Adam has seen clients dip into their nest eggs to pay rent for an adult child or private school tuition for grandchildren.
"Maybe 10 percent get into trouble helping adult kids in their 30s and 40s," Adam says. "Sometimes, it's just paying rent. Usually the kids are underemployed."
Some retirees may be tempted to help adult children who are having financial difficulties following a divorce or break-up. Josh Koehnen, a certified financial planner in San Diego, Calif., knows a retired couple who decided to draw from their savings when a daughter came to them after a broken engagement.
"After exploring several options, they decided to pull money out of their nest egg in order to add a room addition to their home," Koehnen says. "They now have their daughter and two children living with them in the room addition. The construction costs ran way over their initial estimates and the dent in their nest egg has caused them to really tighten up spending."
5. Overlooking taxes
Failing to consider the impact of taxes, including those incurred from retirement account distributions, can lead to costly surprises for retirees.
Adam knows a retired couple who failed to consider taxes and paid a hefty price. The couple decided to use money from a 403(b) plan to finish buying a house and ended up with an enormous bill from the Internal Revenue Service.
"I think the tax bill was something like $150,000, and that could have been avoided," Adam says.
She's also seen clients underestimate the tax costs of withdrawing cash from a 401(k), pension or individual retirement account. But whatever the financial transaction, including taxes in your calculations can help you avoid unexpected financial jolts.
"Always put taxes into equations in retirement," Adam says.