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Most of the retirement planning mistakes we see at Arcadia are not caused by bad math. They are caused by misconceptions about financial planning and retirement topics.
Here are six of the most common misconceptions we encounter, compared to what the evidence actually shows.
Few headlines generate more anxiety among near-retirees than the annual Social Security Trustees Report, which projects that the program's trust fund reserves will be depleted sometime in the early 2030s under current law.
The word "depleted" sounds catastrophic, but It is not.
Social Security is funded through two streams: ongoing payroll taxes collected from current workers, and reserves accumulated in the trust fund from prior years of surplus. The trust fund depletion projection means the reserves run out, not the program. After depletion, ongoing payroll taxes continue to flow in, and those taxes are projected to cover approximately 78% to 80% of scheduled benefits.
According to the Center for Retirement Research's 2026 update, even in the absence of any Congressional action, payroll taxes collected in 2032 would be sufficient to pay roughly 78% of scheduled Social Security benefits.
This means the realistic worst-case scenario, absent any Congressional action whatsoever, is a benefit reduction of approximately 20% to 22%. That is not trivial, and it is worth planning around. But it is very different from losing benefits entirely.
And Congress has acted before. The 1983 Social Security amendments, signed by President Reagan, included benefit cuts, payroll tax increases, and a gradual increase in the retirement age, changes that extended the program's solvency by decades. The political will to protect Social Security is strong across party lines.
Planning guidance: Model Social Security into your plan at something like 80% to 90% of the projected benefit. That captures the realistic risk without ignoring one of the most valuable income sources most retirees have.
Many people assume Medicaid provides a safety net that will cover nursing home or assisted living costs without requiring them to deplete their assets.
Medicaid does cover long-term custodial care, but only after a household has spent down nearly all of its assets.
The eligibility rules vary by state, but in most states a single applicant with more than $2,000 in countable assets does not qualify for Medicaid-funded long-term care. Certain assets are exempt, including a primary residence, a car, and personal belongings, but financial accounts, investment portfolios, and most other savings are counted.
Some families pursue Medicaid planning strategies, such as gifting assets to family members or placing them in irrevocable trusts, to qualify for Medicaid without completely depleting savings. These strategies come with significant strings attached. Gifts made within five years of a Medicaid application are subject to a look-back period and can disqualify the applicant from benefits. An irrevocable trust is genuinely irrevocable. And not all nursing homes accept Medicaid, which can severely limit your options.
For families with substantial retirement savings, the goal of Medicaid planning is typically to reduce assets to qualifying levels, which means actually having fewer resources available for retirement. Self-funding or purchasing insurance is usually a better answer for families with meaningful assets.
A phrase we hear frequently from newly retired clients: 'I do not have a long-term anymore.'
The implication is that they should be in cash, CDs, or very conservative fixed income, because stocks are for people with decades to wait out volatility and they no longer have that luxury.
This thinking is understandable. It is also frequently wrong.
If you retire at 65, your planning horizon is not five years. It is potentially 25 to 30 years. A 65-year-old woman today has an average life expectancy of approximately 87. For a married couple, the probability that at least one spouse lives to 90 is over 40%.
A dollar you do not plan to spend until you are 85 has 20 years to compound. Left in cash or short-term CDs, that dollar loses purchasing power to inflation every single year. Invested in a diversified portfolio with a meaningful equity allocation, it has the potential to more than double in real terms over that period.
Abandoning stocks in retirement in favor of cash or low-yielding fixed income feels safe. But it introduces a different and very real risk: outliving your money not because you spent too much, but because your portfolio did not grow enough to keep up with inflation and 25 to 30 years of withdrawals.
A well-diversified portfolio that includes meaningful equity exposure remains appropriate for most retirees, even as the allocation gradually becomes more conservative with age. The shift should be gradual and calibrated to actual spending needs and time horizon, not a wholesale exit from growth assets at the moment retirement begins.
Many retirees arrive with a deeply held belief that the right way to manage retirement savings is to live off the income the portfolio generates, including dividends, interest, and bond coupons, and never touch the principal itself.
This was sensible advice in a different era. It is not the right framework for most retirees today.
The dividend yield on a broad U.S. equity index has declined dramatically over the past several decades. In the 1970s and 1980s, the S&P 500 yielded 4% to 5% in dividends. Today it yields closer to 1.3%. A $2 million portfolio invested in a diversified stock and bond portfolio might generate $30,000 to $50,000 in dividends and interest annually, which is not enough to cover most retirements, and not nearly proportional to the portfolio size or the spending need.
