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Category: Retirement Planning

Retirement Planning Beyond Finances: Finding Purpose in Your Third Act

Most people don’t struggle in retirement because they didn’t save enough money. They struggle because retirement isn’t just a financial transition. It’s an identity transition. After decades of defining yourself by what you do, suddenly that answer disappears. You’ve planned for the numbers, but have you planned for who you’ll become?

The baby boomer generation is set to be the longest-living generation in history. Your third act (those 25 to 30 years after your traditional career ends) could span longer than many people’s entire careers. That’s not time to wind down. That’s time to decide what you want to be remembered for. But getting there requires more than a solid investment portfolio.

The Retirement Identity Crisis: When ‘What Do You Do?’ No Longer Fits

Picture yourself on an airplane. A friendly stranger strikes up a conversation and asks that quintessentially American question: “So, what do you do?”

If you’re recently retired, you might freeze. What do you do? After a long, uncomfortable pause, you might blurt out: “I’m retired.” It sounds like an achievement, maybe even a rite of passage. But the moment the words leave your mouth, something feels off. What does that even say about you? The only thing it communicates is that you don’t do something anymore. It’s a negative definition—an absence rather than a presence.

This is the retirement identity crisis, and it catches high achievers especially off guard. For decades, our roles and titles define us. I’m a financial planner, manager, teacher, engineer, etc. Those are what we do, not who we are. Who are you? That’s a much bigger, much harder question.

When Sandy Vecchi faced this exact moment on a flight to visit her daughter, the experience shook her. After three decades in financial services helping others prepare for retirement, she’d done everything “right” herself. She’d built savings, created a plan, even retired and moved to a beautiful property with her husband. But when a stranger asked what she did, she had no answer that felt authentic.

The emotional aspects of retirement often center on this identity shift. When you wake up in the morning, there’s no clear purpose pulling you out of bed. The structure that organized your life for 30 or 40 years is gone. Most people’s connections come from colleagues at work. Suddenly, those are missing too.

Research shows that humans are wired to need structure, connection, and challenge. Remove all three at once, and psychological well-being suffers. Often, physical well-being follows. Many retirees gain significant weight in their first two years. It’s not about the food; something deeper is missing.

The Retirement Honeymoon Phase: When Paradise Isn’t Enough

At first, retirement feels like everything it’s supposed to be.

  • You turn off the alarm clocks.
  • You sit on the porch with your morning coffee.
  • You read all those books on your “when I retire” list.
  • You travel.
  • You play golf.
  • You finally have time for hobbies you’ve put off for decades.

The retirement honeymoon phase is real, and it’s wonderful. You’ve earned this freedom. Every day feels like a gift. But here’s what financial planners rarely tell you: the honeymoon phase doesn’t last forever. For most people, it lasts about two years.

Then the cracks start showing. That complete lack of structure, which seemed so appealing at first, starts feeling directionless. The travel that was exciting begins to feel empty. You think, “We’re going on another trip?” and realize something’s missing. The endless leisure that looked perfect in the planning stages doesn’t fill the space left by decades of purpose-driven work.

When Sandy built a brand new home on 20-plus acres, bought chickens, and watched her husband get his Kubota tractor, it felt like paradise. They traveled. They enjoyed life. It was exactly what retirement brochures promise. About two years in, though, she started asking bigger questions: If I live to 100, what will I do with all those years? It definitely wasn’t going to be sitting on the porch doom-scrolling through Facebook.

Understanding retirement transition challenges means recognizing that the honeymoon phase is normal, and so is what comes after. The key is planning for both.

The Wake-Up Call: Mortality and Meaning

Sometimes it takes a crisis to clarify what matters. When Sandy’s husband received a devastating cancer diagnosis—a rare mutated form of the leukemia he’d already survived in his twenties—everything changed. They sold their forever home almost immediately. They moved into a small apartment near the hospital where he’d receive treatment. His only hope was a bone marrow transplant.

Sitting in hospital waiting rooms for months, watching a vibrant man fight for his life, forced a reckoning: If he’s fighting so hard to live, why am I not fully living mine?

You might not face something this dramatic. But at some point in your third act, mortality becomes real in a way it never was during your working years. Maybe it’s a health scare for you or someone close to you, or you find yourself attending too many funerals. Maybe it’s just looking in the mirror and realizing you have more years behind you than ahead of you.

That awareness can be terrifying or clarifying. Ideally, it’s both. It forces you to ask:

  1. What do I want to do with the time I have?
  2. What have I always wanted to do but put on hold?
  3. Who have I always wanted to become?

Beginning With the End in Mind

Stephen Covey’s principle of “beginning with the end in mind” becomes especially powerful in the third act. If you were on your deathbed, what would you hope people say about you? Nobody’s going to say they wish you’d worked more or had more screen time.

Here’s the harder question: What regrets do you have? Those things you kept saying would happen “someday.” You told yourself, “I’m too old,” or “I’m not good enough.” Those are the ones that haunt people.

Bronnie Ware wrote a book on the top five regrets of the dying. The number one regret?

People didn’t do what they wanted to do. They spent their lives doing what everyone else wanted them to do.

You can eventually make peace with your mistakes. You can learn from them, grow from them, and forgive yourself for them. Sidney J. Harris, an American journalist, put it perfectly:

“Regret for the things that we did can be tempered with time. Regret for the things we didn’t do is inconsolable.”

In your first two acts of life (childhood and career), you’re heavily influenced by parents, society, and expectations. You had to be practical because you had bills to pay, responsibilities to manage, and mouths to feed. There’s a little part of you that’s always been back there hanging on, asking: “Are you ever gonna give me a chance?”

The third act is when you finally can.

Purpose After Career Ends: More Than a Job

The word “purpose” gets thrown around a lot. It can feel cliché. But finding purpose in retirement is something you know in your heart you were meant to do with the talents you were given.

Purpose is bigger than a job. As Cicero said, as you get older, your goal is to mentor, to teach. Og Mandino, in “The Greatest Salesman in the World,” asks: What are you going to do that leaves traces on the world?

It doesn’t have to be grandiose, like your name on a building. More important is this: Did you touch anybody and change something for them? Maya Angelou said, “People won’t remember what you said or what you did, but they’ll remember how you made them feel.” That’s a legacy in itself.

