Retirement success isn’t just about what you earn; it’s about how you withdraw. Many people in their 50s and 60s anchor on a simple “percentage rule” without factoring in market order, inflation, taxes, and rising healthcare costs. The result can be a plan that looks fine on paper—but falls short when life happens. In this guide, we’ll unpack the three most common retirement income mistakes and show how safe money strategies can help you lock in essential income for life while keeping growth potential on the rest. Whether you live in Florida, Texas, California, New Jersey, or anywhere across the U.S., these steps can help you build a plan that’s durable, tax-aware, and healthcare-ready.

Mistake #1: Relying Too Heavily on Market Withdrawals

Many retirees use a flat withdrawal percentage from a market-based portfolio, expecting average returns to carry them through. But markets don’t pay you on schedule—your bills arrive monthly. Drawing too much, too soon, forces you to sell during dips, shrinking your future recovery. The popular 4% rule was built on historical conditions that may not match today’s realities, including lower interest rates, higher valuations, and longer retirements. If you retire in a down market or face several soft years early on, even modest withdrawals can become unsustainable. Inflation compounds the problem, pushing you to increase income faster than your portfolio can grow.

Real example: Linda, 62 in Tampa, had $800,000 invested in a mix of stocks and safe money alternatives. She wanted $48,000 per year from her portfolio, adjusted for inflation. After a rough first two years, her withdrawal rate effectively rose above 6% as she tried to keep pace with rising costs. By building a guaranteed income floor with a fixed annuity and delaying some market withdrawals, she reduced portfolio stress, kept her lifestyle intact, and regained confidence.

What to do instead: Segment your income into essential vs. discretionary categories. Cover essentials with guaranteed solutions—such as fixed annuities, fixed indexed annuities with income riders, or deferred income annuities—plus Social Security. Then let your market assets serve discretionary spending and long-term growth. Explore our Annuities Guide and run numbers with our Calculators to see how much income you can secure.

Mistake #2: Ignoring Sequence-of-Returns Risk

Sequence-of-returns risk is the danger of getting poor market returns in the early years of retirement, when you’re taking withdrawals. Even if long-term average returns look acceptable, negative early returns can permanently impair your plan because you’re selling shares at lower prices to fund income. Two retirees can have the same average return but end with very different outcomes depending on the order of returns.

Illustration: Suppose Retiree A gets -10%, 0%, then +10% in the first three years, while Retiree B gets +10%, 0%, then -10%. The average is identical, but Retiree A may be forced to sell more shares to meet withdrawals early, making it harder to recover. This is especially risky for those retiring into volatility.

How to reduce this risk:

• Income flooring: Use guaranteed income products to cover essential expenses so you don’t have to sell growth assets at a loss when markets are down.
• Cash and CD buffers: Maintain 1–2 years of essential expenses in cash or CDs to bridge downturns.
• Bucketing: Divide assets into short-term income, medium-term stability (e.g., fixed annuities or fixed indexed annuities), and long-term growth. Refill buckets strategically after good years.
• Guardrail withdrawals: Adjust withdrawals up or down based on portfolio performance rather than a rigid rule.

Learn how guaranteed income products work in our Annuities Guide, and read up on broader retirement planning concepts in the Retirement Hub.

Mistake #3: Underestimating Longevity and Healthcare Costs

Retirements are getting longer. According to the Social Security Administration, many people live well beyond their “average” life expectancy; you can check personalized longevity estimates using the SSA longevity resources. A longer life amplifies the risk that your savings won’t keep up with inflation and healthcare. Even with Medicare, retirees typically face premiums, deductibles, and out-of-pocket expenses. The Medicare.gov site outlines coverage options and potential costs, but it doesn’t cover most long-term care. Planning only for today’s expenses ignores the tail risk of later-life health events.

Practical reality: A couple in their mid-60s in Phoenix or San Diego might spend thousands annually on Medicare premiums and supplemental coverage, plus prescription costs. A serious illness or need for extended home care can push expenses higher. Without a plan, these shocks can force you to sell growth assets at the worst time—or cut lifestyle.

What to do: Build a lifetime income floor using safe money solutions. Fixed annuities and fixed indexed annuities with lifetime income features can create predictable paychecks you can’t outlive. Consider a dedicated healthcare bucket: cash reserves, CDs, or a guaranteed income product earmarked for premiums and out-of-pocket costs. If you’re still working, maximize HSA contributions. Review coverage annually at Medicare.gov and coordinate spousal benefits.

How to Build a Resilient Retirement Income Plan After 50

1) Define essential vs. discretionary spending

List must-have expenses—housing, utilities, groceries, transportation, insurance, healthcare—and nice-to-haves like travel, hobbies, and gifts. Aim to cover essentials with guaranteed income sources: Social Security, pensions, and guaranteed income products. This “paycheck” strategy keeps your basic lifestyle intact through market cycles.

2) Optimize Social Security timing

Claiming early can reduce benefits for life, while delaying increases them. Use the SSA’s tools and statements at SSA.gov to compare scenarios. Coordinating spousal strategies can further enhance household income longevity.

3) Implement bucketing and guardrails

Maintain a near-term bucket for one to two years of essential expenses in cash or CDs; a medium-term bucket in safe money alternatives like fixed annuities or fixed indexed annuities for stability and income; and a long-term growth bucket for inflation-fighting potential. Use guardrails to adjust withdrawals based on performance and spending needs.

4) Manage taxes proactively

Sequence withdrawals tax-efficiently: taxable accounts first, then tax-deferred, while considering partial Roth conversions in low-income years before required minimum distributions (RMDs) begin. Reference RMD rules at IRS.gov. Tax-aware planning can add years to portfolio longevity.

