Remember getting a flat tire on your bike as a kid? One of the great tricks for repairing the tire was to submerge the inner tube in water to see where the bubbles came from. Then you could find the leaks and patch accordingly.
Your retirement income plan may be sending up bubbles, too, whether around Social Security, retirement account distributions, taxes, or somewhere else. And these holes should be patched up right away.
So, to help you work toward a more airtight retirement plan, let’s look at a few of the common leaks.
1. Taking Social Security Benefits Too Soon
Taking benefits too soon can be costly over the long term. A worker will receive 100% of the benefit when claiming at full retirement age, but the benefit is reduced by as much as 30% when benefits begin earlier. Likewise, spousal benefits are also reduced when applying prior to the spouse’s full retirement age.
Another costly decision for Social Security is not coordinating among spouses. Rather than looking at each person’s benefit individually, you should consider the benefit for the entire household to potentially maximize lifetime and survivor benefits.
2. Not Planning for Required Minimum Distributions (RMDs)
Many people spend the better part of their earning years contributing to retirement plans to build a nest egg for retirement. Although most individuals will need to begin withdrawals from those accounts shortly after retirement, some can afford to delay distributions until later.
If you can wait to take distributions, know that they cannot be delayed indefinitely. You typically need to begin taking withdrawals when you reach age 73. Once this required beginning date is reached, a minimum distribution amount must be taken each year, which can result in an increase in taxable income.
It’s important to understand the impact of RMDs, including the timing, in combination with other expected taxable income. Doing so will provide you with the opportunity to design a more strategic approach to retirement plan distributions and could help to reduce income taxes over the long term.
3. Not Being Proactive with Income Tax Planning
Most taxpayers learn about their tax bill or refund only after completing their annual tax return. By taking a more proactive approach to tax planning, you have the potential to reduce your overall tax liability. This could be possible with year-round strategies including increasing charitable giving, harvesting capital losses, and other methods.
Having the mindset that tax planning can only occur for the current tax year is limiting, though. Consider having a longer-term focus spanning across multiple tax years. Instead of looking at tax liability as starting January 1 and ending December 31, stretch the time horizon to include multiple years. Paying a little more tax now might result in a smaller total tax bill over the course of several years. At times, planning across multiple generations should also be considered.
4. Not Getting the Full Benefit of Charitable Giving
Both the giver and the recipient of a charitable gift benefit from the transaction. The recipient (i.e. the charity) receives a gift of some value. The giver can feel a sense of satisfaction while potentially reducing their income tax liability through a charitable income tax deduction.
But not all gifts lead to tax savings. Under current income tax rules, taxpayers who take the standard deduction can only deduct up to $1,000 in cash donations to qualified charitable organizations ($2,000 if married filing jointly).1 Even if you do itemize, depending on the amount of total itemized deductions in relation to the standard deduction, it’s still possible you aren’t benefitting from the entire gift to charity.
Some of the methods that can help to maximize tax savings from charitable gifts include donating noncash assets (such as appreciated securities) and grouping several years’ worth of charitable giving into a single tax year (known as bunching), possibly through a Donor Advised Fund (DAF). A contribution to a DAF is a charitable gift that is tax-deductible for the year it’s made, but distribution to the ultimate charity may be delayed for years. Do keep in mind, though, that DAF gifts do not qualify for the up-to-$1,000 deduction for those who take the standard deduction.
Taxpayers receiving RMDs may also consider directing these distributions directly to a charity in what’s referred to as a Qualified Charitable Distribution (QCD). Instead of having the check payable to you or directly deposited to your bank account, a check would be issued to the charity or charities of your choice. If properly done, the QCD will satisfy your RMD without increasing your taxable income.
5. Underestimating Costs
The cost to maintain the same standard of living gets more expensive over time due to inflation. You should plan to pay a continually increasing cost for goods and services throughout retirement.
If you assume spending will decrease in retirement, that may lead to problems as well. The daily commute might be traded for an increase in leisure travel. Group medical insurance will go away, and there may be a period of time when health insurance coverage needs to be secured individually with a personal policy for your household. Even once you’re on Medicare, there are costs there, too. Healthcare usage also tends to increase with advanced age.
Is Your Plan Airtight?
When you have a leak in a tire, the first step is to find it. The same can be said for your retirement income plan. By checking your plan against these five common mistakes, you can take an important step toward the financial future you want for your retirement years.
Need someone to help you check for leaks? We’re here to help!
1 “Topic no. 506, Charitable contributions.” IRS, 22 January 2026, https://www.irs.gov/taxtopics/tc506
This article is not intended to provide specific legal, tax, or other professional advice. For a comprehensive review of your personal situation, always consult with a tax or legal advisor.
Distributions from traditional IRAs and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59½, may be subject to an additional 10% IRS tax penalty.
Generally, a donor advised fund is a separately identified fund or account that is maintained and operated by a section 501(c)(3) organization, which is called a sponsoring organization. Each account is composed of contributions made by individual donors. Once the donor makes the contribution, the organization has legal control over it. However, the donor, or the donor’s representative, retains advisory privileges with respect to the distribution of funds and the investment of assets in the account. Donors take a tax deduction for all contributions at the time they are made, even though the money may not be dispersed to a charity until much later.