Purpose in retirement might look like:

  • Starting a business you’ve always dreamed about
  • Volunteering at the library reading to kids
  • Mentoring young people in your former industry
  • Finally writing that book
  • Learning that instrument you put aside at age 12
  • Teaching classes in your area of expertise

The key is that it challenges you mentally and physically. Research consistently shows that you need to find something to challenge both, or you’ll decline rapidly. Our ancestors retired at 65 and passed away at 68. We’re not doing that anymore. We get a lot more years if we keep ourselves engaged.

When Sandy realized that little girl who used to twirl in the backyard pretending to be Maria von Trapp had disappeared when her parents divorced, she understood something powerful. That girl had dreams: unrealistic, creative, joyful dreams. But watching her mother struggle financially after divorce taught her that dreaming wasn’t safe. Security was everything.

Sandy spent decades building security by:

  • Getting an MBA (when very few women did)
  • Building a successful career
  • Helping countless clients prepare financially for retirement

She did everything “right.” But in doing so, she’d buried that dreaming girl completely.

The third act? That’s when the little girl gets to twirl again.

Practical Steps for Post-Retirement Life Planning

Understanding all this intellectually is one thing. Actually planning for it is another. Here’s how to approach retirement planning beyond finances:

Take a Sabbatical First

There’s nothing wrong with traditional retirement. You worked hard to get there. Take time to enjoy life, do some traveling, sleep in, play golf. Give yourself permission to have that honeymoon phase.

When you start thinking, “We’re going on another trip?” or the leisure starts feeling empty, that’s when you know it’s time to look at the bigger picture. For most people, this happens around the two-year mark. Don’t fight it. That restlessness is a signal, not a problem.

Get in the Best Shape of Your Life

Nothing else matters if you’re not healthy. You can have millions in the bank, but you can’t buy health. Physical wellness is the foundation for everything else in your third act.

Many retirees gain significant weight in their first couple of years. The lack of structure, the social eating while traveling, and the loss of purpose all contribute. Making physical health a priority isn’t vanity. It’s about giving yourself the energy and longevity to actually live your third act.

If you’re planning on centenarian status (and research suggests many baby boomers will reach it), you need to start treating your body like it needs to last that long. Start walking. Join a gym. Find physical activities you genuinely enjoy, whether that’s fly fishing in Montana or dancing or hiking.

Read Intentionally

Read books that challenge you to think about who you want to become. Not business books about maximizing productivity. Books about life, purpose, legacy, and growth.

Suggested reading includes:

  • “Who Do I Want to Be When I Grow Old?” by Leider
  • “From Strength to Strength” by Arthur C. Brooks (especially for high achievers)
  • Stephen Covey’s work (it’s much more than business advice—it’s life advice)

Reading isn’t just entertainment in the third act. It’s how you expose yourself to new ideas and reimagine what’s possible.

Make Actual Plans

Don’t just think about what you want to do. Put it on your calendar. If you don’t, it turns into “someday,” which vanishes into the sky.

  • Want to start a new business? Write a business plan with definitive deadlines.
  • Want to volunteer? Schedule the first day.
  • Want to learn something new? Register for the class.
  • Want to write a book? Block out writing time starting next week.

Your third act needs some structure. Not the rigid structure of your working years, but intentional structure. Even in retirement, having plans and dates keeps you moving forward.

Act (This Is the Hardest Part)

Acting is where most people get stuck. The first action is scary. Your first day volunteering. That first business meeting. Starting a class where you’re a beginner at age 65. We tend to think about it, get nervous, and say, “Okay, forget that, I’ll do it someday.”

Often, someday never comes.

The things you want to do in your third act will probably be awkward and embarrassing and not really good the first time around. That’s okay. If you’re not growing, you’re dying. That doesn’t stop being true just because you’ve retired. In fact, it becomes more important.

Focus on Quality Over Quantity

People need less quantity and more quality in their retirement years. It’s not about filling every day with activities. The goal is to fill your days with meaning.

The happiest retirees aren’t trying to stay busy for the sake of staying busy. They’re living intentionally, knowing what they want to do with their lives. If they were taken tomorrow, they’d know they were doing what mattered.

This might mean saying no to things that don’t align with your purpose. It might mean disappointing people who expect you to be available for every request now that you’re retired. It might mean setting boundaries that feel uncomfortable at first.

But living intentionally means making choices, not just going along with whatever comes your way.

Legacy Is More Than What You Leave—It’s How You Live

Yes, work with your estate planning attorney to set up trusts, update your will, and think about what you’ll leave your children financially. That’s important. Many people believe in gifting children while they’re alive so they can watch them enjoy it.

But the legacy you truly want to leave is for your children and loved ones to say: “They were incredible. They stepped out of their comfort zone to take chances on things that were awkward and embarrassing and probably not really good the first time around. They lived fully.”

When you’re on your deathbed, what will bring you peace isn’t the size of your estate. It’s knowing you touched people and changed something for them. You mentored, taught something valuable, and left traces on the world even if that world was just your community, family, or neighborhood.

It’s knowing you gave the dreamer in you a chance.

It’s Not Too Late (Even If You’re Already Retired)

Maybe you’re reading this and thinking: I’m already five years into retirement. I missed my chance. I should have thought about this before.

You haven’t missed anything. Sandy “unretired” after already being retired. She started a podcast, a blog, speaking engagements—all in her mid-60s. She’s learning new technology, putting herself out there in ways that would have terrified her younger self.

Her husband survived his bone marrow transplant. They went fly fishing in Montana, something they weren’t sure they’d ever do. He’s planning a halibut fishing trip to Alaska. They both realized they have more years behind them than in front of them. That clarity is a gift, not a curse.

Their kids are raised and doing well. Nobody’s living with them. This is the time to be selfish. For women especially, that permission is crucial. It’s okay to put yourself first and ask: What’s been on my list that I put on the back burner because I had to be an adult with responsibilities?

The Question That Changes Everything

There’s one question that cuts through all the planning and philosophy:

If you’re fortunate enough and healthy enough to live another 25 or 30 years, what do you plan on doing with all that time?

