Retiring in Colorado is an attractive proposition. You get abundant sunshine, four distinct seasons, outdoor recreation, access to major healthcare systems, and communities ranging from Denver suburbs to small mountain towns.
But retiring in Colorado isn’t simply a matter of selling your house, moving here, and enjoying the mountains. Healthcare can become a major expense if you retire before Medicare. Colorado’s tax treatment of retirement income is favorable in some areas but more complicated in other areas. Homeowners insurance can be surprisingly expensive, particularly in areas exposed to hail and wildfire risk. And a portfolio that worked well while you were earning a salary may need to be managed very differently once you begin taking withdrawals.
There’s also the lifestyle question. The Colorado you experience on a summer vacation isn’t necessarily the Colorado you’ll experience every day in retirement.
These are 10 mistakes I see retirees make most often, and most are much easier to address before retirement than after.
1. Underestimating Your First Year Retirement Spending
One of the most common retirement mistakes is assuming your spending will immediately settle into a predictable long-term pattern. It often doesn’t.
After 30 or 40 years of working, you suddenly have something you haven’t had in decades: time. That changes how much you spend. You may travel more, visit children or grandchildren more often, take longer trips, remodel your home, buy a new vehicle, or simply spend more because you’re no longer structuring life around a work schedule.
None of that is irresponsible. You saved for retirement so you could use your money. The problem is building a retirement plan around a spending number that doesn’t reflect how you actually intend to live.
Rather than assuming retirement spending stays flat, consider modeling different phases: more travel and activities in early retirement, potentially more moderate spending in the middle years, and higher healthcare and support costs later. A couple might spend $150,000 annually for the first several years because they want to travel extensively, then reduce discretionary spending later. A retirement plan should test that scenario rather than assuming flat spending from day one.
What to do instead: Build your retirement plan around the life you actually want to live, not an artificially low spending target designed to make the projections look better.
2. Misunderstanding Colorado Retirement Taxes
Colorado is relatively tax-friendly for retirees, but “Colorado doesn’t tax retirement income” is an oversimplification that trips up people who move here expecting zero state tax on retirement withdrawals.
Colorado generally begins its individual income tax calculation with federal adjusted gross income, which means federal tax planning decisions can affect your Colorado tax bill as well. Social Security receives favorable treatment: for taxpayers age 65 and older, Colorado allows a subtraction for Social Security benefits included in federal taxable income. For taxpayers ages 55 through 64, the rules are more limited and depend on income thresholds.
Other retirement income requires more careful planning. Traditional IRA withdrawals, 401(k) distributions, pensions, and other taxable retirement income can be subject to Colorado income tax at the 4.4% rate, although qualifying taxpayers may be eligible for retirement income subtractions. Colorado’s rules also coordinate the Social Security and pension/annuity subtractions, so the interaction is more nuanced than simply subtracting a fixed amount from all income.
The practical question for retirees isn’t just how much to withdraw. It’s which account the money comes from, how much taxable income gets recognized, whether Roth conversions make sense, how future Required Minimum Distributions will interact with Social Security, and how Colorado’s rules apply to each income type. A withdrawal strategy that saves taxes today can sometimes create larger bills later. We cover this in more depth in our article on the retirement tax bomb.
What to do instead: Coordinate your federal and Colorado tax planning together rather than treating state taxes as an afterthought.
3. Underestimating Health Insurance Before Medicare
If you retire before 65, Medicare isn’t your immediate solution. You need a strategy for the years between leaving work and becoming Medicare-eligible, and for many early retirees this is one of the largest expenses in the entire retirement plan.
For 2026, Colorado’s published average requested Silver-plan premium in the Denver rating area was approximately $1,203 per month for a 60-year-old before subsidies. That’s an average for a specific age and rating area, not a quote for any particular household. Actual premiums depend on age, location, plan selection, and household circumstances. For a married couple in their early 60s, unsubsidized gross premiums can add up quickly.
What makes this particularly important for high-net-worth retirees is that the way you structure withdrawals can affect your healthcare costs. Selling investments, realizing capital gains, taking large IRA distributions, or performing Roth conversions can increase the income used to determine ACA subsidy eligibility. A Roth conversion may reduce future RMDs and future income taxes, but recognizing too much income in a particular year can also increase healthcare costs. These tradeoffs need to be modeled together, not separately.
What to do instead: Before retiring early, model the entire period from retirement through age 65, including premiums, deductibles, out-of-pocket costs, taxes, and the effect of your withdrawal strategy on healthcare costs.
4. Forgetting About Colorado’s Hail and Homeowners Insurance Costs
Colorado’s housing costs aren’t the only housing expense worth considering. Insurance deserves attention too, and it consistently surprises retirees who move here from other states.
