 years.
It is a mistake because as time goes by:
- Health and social care costs increase.
- Financial flexibility decreases.
- The structure of expenses changes.
Another problem is the assumption that a plan set at the beginning will remain valid forever. Circumstances do change, though: health, family relationships, the prices of goods and services, or the economic situation. If you don’t have the habit of updating and reviewing this plan, it is as if you had no plan at all.
In retirement, it pays to return to your financial plan at least once a year, check what has changed, and adjust before reality does it for you.
5. Avoiding Decisions Because “It’s Too Late to Make Changes”
This is a very common psychological mechanism: once we are retired, we would rather keep everything as it is, without making any changes. As a result:
- Funds remain in unsuitable and inefficient products.
- Money is scattered.
- The plan is complicated and hard to follow.
- Yet in retirement, it is simplicity that pays off:
- Fewer products.
- A clear allocation of money by goal.
- Less frequent, but well-considered decisions.
Sometimes, improving our financial situation doesn’t require earning more, but simplifying and improving what we already have. Simplifying finances, however, does not mean giving up on investing.
For most people, the most suitable solutions are simple passive strategies based on broad diversification across stocks and bonds, implemented, for example, through index ETFs. Increasingly, this can also be done with the help of a robo-advisor such as Finax, which automates decisions and reduces stress, which is always a big plus in retirement.
What Does This Mean?
It pays to learn from the mistakes of others. The most expensive mistakes are rarely visible. It is rather a matter of many small decisions that gradually pile up: ones that are put off, ill-considered, or made based on emotions.
A decent retirement does not consist of maximizing returns. It consists of making sure the money comfortably lasts for the rest of your life, without constant stress and without sudden panicked moves.
And it is right now, not on the last day of work, that it pays to start truly planning it.
Frequently Asked Questions
1. Should I withdraw my pension savings as a lump sum or in monthly payments?
For most people, gradual monthly payouts make more sense than withdrawing everything at once. Part of your savings may still have 15 to 25 years ahead of it, and if it stays invested, it can keep growing and protect you from inflation. A lump sum can pay off where local tax rules favor it, so check them first. With the Finax Annuity, your portfolio sends you a regular monthly income while the rest of your money keeps working, and the European Pension (PEPP) also lets you choose a phased drawdown.
Secure a comfortable future and take advantage of the European pension benefits
2. Should I keep investing after I retire?
Yes, at least partially. Retirement can last 20 to 30 years, and money kept only in a savings account or term deposit slowly loses its real value to inflation. The goal is not to chase returns, but to protect your purchasing power. Simple passive strategies built on broadly diversified ETF portfolios with a mix of stocks and bonds are a calm way to do it. Read more about how we approach a relaxed retirement.
3. How much money should I keep in cash when I retire?
Keep enough cash for everyday spending and an emergency fund that covers roughly 3 to 6 months of your expenses. This reserve protects you from unexpected costs, such as health care or home repairs, without having to sell your investments at a bad time. Money you will not need for several years can stay invested and keep defending itself against inflation.