Really sit with that question. Not what will you do next month or next year? What will you do with potentially three decades?

The answer probably shouldn’t be “travel and play golf.” Those can be part of it. But for 30 years? That’s why so many retirees struggle after the honeymoon phase ends. They planned for leisure, not for purpose.

Take quiet time, not time filled with TV or social media, and look at yourself.

  1. What do you still want from your life?
  2. What do you want to do?
  3. How do you see yourself separate from all the roles and titles you’ve held?
  4. Who, or what, do you want to be?

These aren’t easy questions. They require sitting with discomfort and being honest about dreams you buried decades ago. They require admitting that maybe the life you planned isn’t the life that will actually fulfill you.

These are the questions that transform retirement from an ending into a beginning.

Your Third Act Starts Now

You don’t have to be retired to think about this. In fact, if you’re in your fifties and still working, now is the perfect time to start planning. Not just planning your finances (though that’s important), but planning who you want to become.

Look at your life and ask: Is there something I still want to do? Take that quiet time. Make those plans. Put dates on your calendar. Most importantly, start acting on them.

Will you

  • Retire early and take a sabbatical?
  • Never fully retire, but shift to consulting?
  • Work part-time doing something completely different?
  • Volunteer more?
  • Learn something new?

The third act doesn’t have a script. That’s the whole point.

Your third act does require intention. Challenging yourself, mentally and physically, is part of the deal. So is connection, structure, and purpose. You have to be willing to try things that might not work, to be embarrassed, to be a beginner again.

And that version of yourself who used to dream—before life taught you to be practical—finally gets to have a voice.

Because regret for the things you didn’t do? That’s inconsolable.

But regret for the things you’re about to do? That’s not regret at all. That’s living.

Retirement planning beyond finances means preparing for the identity transition, not just the financial one. Your third act could span 25-30 years, which is longer than many careers. The question isn’t whether you have time. The question is: What will you do with the time you have?

How We Help

At Imagine Financial Security, we help individuals over 50 who have at least $1 million saved navigate these complex retirement decisions. If you are looking to

  • Maximize your retirement spending
  • Minimize your lifetime tax bill
  • Worry less about money and live more

You can start by taking our Retirement Readiness Questionnaire on our website at www.imaginefinancialsecurity.com, so we can learn more about how we can help you on your journey to and through retirement.

Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel.

This is for general education purposes only and should not be considered as tax, legal, or investment advice.

Retirement Planning for Singles

I was recently reviewing retirement plans for two long-term clients with remarkably similar situations. Both had saved a little more than $3 million and paid off their homes. Both delayed Social Security until 70. They had a lot going for them. But their retirement strategies looked completely different. Why? One client was married, the other was single.

That realization hit me hard. So much retirement content out there—ours included—focuses on married couples, joint life expectancies, and strategies built for two. But millions of retirees aren’t married. They’re divorced, widowed, or maybe they were never married in the first place. When it comes to retirement planning for singles, the strategy looks completely different than planning for married couples.

Let’s talk about what changes when you are single and planning for retirement.

Retirement Planning for One

Obviously, when retiring alone, you’re only planning for one life expectancy. According to IRS life expectancy tables, if you’ve reached age 60, your remaining life expectancy as a male is about 20 years. As a female, it’s about 23 years and some change.

For married couples, this can be complex, especially if one spouse is healthy with great genes and longevity on their side, while the other faces more uncertainty. You need to figure out different strategies, such as Social Security benefits and survivor benefit planning. The reality of retiring alone means you have complete control over your retirement vision and spending, which makes this equation simpler to address.

How Much Money Does a Single Person Need to Retire?

If longevity is stacked in your favor, it’s probably beneficial to delay your Social Security benefit until 70. Married couples have the option of delaying the larger of the two benefits while starting the smaller benefit earlier. When you’re single, you don’t have to compromise on your retirement lifestyle choices, but you must have adequate savings during that bridge period—the time from your retirement start date until you begin taking Social Security.

If you retire at 60, that bridge period could potentially be 10 years. A lot can happen in 10 years to your health, the markets, and ultimately your portfolio. How much money a single person needs to retire depends heavily on their Social Security claiming strategy. While retirement planning for singles simplifies life expectancy to some extent, it makes the Social Security timing decision extremely important. If you run into a bear market during that bridge period, it can be quite damaging, so you must have a bear market withdrawal strategy to hedge against that risk.   

Tax Planning Becomes More Complex

This is a big one. Tax brackets work differently in retirement for singles compared to married couples filing jointly. Singles cannot spread their taxable income across a joint return. Couples can—their brackets are basically doubled throughout all tax brackets until you hit that 37% top bracket.

Roth Conversion Opportunities

The Roth conversion window becomes smaller when you’re single. If you’re trying to fill up the 22% bracket, you have a lot less room to do so than if you were filing a joint return. You also need to be careful about IRMAA thresholds if you’re on Medicare.  These surcharges are hidden taxes on your Medicare Part B and Part D. If you’re doing Roth conversions, not only do you have less room in the income tax brackets, but you also have less room for error with those IRMAA thresholds.

The RMD Tax Trap

Once required minimum distributions kick in, they dramatically impact the single tax filer more than the joint filer. Let’s use that example I mentioned earlier: Client A, a joint filer with $3 million saved, versus Client B, a single filer also with $3 million saved. When those required minimum distributions kick in, they’re going to have a much bigger tax impact on the single filer.

Projecting out your lifetime tax bracket over time becomes critical because the tax trap of those required minimum distributions is more severe for single filers than married filers.

Investment Strategy

Here’s something I don’t see talked about enough: the investment strategy changes substantially when retirement planning for singles versus joint retirees. I have several couples I work with where one spouse has an aggressive risk tolerance, and the other has a very conservative risk tolerance. They sort of balance each other out.  One advantage from an investment perspective for singles is the simplified decision-making process.

On the surface, that can mean a more straightforward investment strategy in retirement. But I’ve noticed something interesting: during downturns, I hear from some of those single clients a little more. Maybe that’s just my imagination, but I think behavioral finance becomes much more important.