Hail is a significant risk along the Front Range, and Colorado homeowners have also had to contend with wildfire exposure, rebuilding costs, and insurance availability. The state’s Division of Insurance has highlighted both rising homeowners insurance costs and non-renewal issues facing some Colorado homeowners. Colorado’s Division of Insurance has found that hail accounts for a significant portion of homeowners insurance premiums along the Front Range.
Your true housing budget includes property taxes, homeowners insurance, HOA dues, utilities, maintenance, roof replacement, landscaping, snow removal, and major repairs. A home that looks affordable based on the purchase price alone may not be nearly as attractive once you add all of those. Before making an offer, get an insurance quote. Ask about the roof’s age and replacement history, hail coverage terms, wildfire exposure, deductibles, replacement-cost coverage, and policy exclusions.
What to do instead: Evaluate the total cost of ownership, not just the purchase price.
5. Moving to a Colorado Mountain Town Without Testing It
It’s easy to fall in love with the idea of retiring in Breckenridge, Telluride, Steamboat Springs, or another Colorado mountain community. Vacationing there and living there year-round are genuinely different experiences.
Breckenridge, for example, sits at approximately 9,600 feet. Altitude effects on sleep, exercise tolerance, and day-to-day energy are real and tend to become more significant with age. Winter road conditions, distance from specialized medical care, housing costs in desirable mountain towns, and the availability of everyday services all matter differently when you’re living there than when you’re visiting for a week.
The more important question to ask isn’t “Do I love it here in July?” It’s “Would I still want to live here if driving became more difficult? What happens if I eventually need a specialist, more frequent medical appointments, or a walkable neighborhood?” Those priorities shift over a 20 or 25 year retirement in ways that are easy to underestimate at 65.
What to do instead: Rent for an extended period, including winter, before purchasing a permanent home in a mountain community.
6. Ignoring Sequence of Returns Risk
The beginning of retirement is one of the most financially vulnerable periods for an investment portfolio. If your portfolio falls sharply during the first few years of retirement while you’re simultaneously withdrawing money, the damage can be much greater than experiencing the same decline while you were still earning a salary.
Consider a retiree with a $2 million portfolio withdrawing $100,000 per year. If the market falls 25% in year one, the portfolio may be closer to $1.5 million before considering withdrawals. At that point, every dollar withdrawn comes from a significantly smaller base, leaving fewer assets available to participate in a future recovery. This is sequence of returns risk, and it’s one of the clearest reasons why a retirement portfolio needs to be designed differently than an accumulation portfolio.
The solution isn’t putting everything into cash or bonds. You still need long-term growth over a retirement that may last 25 to 30 years. The answer is building the portfolio and withdrawal strategy together, with near-term spending needs, guaranteed income sources, and withdrawal rates all factored into how the portfolio is constructed. We cover the mechanics in our sequence of returns article.
What to do instead: Build a portfolio and withdrawal strategy together rather than determining your investment allocation independently from how much you plan to withdraw.
7. Retiring Without a Written Withdrawal Strategy
Knowing you have $2 million saved is not the same thing as knowing how to turn that $2 million into retirement income. Which account should you use first? Should you withdraw from taxable investments, Traditional IRAs, or Roth accounts? When should you claim Social Security? Should you perform Roth conversions? How much? What happens when RMDs begin?
These decisions interact with each other in ways that aren’t obvious, and the standard rule of “spend taxable accounts first, then traditional retirement accounts, then Roth accounts” isn’t universally correct. For some retirees, strategically drawing from an IRA earlier makes sense to reduce future RMDs. For others, preserving Roth assets has more long-term value. The optimal strategy depends on tax brackets, spending needs, Social Security timing, charitable goals, estate plans, and expected longevity.
Without a written strategy, most retirees default to withdrawing from whatever account feels most accessible. That can work in the short run while creating unnecessary taxes or larger forced distributions over a 20 or 30 year retirement. We walk through this in our article on retirement withdrawal order.
What to do instead: Create a year-by-year retirement income strategy rather than making withdrawal decisions month to month as bills arrive.
8. Getting Social Security Timing Wrong
Retiring at 62 doesn’t automatically mean you should claim Social Security at 62. Waiting until 70 isn’t automatically correct either. The decision should be evaluated alongside your health, longevity expectations, your spouse’s benefit, other retirement income, your investment portfolio, and your tax situation.
For married couples, Social Security isn’t just about maximizing income while both spouses are alive. The more important question is often what happens to the surviving spouse. A strategy that produces slightly more income today may not provide the best protection for the survivor, and the higher earner’s claiming decision directly affects the survivor benefit that continues after that spouse dies.