Your retirement portfolio is not an endowment fund. It is not a savings account. It was not built to be preserved indefinitely and passed on untouched. It was built to fund your retirement. Spending principal at a sustainable rate is not reckless. It is what the portfolio is for.
The sustainable withdrawal research, including Bengen's 4% rule updated to approximately 4.7% for diversified portfolios in his 2025 work, is specifically designed to identify how much can be withdrawn from principal and income combined while giving the portfolio a very high probability of lasting 30 years. That range, somewhere between 3.5% and 5% depending on circumstances, is the framework to use.
The retirees who are most at risk of dying with more money than they needed, and regretting experiences they did not have, are often the ones who rigidly applied the no-principal rule in a low-yield environment and lived unnecessarily below their means for decades.
This assumption is intuitive. You are no longer earning a salary, so your income is lower, so your taxes must be lower.
For some retirees, this is true. For many others, particularly those who saved diligently in Traditional 401(k) and IRA accounts throughout their careers, it is not.
Every dollar withdrawn from a Traditional IRA or 401(k) is taxed as ordinary income. Add Social Security benefits (up to 85% of which can be taxable depending on total income), Required Minimum Distributions beginning at age 73, any pension income, and rental income, and some retirees find themselves with a higher effective tax rate than they had during their peak earning years.
A couple who spent 30 years building a $3 million Traditional IRA is required to begin taking RMDs at 73. The IRS Uniform Lifetime Table mandates a withdrawal of approximately 3.8% of the prior-year balance in the first year, roughly $114,000 on a $3 million balance. That $114,000 is fully taxable as ordinary income, is added to Social Security income, and may push the couple into a bracket they were not expecting.
Medicare premiums add another layer. IRMAA surcharges apply to Medicare Part B and Part D when income exceeds certain thresholds. In 2026, a couple with income above $218,000 pays significantly more for Medicare than a couple below that threshold.
The strategy that most effectively addresses this reality is Roth conversion planning in the years before RMDs begin. The window between retirement and age 73 is often a period of relatively lower taxable income, when large Roth conversions can be executed at lower marginal rates, reducing the eventual RMD burden and building a pool of tax-free income that does not count toward IRMAA calculations.
'I will retire when I have $2 million.' 'My number is $3 million.' 'I need $5 million.'
Target savings figures are useful as planning anchors. They can also mislead in ways that keep people working longer than necessary, or occasionally cause people to retire too soon.
A $2 million portfolio is more than enough for one household and not nearly enough for another, depending entirely on how much you spend, what other income sources you have, and how long you need the money to last.
The number itself tells you almost nothing without the context of spending and income sources.
The right framework is to understand your actual spending in retirement, model your guaranteed income sources, calculate the gap your portfolio needs to fill, and determine a sustainable withdrawal rate that covers that gap across a 25- to 30-year horizon. The portfolio size that makes sense follows from that analysis and may be meaningfully different from the round number you had in mind.
All six of these misconceptions share something in common. They are driven, at least in part, by fear.
Fear that Social Security will disappear. Fear that the portfolio will run out. Fear that taxes will rise. Fear that long-term care will be catastrophic. Fear of spending principal.
Fear is a legitimate emotion when thinking about a 30-year period of financial dependence on a portfolio. But fear-based planning tends to produce outcomes that are worse than evidence-based planning, not better. It leads to living below your means when you do not have to, deferring experiences that matter, and arriving at the end of life with resources you never used and regrets you cannot undo.
The evidence on almost every point above is more reassuring than the headlines suggest. Social Security will exist. A portfolio with a thoughtfully managed withdrawal rate will almost certainly last. Taxes can be managed with proactive planning. Long-term care is a genuine risk, not an inevitability, and it can be addressed with a real financial planning strategy.
Getting the fundamentals right matters more than getting everything perfect. And the fundamentals, for most of the people we work with, are in much better shape than they fear.
Disclosure: This article is for informational purposes only and does not constitute personalized financial, tax, or legal advice. Tax laws and Social Security rules are subject to change. Please consult a qualified financial advisor and CPA for guidance specific to your situation. Arcadia Private Wealth LLC is a Registered Investment Advisor.
Grant Webster, CFP®, TPCP®
Founder, Wealth Advisor