I was referred to a client about three years ago. She had been widowed for eight years and had been working with Fidelity.  She told me when I first met with her that she was checking her accounts every single day. Yes, every single day. It was giving her extreme anxiety, especially when markets were volatile back in 2022. She didn’t have that trusted partner to ride those ups and downs with. She was kind of panicking alone, and sometimes that can lead to bad investment decisions when you’re reacting emotionally to market volatility, especially when you’re retired. What you have is what you have; you’re not adding more to the portfolio.

I’m happy to report that I met with her a couple of months ago and she shared that she literally never checks her accounts anymore. That didn’t happen overnight. Early on when we were working together, she was still in that habit. But after thoughtful planning and strategic implementation, she gradually became more comfortable with the strategy and began worrying less about her portfolio each day. The investment strategy and planning around it become simpler because we aren’t battling different personalities, but the management can become more challenging when you’re in your own head with nobody to bounce ideas off of.

Housing Decisions: A Critical Component

On the surface, a single person may not need as much space. You could probably get away with a smaller single-family home or maybe even a condo. But the more challenging issue is aging in place. Should you move near family? Should you move near better healthcare? Statistics show that retirement planning for single women often accounts for longer life expectancies, making these decisions even more critical.

One solution that has been rapidly gaining popularity among retirees—and definitely within my client base—is moving into a CCRC, a continuing care retirement community. Think of a CCRC as buying into a retirement ecosystem instead of just buying a home. They typically have multiple stages of living:

  1. Independent living
  2. Assisted living
  3. Skilled nursing
  4. Memory care.

One of my clients who lives in Florida is in a very nice one in the Jacksonville area and absolutely loves it. All of her friends are there, her activities are there, her dining is there, her workout facilities are there, and even transportation to certain events is there. It’s basically maintenance-free living. After losing her husband more than a decade ago, she’s dating her neighbor two doors down. It’s hilarious and cute at the same time.

While there are many perks, the cost can be extremely high. Entrance fees can sometimes be $200,000, $500,000, or even a million dollars or more if they’re really upscale. Then you have monthly fees on top of that. Granted, a lot of your lifestyle will be covered by those monthly fees, but the upfront cost is massive. And unfortunately, your beneficiaries won’t receive that asset when you pass away like they would if you were to pass on a single-family home or a condo. 

Given their popularity, waiting lists can be long—sometimes five years or even 10 years. You need to decide on the right facility, get on the waitlist, and then make that financial commitment later.

Long-term Care Planning

Long-term care is a critical component for anyone’s retirement, but for singles it does create some complexity.  For starters, there is no spouse around to help with caregiving or coordinating caregiving as they age.  70% of caregiving today is provided by unpaid caregivers, most of whom are spouses. For singles:

  • Who will be the caregiver?
  • Who will be the caregiving coordinator?
  • Where would the funds come from to pay for that care?
  • Who is managing the financial affairs during all of this? 

One thing I hear time and time again from the folks I work with is that they do not want to be a burden on their family members. They don’t want to be a burden on their children or siblings. Maybe you don’t have that trusted family member who lives near you.  These long-term care planning decisions can be a bit more complicated, so make sure to speak with your advisor about your options and whether or not looking into Long-term Care Insurance might be a viable solution. 

Estate Planning

Singles face some built-in challenges in their estate planning.  There’s no automatic spousal direction where your spouse steps in to be your executor or manages the finances if you are unable to.

The question that a lot of single retirees I work with have difficulty answering is: Who will be that individual to step in on your behalf to make those financial decisions if you’re unable to? And furthermore, how familiar are those individuals with your plan?

If it’s a sibling or even an adult child, they may know they’re in charge of making those decisions, but they may not know your financial situation. They may not know your balance sheet. I work with an older client in her 80s who lost her husband about six years ago. She has tapped her two adult children into the planning process, and I work with them as much as I do with her directly.  This is how it should be done!

She wasn’t what I would call the CFO of the household. Her husband made a lot of those decisions on their behalf. She’s very fortunate to have her two daughters, who are both local, responsible, and involved in the process. Otherwise, this would be crippling for her. She would be so afraid of making the wrong decision. But some of you may not have that situation. Perhaps you don’t have children, or perhaps they’re not in a position to help due to proximity or fiscal responsibility.

Interestingly, this is a big reason single retirees and pre-retirees hire our firm. Having that trusted third party who knows your plan and can help your trusted contacts follow through on your wishes provides significant peace of mind. 

Lifestyle and Spending Patterns

There’s no research or data backing this—just my observation working with retirees over the last 18 years. Lifestyle changes are a bit more subtle for a single retiree than for a married couple. With married couples, I often see that as they age, travel slows down and going out to eat becomes less frequent. Life just becomes a little quieter.

But for a lot of the singles I work with, their spending is their community. It’s the golf league, the church trips, the travel groups, dinners out with friends. Those spending stages I often talk about—the go-go years, slow-go years, and no-go years—can be more subtle for single retirees versus married couples.

I’m sure many of you who are married and reading this are thinking, “We’re doing all those things too.” There’s no hard-and-fast rule on this one. But when you’re planning as a single, the lifestyle you want to build often becomes a core part of your social interactions. Keeping those in place as long as possible is important for your mental health.

The Good News About Retirement Planning for Singles

After reading this, you might think retirement seems more complicated if you’re single. I don’t actually think that’s true. There’s a simpler planning process in many ways.

  • One vision
  • One spending style
  • One retirement start date
  • One risk tolerance
  • One Social Security decision

Effective retirement planning for singles requires addressing unique challenges that married couples don’t face, but it also offers unique advantages.

At the end of the day, being single doesn’t mean retirement is better or worse. The strategy and the playbook simply change. Tax planning will be different. Your Social Security strategy will be different. Your housing decisions change. Long-term care planning becomes critical. Estate planning becomes more complicated. But with good, thoughtful planning, there’s no reason a single retiree cannot enjoy an incredible retirement.

In fact, some of the happiest retirees I’ve worked with are single because they’ve built retirement around the life they want, not the life someone else expected them to have. Many people worry about retiring alone, but with proper planning, it can lead to an incredibly fulfilling retirement.

Take Action Now

If this article made you pause and think about areas you haven’t thought through yet, I encourage you to start those conversations now. Whether it’s with your family members, an estate planning attorney, or a trusted financial planner, don’t wait until a health event or life change forces you into those conversations. Have them proactively, not reactively.