“When should I claim Social Security?” is often the wrong starting question. The better question is how Social Security fits into the overall retirement income strategy, including the portfolio, taxes, and the survivor income picture. We cover this in detail in our Social Security optimization article.
What to do instead: Evaluate Social Security alongside your investment portfolio, taxes, and survivor income needs rather than as an isolated decision.
9. Managing Your Portfolio Like You’re Still Working
The portfolio that helped you build wealth isn’t necessarily the portfolio you want when you’re drawing from it. During your working years, you contributed regularly, had time to recover from declines, and didn’t depend on the portfolio for monthly expenses. Retirement changes all three of those things simultaneously.
Your retirement portfolio may need to produce income, fund withdrawals, provide liquidity, manage market volatility, keep pace with inflation, and support a 25 or 30 year retirement. That’s a different set of demands than what an accumulation portfolio faces.
This doesn’t mean becoming dramatically more conservative. It means distinguishing between risk tolerance and risk capacity. You might comfortably tolerate a 30% portfolio decline emotionally, but if you’re withdrawing heavily from the portfolio and have limited guaranteed income, your financial plan may not absorb that same decline without lasting damage. Retirement income isn’t static either. Social Security decisions, RMD amounts, healthcare costs, and spending needs all shift over a long retirement, and the investment strategy needs to be revisited alongside them rather than set once and left unchanged for decades.
What to do instead: Evaluate investment risk in the context of your entire retirement income plan, and revisit the allocation periodically as income sources and spending needs change.
10. Treating the Retirement Plan as Finished
This may be the most widespread mistake. Retirement isn’t the end of financial planning. It’s when financial planning becomes more important, because the decisions are harder to reverse and the consequences compound over a longer remaining horizon.
Your circumstances will change. So will the tax code, markets, healthcare costs, spending patterns, and your own priorities. At 65 the focus may be on Roth conversions, Social Security, ACA coverage, and portfolio withdrawals. At 73 the conversation shifts to RMDs, Medicare, charitable giving, and potentially long-term care. At 80 the priorities look different again.
Each year, a complete retirement plan should revisit whether spending changed, whether the tax situation shifted, whether Roth conversions are still appropriate, whether RMDs are approaching, whether healthcare costs changed, and whether the investment allocation still matches the household’s actual income needs and risk capacity.
What to do instead: Treat retirement planning as an ongoing process rather than a one time plan completed before you stop working.
Is Colorado a Good Place to Retire?
Colorado can be an excellent retirement destination for people who value sunshine, outdoor recreation, healthcare access in the Denver metro, and an active lifestyle. For residents 65 and older, the favorable treatment of Social Security and available retirement income subtractions make the state reasonably tax-friendly compared with many alternatives.
But Colorado isn’t inexpensive everywhere, and it isn’t automatically tax-free for retirees. Healthcare before Medicare, homeowners insurance, housing costs in desirable areas, and the economics of mountain living can materially affect how much you need and how long your money lasts.
The more useful question isn’t whether Colorado is a good place to retire in the abstract. It’s whether Colorado is a good place for your retirement, given your income, assets, taxes, healthcare needs, housing preferences, and the lifestyle you actually want.
Gabriel Motta, CFP®, is a retirement financial advisor in Greenwood Village, Colorado, specializing in pre-retirees and retirees in the five to fifteen years before and after retirement. If you’re approaching retirement in Colorado and want to work through how your specific plan holds up before you make decisions that are hard to reverse, we’d be glad to start that conversation. You can also review our services and fees.
Colorado Retirement Planning: What to Do Before You Retire
If you’re within five to ten years of retirement, the most valuable planning work happens now while you still have income, flexibility, and time to make adjustments. A strong Colorado retirement plan should answer how much you’ll actually spend, when to claim Social Security, how much income should come from each account, whether Roth conversions make sense, how RMDs will affect future taxes, what healthcare will cost before Medicare, how withdrawals will affect ACA costs, and how the plan holds up if markets fall early in retirement.
Frequently Asked Questions
Is Colorado a good place to retire? Colorado can be an excellent retirement destination for people who value sunshine, outdoor recreation, healthcare access, and an active lifestyle. The tradeoffs include housing costs in desirable areas, homeowners insurance, healthcare before Medicare, and the higher costs associated with some mountain communities.
Does Colorado tax Social Security benefits? Colorado allows taxpayers age 65 and older to subtract Social Security benefits included in federal taxable income. Taxpayers ages 55 through 64 may qualify for a subtraction subject to income limits. The rules interact with other retirement income subtractions, so the calculation is more nuanced than a simple exclusion.
