If you've recently retired or you're thinking about leaving the workforce soon, you have a lot of big life decisions to make. Many of these involve handling your finances without a paycheck or employer-provided health insurance. 

The choices you make early in retirement can affect you for the rest of your life, and mistakes could have serious consequences (like running out of money). But you can avoid some common errors if you're careful as you make your retirement plans. In particular, here are four big mistakes you absolutely can't afford.

Older couple smiling on the floor and surrounded by moving boxes.

Image source: Getty Images.

1. Taking out too much of your savings

You need enough money invested so you can earn a reasonable return. If you withdraw too much, you could end up with an account that isn't large enough to sustain you. Running out of money is the worst fear of many retirees, so you need to determine a plan for withdrawing funds to make sure that doesn't happen.

Traditionally, experts recommended following the 4% rule. This says you could take 4% of your account balance out of your investment account the first year you retire. Each year, you'd then raise your withdrawal amount slightly to keep pace with inflation. Unfortunately, thanks to lower projected returns and longer life spans, following the 4% rule may no longer be a good way to ensure your accounts don't run short.

Instead, you may want to pick a withdrawal rate below 4% or even stick with just withdrawing the interest and leaving the principal balance alone (although this latter strategy would work only if you have a very large account balance and can comfortably live only on interest). 

2. Choosing the wrong Medicare coverage

Contrary to popular belief, Medicare coverage isn't all that comprehensive. Traditional Medicare (Parts A and B) covers hospitalization and outpatient care, but there's a 20% co-insurance cost to pay for outpatient care under Part B as well as a deductible for both Parts A and B. And while Medicare Part D helps cover prescription costs, seniors who take lots of drugs could still face significant out-of-pocket expenses. 

Depending on your health needs, you may decide you should purchase a Medigap Plan to supplement traditional Medicare or a Medicare Advantage plan to take the place of it. Some of these plans can provide much more comprehensive coverage, albeit at a higher premium.

3. Filing for Social Security benefits at the wrong time

The time you file for Social Security benefits makes a huge difference in the amount of your benefits. Every retiree has a full retirement age (FRA) designated by law, which is between 66 and 67. If you file to start your checks prior to your FRA, the standard benefit you'd get is reduced, while waiting to file until after FRA means the standard benefit increases up until age 70.

The benefit increase or decrease is calculated monthly, and while it's a small amount, it can add up to have a big effect on your benefits after several years. Each of the first three years you claim benefits prior to FRA will result in around a 6.7% annual benefit reduction, and if you claim more than three years early you'll face an additional 5% annual reduction. On the other hand, each year of delay after FRA can result in an 8% bump in your standard benefit amount. 

Retirees who don't think they'll live very long may want to claim benefits at the earliest possible time, at age 62. Those who believe they'll outlive their projected life spans may prefer to wait until after FRA. This strategy can pay off if you live longer than it takes for your higher monthly benefits to make up for all the income forgone during the years you delayed. 

4. Trying to hold on in a high cost-of-living area if you lack the funds

Some areas of the country are much more expensive for retirees to live in than others. If you live in one of them, you may be forced to spend more of your retirement savings than you can afford in order to maintain your standard of living. Once your account runs short, all future returns will be smaller, so it will be harder for you to make ends meet. 

As soon as you see that living in your current location is likely to cost you too much and become unsustainable, you should move ASAP. This will preserve your nest egg so it can continue producing the money you need for the rest of your life. 

Don't let these mistakes ruin your retirement

There are no do-overs when it comes to retirement security if you've spent your money too quickly or locked yourself into smaller Social Security checks for life. Before you decide when to claim your benefits, what medical coverage you need, or how much you can afford to spend, be sure to look at your budget and the big picture. By making smart choices now, you can maximize the chances of your money lasting for the rest of your life.