If you are approaching or already in retirement and don’t have a trusted partner, consider working with a financial planner who understands the unique challenges and opportunities of retirement planning for singles.

At Imagine Financial Security, we help individuals over 50 with at least $1 million saved navigate these complex retirement decisions. If you are looking to

  • Maximize your retirement spending
  • Minimize your lifetime tax bill
  • Worry less about money

You can start by taking our Retirement Readiness Questionnaire on our website at www.imaginefinancialsecurity.com, so we can learn more about how we can help you on your journey to and through retirement.

Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel.

This is for general education purposes only and should not be considered as tax, legal, or investment advice.

7 Retirement Expenses That Consistently Catch Pre-Retirees by Surprise

When I launched Imagine Financial Security back in 2021, I thought I had everything figured out. I created detailed spreadsheets with revenue projections for years one, two, and three. I mapped out my expense projections carefully. But here’s what I discovered: the revenue I thought I needed to support my family was 50% lower than reality.

Part of that gap stemmed from inflation, which hit 9.1% in 2022. But a bigger part? My wife and I went from zero to three children in just 16 months (yes, twins surprised us with pregnancy number two). I’d never owned a business before. I’d never been a dad before. I didn’t know what I didn’t know.

You’re facing a similar challenge as you approach retirement. One of the biggest mistakes pre-retirees make is underestimating their retirement expenses. I’ve had people sit down with me and confidently say they need $8,000 a month to retire. Then we start talking about travel plans, golf trips, gifting to children and grandchildren, replacing vehicles, and home repairs. Suddenly, that $8,000 becomes $10,000, $11,000, or even $12,000 a month.

This doesn’t happen because people are lying or fudging their budget. It happens because they kind of forgot how life really works. Understanding your retirement expenses is critical to building a plan that actually works. If we’re off by $10,000, $15,000, or $20,000 annually, that could mean the difference between retiring at 55 versus waiting until 59 or 60.

Today, I’m sharing seven retirement expenses that consistently catch people by surprise. These aren’t theoretical concerns. These are real issues I’ve observed over 18 years of helping people plan for and execute successful retirements.

Why Estimating Retirement Expenses Is More Challenging Than You Think

Estimating retirement expenses requires thinking through scenarios you’ve never experienced yet. You’re trying to predict costs for a lifestyle you’ve never actually lived, potentially spanning 25, 30, or even 35 years. The challenge with estimating retirement expenses is that most people are overly optimistic. They envision the retirement they need rather than the retirement they really want.

If you’re married or have a partner, this gets even more complicated. You’re probably the chief financial officer of your household, but your spouse or partner probably isn’t. They may be more inclined to spend on things you’re not thinking about. Having open communication and honest dialogue about these expenses is critical.

A retirement plan is only as good as the inputs that go into it. If our investment return assumptions are wrong, that’s a problem. If inflation projections are off, that’s a problem. But as long as we’re directionally right on those factors and we get the budget assumptions right, we should be in good shape.

Nobody’s going to dial in every single expense 100% accurately—that’s impossible. But if we underestimate spending assumptions, that can dramatically impact your entire plan.

Expense #1: The Go-Go Years – When Living Expenses in Retirement Peak

I like to break retirement into three distinct phases.

  1. First, you have the go-go years—the honeymoon phase of retirement.
  2. Then come the slow-go years, when you start to slow down because physically you don’t have the health you had in your 50s and 60s.
  3. Finally, there are the no-go years later in life, when your family is probably visiting you rather than you visiting them.

Your living expenses in retirement will likely be higher in the early years than you expect. I recently had someone tell me, “Kevin, retirement is great, but every day is Saturday. The things I loved doing on Saturday when I was working, now I can do every single day.”

If I were retired today, I’d be playing golf, fishing, traveling, and going out to eat far more often than I do now. If you’re a golfer, you know exactly what I’m talking about. I’d be booking trips to Bandon Dunes, Royal Port Rush, Streamsong, and Pinehurst. I’d rather take those trips when I’m physically able to swing the club properly, not when I’m 75 or 80 and can barely hit the ball 200 yards.

Maybe you’re not a golfer. Maybe you’re thinking about bucket-list travel or cycling trips. Whatever your passion, you’re going to pursue it heavily during your go-go years because this is the honeymoon phase of your retirement.

Planning for the Go-Go Years

Here’s something important to remember: no one has a crystal ball. You can’t tell me exactly how long your go-go years will last. I once had a client who had big plans for retirement at 65. She passed away right before retirement at 64. That story always hits home for me because it reminds me that we never know what may happen. One diagnosis can change everything.

Even if you plan to work another three, four, or five years, nothing stops you from thinking about bucket-list trips today. Many of you listening have already saved seven figures or multiple seven figures for retirement. The impact of your additional savings contributions today isn’t as meaningful as contributions you made 25 or 30 years ago—that’s the compounding effect at work.

If you’re only working two or three more years and you’re maxing out 401(k)s and Roth accounts, you may actually be oversaving. You might be able to carve out $15,000 or $20,000 to take some of those bucket-list trips today instead of waiting. Because again, we never know what may happen.

People often assume retirement spending will match their pre-retirement spending. Not so fast. In the go-go years, I consistently see people spending more in that early phase because there’s pent-up demand. Think about the pandemic—everyone was stuck at home, and then when restrictions lifted, there was massive pent-up demand for travel and experiences. Early retirement works the same way. You’ve got all these things you want to do, and suddenly you have the time to check them off your list.

Expense #2: Home Repairs and Renovations You’ll Actually Want

We need to build home repairs into the budget. I’ve seen rules of thumb suggesting you budget 1% of your home value annually. That’s a good starting point, but here’s what I’ve noticed: when you retire, you start noticing things like:

  • I kind of want to renovate the kitchen
  • Let’s redo the basement
  • I want to create a better man cave
  • We should throw in a pool or redo the deck

Life slows down a little, and you’re spending more time at home. You start thinking, “I’ve worked hard to reach financial independence. I love my house, but I want to make it the house I want to stay in for the next 20 to 30 years.”