Does Colorado tax IRA and 401(k) withdrawals? Generally, taxable IRA withdrawals, 401(k) distributions, and other retirement income can be subject to Colorado income tax at the 4.4% rate. Qualifying taxpayers may be eligible for retirement income subtractions, and the rules depend on age and the type of income received.
How much does health insurance cost in Colorado before Medicare? Costs vary substantially by age, location, plan, and household circumstances. For 2026, Colorado’s published average requested Silver-plan premium in the Denver rating area was approximately $1,203 per month for a 60-year-old before subsidies. Actual premiums for a specific household can be substantially different.
Can I retire in Colorado before age 65? Yes. But retiring before Medicare eligibility requires planning for health insurance between retirement and age 65. Your income and withdrawal strategy can also affect the cost of ACA coverage, making tax and healthcare planning particularly important in those years.
What are the best places to retire in Colorado? The south Denver metro, including Greenwood Village, Centennial, Highlands Ranch, Lone Tree, and Parker, offers convenient healthcare, shopping, restaurants, and airport access. Fort Collins and Colorado Springs offer a different balance of city amenities and lifestyle. Mountain communities offer exceptional scenery and recreation but require careful consideration of altitude, winter weather, healthcare access, and housing costs.
Should retirees live in the Colorado mountains? Mountain living can be an excellent retirement choice, but it should be tested carefully. Spending extended time in the community during winter as well as summer before buying is strongly advisable. Healthcare access, winter driving, altitude, and home-maintenance requirements can become more important factors as you age.
When should I start retirement planning? Ideally, several years before retirement. The five to ten years before retirement can be especially valuable because you still have time to make decisions involving Roth conversions, Social Security, investment allocation, savings, healthcare, and the timing of retirement itself.
Key Takeaways
- Don’t underestimate your first-year spending. Retirement often starts with more travel, projects, and discretionary spending than the long-term plan assumes.
- Understand Colorado’s actual tax rules. Social Security receives favorable treatment for residents 65 and older, but other retirement income may still be taxable, and the rules interact with each other.
- Plan for healthcare before Medicare. Early retirement can create a significant insurance expense, and your withdrawal strategy affects your ACA subsidy eligibility.
- Get homeowners insurance quotes before buying. Hail, wildfire exposure, and rebuilding costs can materially affect the cost of owning a Colorado home.
- Test mountain living before committing. A vacation experience isn’t the same as living there year-round through multiple seasons.
- Create a written withdrawal strategy. Your retirement accounts should be viewed as a coordinated income system, not separate buckets you draw from reactively.
- Evaluate Social Security as part of the entire plan. Claiming decisions affect both lifetime income and survivor income.
- Don’t manage your portfolio exactly as you did while working. Retirement introduces withdrawals and sequence of returns risk that require a different approach.
- Keep planning after retirement. Taxes, RMDs, healthcare, spending, and investment needs continue to change across a 25 to 30 year retirement.
About the Author
Gabriel Motta, CFP®, MBA, is the founder and principal of Inclinevest LLC, a fee-only fiduciary retirement financial advisor and financial planner based in Greenwood Village, Colorado. He works with pre-retirees and retirees throughout south Denver, across Colorado, and nationally, including clients in Highlands Ranch, Centennial, Lone Tree, Aurora, Parker, Castle Rock, and Littleton. As a retirement planner and wealth manager, Gabriel helps clients navigate retirement income planning, Social Security strategy, tax-efficient withdrawals, and equity compensation. Gabriel is a NAPFA and XY Planning Network member. Learn more at inclinevest.com or schedule a conversation.
Sources
- Colorado Department of Revenue, “Income Tax Topics: Social Security, Pensions and Annuities” — https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities
- Colorado Department of Revenue, “Individual Income Tax Filing Guide” — https://tax.colorado.gov/retirees
- Colorado Governor’s Office, “2026 ACA Premium Data” — https://www.colorado.gov/governor/news/chaos-congressional-republicans-leads-average-premium-increases-over-28-2026
- Colorado Division of Insurance, “Homeowners Insurance Resources” — https://doi.colorado.gov
- Social Security Administration, “Retirement Benefits” — https://www.ssa.gov/benefits/retirement/planner/applying2.html
- IRS, “Retirement Topics: Required Minimum Distributions” — https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
- Medicare.gov, “Part B Costs” — https://www.medicare.gov/your-medicare-costs/part-b-costs
This article is for general informational and educational purposes only. It isn’t personalized investment, tax, or legal advice, and it shouldn’t be relied on as a substitute for guidance specific to your situation. Inclinevest LLC is a registered investment adviser. Registration doesn’t imply any level of skill or training. Please consult a qualified professional before making decisions about your own financial circumstances.
