Retirees with large balances often assume they can absorb a rough patch in markets. That confidence is usually misplaced. If stocks fall early in retirement and withdrawals continue, the damage can be permanent, according to Fidelity (March 2026).

Fidelity suggests aiming for no more than 4% to 5% of retirement savings in the first year as a rough starting point, per the same guidance (March 2026). That only works if essential bills are covered by income that does not depend on selling investments. Social Security, pensions, and annuities belong in that bucket, and Fidelity notes that many CDs were yielding 3.8% or more as of March 25, 2026, while higher rates have also improved annuity payout rates, per Fidelity (March 2026).

A bond ladder can also help by holding bonds to maturity, which reduces the pressure to sell equities when prices are swinging on interest-rate news, per Fidelity (March 2026). It is not a glamour trade. It is a cash-flow decision, which is usually what retirement turns out to be.

Once a saver reaches age 73, required minimum distributions start for most traditional IRAs and workplace 401(k)s, per Fidelity (April 2025). Miss the deadline or take too little and the IRS can hit the shortfall with a 25% penalty, though the penalty may be reduced if corrected in time, per Fidelity (April 2025).

The timing matters too. Morningstar says a given year’s RMD is effectively set by the previous December 31 balance, so a retiree can be forced to withdraw the same amount even after a market drop in the current year, according to Morningstar (February 2026). That is one reason delaying the first RMD until April 1 of the following year is a trade-off, not a free gift. It creates two RMDs in one calendar year, which can push income higher and crowd a retiree into a worse tax bracket, Fidelity warns (March 2026).

The mechanics are also less forgiving in a 401(k) than in an IRA. Fidelity says IRA owners can aggregate RMDs across accounts and satisfy the total from one IRA, while 401(k) participants must take separate RMDs from each workplace plan, per Fidelity (March 2026). Spreading withdrawals across the year, monthly, quarterly, or semiannually, can smooth sale prices and steady cash flow, Morningstar notes (February 2026).

For people who do not need current RMD cash, a qualified longevity annuity contract, or QLAC, can move up to $210,000 from a traditional IRA or eligible 401(k) out of future RMD calculations, with income starting as late as age 85, per Fidelity (August 2025). That is one of the few ways to make a big account slightly less bossy.

The quiet mistake is doing too little in the years before Social Security and RMDs begin. Many households drift through early retirement drawing only what they need, letting tax-deferred balances keep growing and setting up a larger tax bill later. Morningstar says the years after retirement but before Social Security and RMDs can be low-tax years, which makes them a good time to draw more aggressively from traditional accounts or convert some of that money to Roth, according to Morningstar (March 2026).

That withdrawal order matters. Morningstar says Roth accounts are the most tax-advantageous in retirement, followed by taxable brokerage accounts, with traditional tax-deferred assets last, according to Morningstar (March 2026). Taxable accounts, especially checking or cash holdings, are usually the cleanest early spending source because they often do not carry large capital gains bills, per Morningstar (March 2026).

That said, low-cost-basis taxable assets deserve caution. Morningstar notes they can be better left alone if heirs are likely to benefit from a step-up in cost basis later, according to Morningstar (March 2026). Retirement tax planning is partly about today, partly about the inheritance ledger nobody likes to mention out loud.

Roth conversions can help during market downturns because the tax is calculated on a lower account value, and later recovery can grow tax-free if the Roth rules are met, per Fidelity (March 2026). Fidelity also notes that RMD income can raise a retiree’s bracket, increase Medicare premiums, and expose more investment income to the 3.8% net investment income tax, per Fidelity (August 2025). Once the balance gets large enough, the tax bill does not just arrive. It compounds.

For charitable retirees, qualified charitable distributions add another lever. Fidelity says a QCD allows direct transfers from an IRA, not a 401(k), to a qualified charity of up to $111,000 per individual in 2026, and the transfer counts toward the RMD while staying out of taxable income, per Fidelity (August 2025). A 401(k) typically has to be rolled into an IRA before that route is available.

The three biggest 401(k) retirement planning mistakes are easy to miss because they do not show up while the account is still growing. Sequence-of-returns risk, RMD timing, and withdrawal sequencing become the real work only when the balance is finally big enough to matter.

That is the twist. A large 401(k) is not the finish line. It is the point where the plan has to get smarter, because from here on out the challenge is no longer saving. It is deciding which account gets spent first, when taxes should be paid, and how much market risk to leave standing between a retiree and next month’s bills.