If you’ve been in your home for 10, 15, or 20 years, there are probably projects you’ve been putting off. Just because the mortgage is paid off doesn’t mean housing expenses disappear. Principal and interest payments go away, sure, but taxes and insurance continue—and they’ll probably increase over time.

Build in not only recurring unexpected repairs but also those big-ticket items on your wish list. I’ve seen people spend six figures or multiple six figures in the first couple years of retirement just getting their house “retirement ready.” They’re making it a place they’re proud of and want to spend time in over the next 10, 15, or 20 years.

Expense #3: Taxes – The Most Underestimated Retirement Expense

If you’ve been following my podcast or YouTube channel, you know I’m passionate about tax planning and minimizing your lifetime tax bill. Taxes are an overlooked expense that pre-retirees commonly underestimate.

Many people think, “Well, when I’m working, taxes just get withheld. I max out my 401(k), but there’s not much else I can do.” In retirement, you get to choose your tax strategy. You get to choose your tax bracket to a certain degree, especially in that early phase of retirement.

The Golden Window for Tax Planning

I call the period from retirement until required minimum distribution age (73 or 75) the golden window for tax planning—the Roth conversion window. After that window closes, there’s not much you can do. You really need to be intentional before you retire and during early retirement about minimizing your lifetime tax bill.

These strategies could save you six figures, or even multiple six figures, in lifetime taxes paid. On top of that, you can maximize the tax efficiency of your legacy. This is a big reason why many clients hire us.

Think about it: once you retire, your tax situation often simplifies. You might have some consulting income or part-time income, but most of your income comes from retirement distributions, dividends, and interest. Pretty straightforward. But your tax preparer isn’t looking at your lifetime tax bill—that’s what we focus on.

There are so many opportunities here:

  • Planning for Social Security taxation
  • Planning for required minimum distributions
  • Optimizing capital gains
  • Tax loss harvesting
  • Minimizing IRMAA surcharges
  • Maximizing ACA tax subsidies before Medicare

For many of you, especially those who’ve built sizable wealth in tax-deferred accounts, taxes could actually be your top one, two, or three expenses in retirement.

What’s underestimated isn’t just the tax amount—it’s the lack of planning for taxes. Being intentional about the timing of those taxes, when to execute conversions, when to harvest gains at 0%, when to focus on ACA subsidies versus minimizing your long-term tax bill—these are all things you need to consider as you approach retirement and go through that early Roth conversion window phase.

If you miss that window, there’s not much you can do later on.

Expense #4: Adult Children May Still Be on the Payroll

This is tough for some of you, but it’s reality: adult children might still be on the payroll. I’m not talking about an 18, 19, or 20-year-old. I’m talking about an adult child who’s 30, 35, or even 40 years old.

I see this firsthand. I’ve been an advisor for 18 years, and I’m fortunate to have great relationships with the clients we serve. People tell me things they probably don’t even tell their therapist. It’s tough. You want to help your kids and grandkids, but there’s a fine line between helping out and enabling.

Enabling

I’ve seen what enabling does, and it’s not pretty. If you’re an enabler, you often don’t even see it yourself. You almost need a third party to step in and say, “You need to stop this.”

I had a client who admitted she was enabling her adult daughter. Her late husband, who was this daughter’s stepfather, stepped in and said, “No, we’re not doing this anymore.” He put his foot down and cut her off. Unfortunately, that fractured the relationship, but it was what was best for both parties—mom and daughter. I pray that one day they can reunite and work out their differences, but it hasn’t happened yet.

I’ve also seen the other side, where enabling continues. You’re not doing them a favor.

Short-Term Help

That said, there are times when you genuinely need to step in and help your adult child.

  • Are they going through a divorce
  • Maybe they lost a spouse
  • Is there a large expense coming up like a wedding or a down payment

If they’re good stewards of money and grateful for the gifts you give them, that’s entirely different.

These situations will come up. How do you quantify that? I really don’t know. It’s hard to say. You know your family best. You know what goals might arise and how to potentially budget for them.

This surprises many pre-retirees. They think, “The kids are off the payroll. They’re out of college. They’re on their own.” Not so fast. In today’s world, housing costs have skyrocketed, childcare is expensive, and raising a family is hard.

How to Budget for Assisting Adult Children

I don’t have a perfect answer for how to budget for these things, other than:

  1. Try not to enable your adult children.
  2. Help when you can—many of you can easily help financially.
  3. Pick the areas you are willing to help with.
  4. Come up with a plan.
  5. Communicate why you want to help them.
  6. Make sure it doesn’t become something they expect every time something big comes up.

This is also a great opportunity to revisit your estate plan given the financial dynamics with your beneficiaries and how they are navigating their own finances. 

Expense #5: Delegating Tasks You Used to Do Yourself

You’re going to start delegating things you used to do yourself. This can even happen pre-retirement. It happens to me to a certain degree. There are things I used to DIY that I’d rather delegate now. My time is limited. If I were DIYing everything, I’d have no time for my podcast or to spend with my kids.

Over time, you’ll find you start to delegate more. Lawn care, landscaping, cleaning your home—all these things. You’re thinking, “I’d rather travel. I’d rather go on this golf trip than spend my Saturday mowing the lawn.”

The older you get and the closer you get to retirement, think through what’s realistic. What tasks will you probably delegate over the long term? What do those things cost? Build that into your budget.

Talk to your neighbors who are in their 70s and 80s. Are they mowing their own lawns? Are they doing all their gardening? Maybe some of them are, but probably many are delegating at this point.

Think through what expenses could become part of your annual recurring budget and build them into your retirement plan.

Expense #6: Vehicle Replacement – A Typical Expense in Retirement People Forget

When planning for typical retirement expenses, don’t forget to account for the cost of replacing your car every 7-10 years. Vehicle replacement may seem like a small issue because it doesn’t happen every year, but if you do the math, the numbers add up quickly.

If you have a 30-year retirement and you’re replacing your car every seven years, that’s three new cars per person. If you have two people in your household, that’s potentially six or seven new cars during retirement.

Look at vehicle prices today. I’ve been driving this Honda for 12 years now. I can afford a new car—I just had other things I wanted to spend my money on. But we’re getting to that point. The car has some mileage on it, and my wife wants something bigger and safer for road trips.

