The 5 Financial Mistakes I See in the First 3 Years of Retirement (For Affluent Grosse Pointe Families)

In Grosse Pointe, the retirement conversation is rarely about whether someone can retire.

It’s usually about how to retire well without unintentionally damaging what took decades to build.

Most of the families I work with have:

• $3M to $10M invested

• A primary residence, in the Pointes

• Property up north

• Or a winter home in Florida

The risk in this tier is not running out of money because of poor savings habits.

The risk is structural missteps in the first three years that quietly reduce flexibility for the next thirty.

Here are the five I see most often.

1. Expanding Lifestyle Permanently in the First 24 Months

Year one of retirement often comes with upgrades.

Renovating the lakefront home.
Buying in Harbor Springs or Charlevoix.
Upgrading the Florida condo.
Adding a larger boat.

None of this is reckless.

But when multiple high fixed-cost decisions are layered on top of one another, the portfolio’s required distribution level changes permanently.

A $5M portfolio supporting one residence behaves very differently than one supporting:

• Two or three properties

• Travel between states

• Ongoing support for adult children

• Club dues

• Boat and maintenance costs

The mistake is not spending.

The mistake is locking in higher fixed overhead before stress-testing what happens in a prolonged market decline during years one through three.

The first three years are uniquely sensitive to early negative returns. If markets fall while distributions rise, the math compounds in the wrong direction.

Affluent retirements fail slowly, not suddenly.

2. Reacting to Market Volatility After Retiring

The emotional shift after the final paycheck stops is real.

When you are accumulating, volatility feels temporary.
When you are distributing, volatility feels threatening.

I often see newly retired households reduce equity exposure significantly after a 15 to 25 percent market decline.

That feels prudent.

In higher net worth retirements, it is often the wrong move.

With 25 to 30 year life expectancies, capital still needs to compound. Inflation over decades is a larger threat than short-term volatility.

The right approach is structural, not reactive.

This often means separating several years of planned distributions into stable assets while allowing the remaining capital to remain growth-oriented.

The plan should exist before the downturn. Not because of it.

3. Mishandling the “Low Tax Window” Between Retirement and RMDs

The years immediately after retirement are often the lowest tax years you will ever have again.

Before:

• Required Minimum Distributions begin
  

• Social Security is fully online

• Medicare IRMAA brackets increase premiums

This window is powerful.

For affluent households, it can be used to:

• Strategically convert portions of large pre-tax IRAs

• Manage future RMD exposure

• Control future Medicare surcharges

• Reposition assets for heirs

Instead, many retirees default to “no changes” because their income temporarily looks lower.

Five years later, income stacks:

• RMDs

• Social Security

• Dividends

• Capital gains

And tax brackets are materially higher than they needed to be.

The first three years are often the cleanest opportunity to reposition tax exposure permanently.

Most families miss it because no one frames it as a window.

4. Claiming Social Security Without Coordinating the Whole Plan

In higher net worth households, Social Security is rarely about cash flow necessity.

It’s about optimization and survivor planning.

Claiming early may not break the plan, but it can:

• Reduce guaranteed lifetime income

• Reduce survivor income for a spouse

• Increase long-term portfolio pressure

For married couples, especially where one spouse is expected to outlive the other, coordination matters.

In many affluent households, early claiming is chosen out of habit rather than strategy.

The decision is permanent. It deserves modeling within the entire estate and income structure, not isolation.

5. Underestimating the Estate and Legacy Implications of Multi-Property Ownership

In Grosse Pointe, it is common to own:

• A primary residence

• A Northern Michigan property

• Possibly a Florida home

What is less common is a coordinated plan for what happens to those properties.

Questions that often go unaddressed in the first few retirement years:

• Do all children want equal ownership?

• Should one child inherit the lake home and equalize with other assets?

• What are the capital gains implications if a property is sold during life versus transferred at death?

• Does the estate plan reflect current asset values?
  
  

Retirement is when lifestyle stabilizes.

It is also when estate structure should be updated to reflect reality.

Ignoring this in the first three years usually creates friction for the next generation.

The Pattern I See

In Grosse Pointe, the question is rarely:

“Can we retire?”

It’s more often:

“Can we retire without reducing flexibility, increasing taxes unnecessarily, or complicating what we leave behind?”

The families who navigate the first three years well tend to:

• Avoid locking in permanent overhead immediately

• Separate short-term income needs from long-term growth capital

• Use the low-tax window intentionally

• Coordinate Social Security within the full plan

• Update estate structures to reflect current asset reality
  
  

Retirement is not the end of planning.

For affluent families, it is the beginning of a different phase — one that is less about accumulation and more about structure.

If you are within five years of retirement or recently retired and unsure whether your current strategy accounts for these early structural risks, that is a conversation worth having.

The first three years quietly shape the next thirty.