5) Plan for healthcare and long-term care

Price Medicare options at Medicare.gov’s plan compare, and set aside a dedicated healthcare fund. Consider pairing guaranteed income with a conservative medical reserve so market fluctuations don’t derail care decisions.

Explore step-by-step planning resources in our Retirement Hub, and get custom projections with our Calculators.

Case Studies: What These Mistakes Look Like in Real Life

Case 1: Market-only withdrawals create lifestyle stress

Mark and Dana, 58, Austin, TX: They saved $1.2 million, mostly in market-based funds. Their plan: withdraw 4% ($48,000) growing with inflation and claim Social Security at 62. When a downturn hit early, their withdrawals climbed as a share of assets, and their confidence dropped. A SafeMoney advisor restructured their plan: they delayed Social Security for higher lifetime benefits, purchased a fixed indexed annuity to guarantee a base income later, and set aside two years of essential expenses in CDs. With an income floor in place, they reduced withdrawals during down years and maintained travel goals.

Case 2: Sequence risk, meet income flooring

Rosa, 67, San Diego, CA: Rosa retired with $900,000 and wanted $50,000 of annual income on top of Social Security. Early volatility forced her to sell at losses. She used a deferred income annuity to start guaranteed payments at 72, covering most essentials. The rest remained invested for growth. Now sequence risk matters less; she can pause or reduce market withdrawals when needed, letting the portfolio recover.

Case 3: Longevity and healthcare underestimated

James, 60, Newark, NJ: James planned only to age 85 and assumed Medicare would cover most expenses. A family history review suggested he could live into his 90s. He adjusted his plan: added a fixed annuity ladder to extend guaranteed income through age 95+, built a healthcare bucket for premiums and out-of-pocket costs, and reviewed coverage annually at Medicare.gov. Now his plan supports a longer life with less financial strain.

How to Work with an Advisor to Avoid These Mistakes

A skilled advisor can stress test your plan under different market sequences, tax scenarios, and healthcare shocks—before you commit. This is especially valuable if you’re within five to ten years of retirement or already retired. Look for advisors who understand both growth investing and safe money strategies, and who can coordinate Social Security, tax planning, and healthcare decisions. Ask for a written “income map” that shows which accounts fund which expenses and when, supported by guaranteed income where appropriate.

What to expect from a SafeMoney approach:

• Clarity on essential vs. discretionary expenses
• Income flooring using guaranteed solutions (e.g., fixed annuities, fixed indexed annuities)
• Withdrawal guardrails and bucketing to mitigate sequence risk
• Tax-aware strategies, including RMD planning and opportunistic Roth conversions
• Healthcare budgeting integrated with Medicare options

Wherever you live—Dallas, Phoenix, Miami, Chicago, or Los Angeles—local regulations and taxes can affect your plan. Get matched with a professional who understands your state and city nuances through our Find Advisor tool.

Actionable Takeaways

• Don’t rely solely on market withdrawals. Build a guaranteed income floor for essentials using safe money alternatives.
• Protect against sequence risk with bucketing, cash/CD buffers, and guardrail withdrawals.
• Plan for longevity: model income through age 95+ and secure lifetime income you can’t outlive.
• Estimate healthcare costs using Medicare.gov, and create a dedicated healthcare bucket.
• Coordinate Social Security timing with your overall income plan using resources at SSA.gov.
• Manage taxes proactively—review RMDs at IRS.gov and consider Roth conversions in low-income years.
• Run scenarios in our Calculators and review the fundamentals in the Retirement Hub.

Frequently Asked Questions

Is the 4% rule still safe for retirement income?

The 4% rule is a historical guideline, not a guarantee. It depends on future returns, inflation, and your longevity. In lower-yield, higher-valuation environments, a static 4% starting withdrawal may be aggressive. Many retirees prefer dynamic “guardrail” strategies that adjust withdrawals based on performance, combined with a guaranteed income floor from safe money solutions. This approach can preserve flexibility while protecting essentials.

How do I reduce sequence-of-returns risk without sacrificing growth?

Create an income floor using guaranteed income products like fixed annuities or fixed indexed annuities for essential expenses. Maintain 1–2 years of cash or CDs for near-term needs, then invest the rest for long-term growth. Use bucketing to structure time horizons and apply guardrails so withdrawals flex with market conditions. This keeps you from selling growth assets at the wrong time while still participating in upside over multi-year periods.

How should I estimate healthcare costs in retirement?

Start with Medicare Part B, Part D, and supplemental coverage premiums, plus deductibles and copays. Use the plan comparison tools at Medicare.gov. Include dental, vision, hearing, and potential long-term care needs, which Medicare generally doesn’t cover. Build a dedicated healthcare bucket (cash, CDs, or guaranteed income) so market swings don’t determine your care. Review your coverage annually and coordinate with your income plan.

When should I claim Social Security benefits?

It depends on health, longevity expectations, spousal benefits, and your income floor. Delaying can increase lifetime benefits, which strengthens your guaranteed income base. Use your SSA statement and calculators at SSA.gov to model scenarios and coordinate with other guaranteed income sources. An advisor can help weigh taxes, survivor needs, and market conditions.

What are safe money alternatives I can use for my income floor?

Safe money alternatives include CDs, fixed annuities, fixed indexed annuities, and guaranteed income products designed to provide stable, predictable payouts. These can complement market assets by covering essential expenses, reducing sequence risk, and improving peace of mind. Explore product types and how they fit into an overall plan in our Annuities Guide.