I haven’t replaced a car in six years. The last vehicle we bought was my wife’s minivan. Prices have gone up astronomically. It’s unbelievable. I see some of these SUVs people are driving—and I’m not judging—but people are spending $110,000 or $120,000 on vehicles.

Many of you listening could easily afford that, but you’re still not doing it. You’re comfortable buying used vehicles. That’s fine—I value experiences over vehicles. I’m not a big car guy. But if you like to replace your vehicle every three to five years, you need to factor that in. If you’re doing the bare minimum—once every seven, 10, or 12 years—you still need to budget for it.

Vehicle Replacement Planning

Regardless of your vehicle plan, put it on paper. Put it into your retirement budget. Figure out how you’ll finance it. Will you pay cash? Where will that money come from?

  • Brokerage accounts
  • Traditional IRA
  • Required minimum distributions
  • Roth account

Have a plan and be intentional. This isn’t like an unexpected home repair. This will come up regularly, and it can dramatically impact your long-term plan if you don’t budget for it.

Expense #7: Healthcare and Aging Costs Throughout Retirement

Healthcare in the US is expensive—we all know this. It’s a racket, frankly, no matter how you slice it. Once you go on Medicare, things get a little easier, but many of you will retire before Medicare eligibility.

You don’t realize how much your employer subsidizes your insurance until you retire. Then you see the sticker price on a private policy: $1,000, $2,000, or even $6,000 a month if you’re living in California. These are expenses you need to budget for.

If you’re strategic and listen to my advice about minimizing premiums through ACA premium tax credits, that’s a different conversation. That goes hand in hand with tax planning in retirement. But there’s that bridge to Medicare you need to plan for.

Once you’re on Medicare, the game isn’t over. You still have out-of-pocket expenses: vision, dental, supplemental insurance, Medigap. All of these can add up significantly more than you planned for.

Maybe you’re fortunate enough to have high income in retirement, and you’re subject to IRMAA. You could be paying another $10,000 a year in medical costs because of your modified adjusted gross income. You need to factor that in post-Medicare.

Aging and Long-Term Care

Then later on, we’ve got aging in place and long-term care. These are things we need to think about when building a retirement budget. Statistics show 70% of you will need some kind of care later in life. We don’t know how long that will last or the extent of care needed.

Most of you would probably prefer to age in place at home rather than move into a nursing home. Think about how to modify your home to make it livable throughout your 70s, 80s, 90s, and potentially into your 100s.

At the very end of life, what if you’re part of that 70% who needs long-term care? How will you pay for it?

  1. Will you fund it out of pocket?
  2. Will you have long-term care insurance?
  3. Will you use your traditional IRA, an HSA, or a Roth account?

Think through that long-term care plan, so you’re not a burden on your beneficiaries and adult children.

Retirement Spending Isn’t Linear—And That’s Why Planning Matters

The biggest lesson I want you to take away is this: retirement spending is not linear. You don’t spend the same amount at 62 as you do at 82. The challenge is that the most expensive years are often the early years for your lifestyle, but later in retirement, healthcare costs spike. Things flip. Healthcare may be lower on the front end and higher on the back end. Travel and golf are higher on the front end, lower on the back end.

Think about checking off those big bucket-list experiences early in retirement, then adjust your spending as you move through different retirement phases. Retirement planning isn’t about figuring out one spending number—it’s about understanding how expenses change over time.

Most retirement issues don’t happen because someone earned 7.5% versus 7.2% on their investments. They happen because the assumptions were way off, particularly on the expense side.

If you’re approaching retirement and want help stress testing your plan—figuring out how taxes, spending, and financial optimization all tie together—this is exactly the type of work we do at Imagine Financial Security.

How We Can Help

Our firm helps individuals over 50 who have at least $1 million saved navigate these complex retirement decisions. If you are looking to

  • Maximize your retirement spending
  • Minimize your lifetime tax bill
  • Worry less about money

You can start by taking our Retirement Readiness Questionnaire on our website at www.imaginefinancialsecurity.com, so we can learn more about how we can help you on your journey to and through retirement.

Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel.

This is for general education purposes only and should not be considered as tax, legal, or investment advice.

12 Roth Conversion Obstacles That Could Derail Your Retirement Tax Strategy

If you’ve been considering a Roth conversion as part of your retirement strategy, you’re likely aware of the potential benefits. However, what many people don’t realize is that there are numerous obstacles that can either completely eliminate your ability to convert to a Roth or significantly reduce your conversion capacity. These Roth conversion obstacles act like landmines in your retirement planning, potentially derailing even the most well-intentioned tax strategies.

After working with countless clients who have multiple seven-figure accounts primarily in tax-deferred vehicles like traditional IRAs and 401(k)s, I’ve identified 12 specific obstacles that can interfere with your Roth IRA conversion plans. Understanding these potential hurdles before you begin your conversion strategy can help you avoid costly mistakes and optimize your retirement tax planning.

Understanding the Roth Conversion Window

Before diving into the specific obstacles, it’s important to understand what we call the “Roth conversion window.” This is the optimal time period when Roth conversion makes the most sense in your retirement plan. Typically, this window opens when you retire and your earned income drops. It closes when required minimum distributions (RMDs) begin at age 73 or 75, depending on your birth year.

During this window, you have the opportunity to fill up lower tax brackets by converting traditional retirement account funds to Roth accounts. However, various income sources and life circumstances can narrow or eliminate this window entirely.

Obstacle #1: Social Security Timing and Your Conversion Strategy

One of the most common obstacles I see is the timing of Social Security benefits. When people retire, there’s often a natural tendency to start claiming Social Security as early as possible. The thinking is understandable. You don’t have a crystal ball to tell you how long you’ll live, and you want to get your money while the getting’s good.

However, Social Security benefits can significantly impact your Roth conversion capacity. While Social Security isn’t entirely taxable, up to 85% of your benefit could be subject to taxation, and this taxable portion gets added to your adjusted gross income. This additional income can push you into higher tax brackets, reducing the amount you can convert at lower tax rates.

The timing of when you claim Social Security matters tremendously. If you claim early or even at full retirement age, you’re adding income that reduces your conversion window. If you delay until age 70 to maximize your benefit, you’ll have a larger conversion window from retirement until 70, but then a much smaller window from 70 until RMDs begin.

