About 45% of Americans will run out of money in retirement, including those who invested and diversified. Here are the 4 biggest mistakes being made.

Some wealthier millennials and Gen Zers are over-saving for retirement.

If you’re aiming to retire at the standard age of 65, buckle up because you’re going to want to hear this one.

According to a simulated model that factors in things like changes in health, nursing home costs, and demographics, about 45% of Americans who leave the workforce at 65 are likely to run out of money during retirement.

The model, run by Morningstar’s Center for Retirement and Policy Studies, showed that the risk is higher for single women, who had a 55% chance of running out of money versus 40% for single men and 41% for couples.

The group most susceptible to ending up in this situation are those who didn’t save toward a retirement plan, according to Spencer Look, the center’s associate director. Still, retirement advisors say even those who think they’re prepared aren’t.

It’s a big problem, says JoePat Roop, the president of Belmont Capital Advisors, who has been helping clients set up income streams for their retirement years. What might surprise many is that one of the biggest mistakes people make isn’t so much about how much they save but how they plan around what they save.

To be more specific, Roop says what catches retirees off guard is taxes and the lack of planning around them. Many assume they will be in a lower tax bracket once they stop receiving a paycheck. But from his experience, retirees often remain in the same tax bracket or could even end up in a higher one.

“It’s wrong in so many ways,” Roop said. After retiring, most people’s spending habits either remain the same or go up. When you have more leisure time on your hands, more money goes toward entertainment and travel, especially in the first few years of retirement. The outcome is a higher withdrawal rate, which can push you into a higher tax bracket, he noted.

People spend their careers investing in a 401(k) or an IRA because they allow contributions before taxes. It sounds like a great perk when you can cut your taxes and defer them. The downside is that withdrawals will be taxed.

His solution is to add a Roth IRA, an after-tax account that allows gains to grow tax-free. This way, during a year when you need to withdraw a higher amount, you can resort to that account instead, he noted.

Another big mistake people make is moving money around in an inefficient way that leads them to incur more taxes than they should or lose on future returns. This can include choosing to withdraw a high amount of money from an investment account to pay off a mortgage or buy a house.

“There are rules that the IRS has set up for us, and they’re there to pay the government, not you,” Roop said.

A prime example of a big tax mistake one of Roop’s clients (let’s call him Bob) made recently was liquidating part of an IRA to buy a house.

Bob is a man of modest means retiring this year, Roop said. But a sudden breakup with his girlfriend led him to cash out some of his IRA to buy a house. He decided to withhold the tax, which could have been between $30,000 and $40,000.

“When he told us this, my mouth dropped,” Roop said. “I said, Bob, you had the money for the down payment in another account where there would’ve been no tax, and we were going to roll over your IRA and put it in a tax-deferred account.”

In this case, Roop planned to move money from Bob’s IRA to an annuity that would have paid him a bonus of 10%, or $15,000. The mistake might cost Bob between $45,000 and $55,000, between the owed taxes and the missed bonus.

The lesson: don’t be Bob.

The next big mistake is sequence risk, which is when you withdraw from your portfolio when the stock market is down.

“The S&P 500 has averaged close to 10% for the last 50 years,” Roop said. “And so it’s a true assumption that over the next 50 years, it’ll probably make between nine and 11%. But when people retire, we don’t know the sequence of returns.”

Simply put, if you retire next year with an investment portfolio worth a million dollars and the market drops by 15% that year, you now have $850,000. If you need to withdraw during that time, it will be very difficult to get back to breakeven, Roop said.

It means that owning stocks and bonds isn’t enough diversification. He noted that you must also have something that is principal-protected, such as a CD, fixed annuities, or government bond. This way, you can avoid touching your portfolio during a bad time in the market.

Gil Baumgarten, founder and CEO of Segment Wealth Management, says another big reason he sees people run out of money is the lack of appropriate risk-taking they make during their income-earning years.

A low-risk approach is earning interest on cash, a terrible form of compounding because it’s taxed higher than ordinary income with lower returns, he noted. Meanwhile, stocks could see higher returns and aren’t taxed until sold, or aren’t taxed at all if you opt for a Roth IRA.

“People don’t take into account how expensive things get over time, not realizing that they can live another 40 years in retirement. You can’t get rich investing your money at 5%,” Baumgarten said.

As for those who do take risks, it’s often the wrong kind. They chase hype and bet on highly speculative investments. They end up losing money and assume risk is bad, Baumgarten said. The right kind of risk is a higher exposure to stocks through mutual funds or index funds and even buying blue chip stocks, he noted.