This doesn’t mean you should automatically delay Social Security just to do conversions. Your decision should consider your overall financial picture, including withdrawal rates, risk tolerance, sequence-of-returns risk, and life expectancy. The key is understanding how the timing of Social Security directly affects your ability to execute a Roth conversion strategy.

Obstacle #2: Pension Income Reducing Your Conversion Window

Pension income presents another significant obstacle to Roth conversions. Pensions provide excellent guaranteed income to layer on top of Social Security. However, they can dramatically reduce or eliminate your conversion window. Most pensions begin at retirement, whether that’s at 60, 62, or 65, and this income stream immediately fills up your lower tax brackets.

If you’re fortunate enough to have a pension with a lump-sum option, you face an important decision. Taking the lump sum allows you to roll the funds into your own IRA, where they become available for future Roth conversions. However, choosing the lifetime income stream means accepting that income throughout retirement, which reduces your conversion capacity.

Some pensions also offer flexibility in timing. Just like Social Security, you might be able to delay your pension start date, earning delayed retirement credits while creating more room for conversions in the early years of retirement. The key is coordinating the timing of your pension with your overall Roth conversion strategy and Social Security decisions.

Obstacle #3: Spousal Income Affecting Your Roth IRA Conversion Plans

Even if you’re ready to retire, your spouse might still be in their peak earning years and want to continue working. This creates a situation where, despite your retirement, your household may still be in a high tax bracket due to your spouse’s earned income.

Whether your spouse is working full-time or doing part-time consulting, any earned income fills up those lower tax brackets, leaving less room for conversions. This means your Roth conversion window doesn’t necessarily begin when you retire—it begins when both spouses are fully retired.

This obstacle requires careful coordination between spouses. You might need to wait until both of you have stopped earning significant income before implementing an aggressive conversion strategy. Alternatively, you might do smaller conversions while one spouse is still working, then ramp up conversions once both are retired.

Obstacle #4: Business Sale Income and Conversion Timing

For entrepreneurs, selling a business can create a significant obstacle to Roth conversions. While the ideal scenario might be to take a lump-sum payment and walk away, the reality is often more complex. Many business sales involve installment sales, consulting agreements, earnout provisions, or seller financing arrangements.

When business sale income is spread over five or ten years, it can completely eliminate your conversion window during that period. Each year, you’re receiving substantial income from the business sale, filling up your tax brackets and leaving no room for conversions.

The structure of your business sale has long-term implications for your tax strategy. While taking a lump sum might result in a higher tax rate in the year of sale, it clears the way for conversions in subsequent years. Spreading the income over time might seem more tax-efficient initially, but it can prevent you from taking advantage of lower tax brackets for conversion purposes.

Obstacle #5: Non-Qualified Deferred Compensation Plans

Highly compensated employees, executives, and physicians often have access to non-qualified deferred compensation plans. Unlike qualified plans such as 401(k)s, these plans have no limits on compensation amounts, allowing you to defer substantial amounts of income.

The challenge comes with the distribution elections you must make when contributing to these plans. You typically need to elect how you want the funds distributed in retirement when you make the contribution. For example, you might elect to receive distributions over five years beginning one year after separation from service.

I recently worked with a client who had elected five-year distributions from their deferred comp plan. This meant they would receive approximately $250,000 per year for five years after retirement. During this period, aggressive Roth conversions were virtually impossible due to the high income from the deferred comp distributions.

The irrevocable nature of many of these elections makes planning crucial. You need to think through how these future distributions will impact your conversion window and coordinate them with other retirement income sources. Some plans allow one-time election changes, but the rules vary significantly between plans.

Obstacle #6: Having All Assets in Tax-Deferred Accounts

When all your assets are in tax-deferred accounts, Roth conversions become less attractive from a cash flow perspective. Ideally, when you convert $100,000 from a traditional IRA to a Roth IRA, you want that full $100,000 to remain invested and growing tax-free. To achieve this, you need to pay the taxes on the conversion from other sources, such as a brokerage account or a high-yield savings account.

However, many people don’t have substantial after-tax funds available. If you have to pay the conversion taxes directly from the IRA being converted, the strategy becomes less compelling. You’re essentially reducing the amount that gets converted and continues growing tax-free.

This doesn’t necessarily eliminate conversions as a strategy, especially if legacy planning is important to you. Even paying taxes from the IRA itself can make sense in certain situations. However, it does create a hurdle that makes conversions less optimal than they could be with better tax diversification.

Obstacle #7: Retiring Too Late and the “One More Year” Syndrome

Many successful professionals fall into what I call the “one more year” syndrome. They’re at the peak of their earning power, they’ve mastered their craft, and the work feels relatively effortless because of their expertise. It becomes tempting to work just one more year for one more bonus, one more year of deferrals, one more year of high income.

However, each year you delay retirement, your conversion window becomes smaller. If you were born between 1951 and 1959, your RMDs begin at age 73. If you retire at 70, you only have a three-year window for conversions. For those born in 1960 or later, RMDs begin at 75, providing a slightly larger window.

Early retirement isn’t just a lifestyle advantage—it’s also a significant tax planning opportunity. The earlier you retire, the longer your conversion window and the more you can spread conversions over multiple years at lower tax rates, rather than trying to do large conversions in a compressed timeframe.

Obstacle #8: The IRMAA Surcharge Impact

IRMAA (Income-Related Monthly Adjustment Amount) represents a hidden tax on Roth conversions for Medicare beneficiaries. This surcharge increases your Medicare Part B and Part D premiums based on your modified adjusted gross income from two years prior.

When you’re trying to maximize conversions within a specific tax bracket, IRMAA can significantly increase the effective tax rate on those conversions. For example, if you’re filling up the 22% tax bracket but trigger the first IRMAA tier, your effective tax rate on those conversion dollars becomes much higher than 22%.

While you shouldn’t let IRMAA completely derail your conversion strategy, you need to factor these additional costs into your calculations. Sometimes triggering IRMAA for a few years during your conversion window still makes sense for long-term tax optimization, but you should understand the full cost of your conversion strategy.

Obstacle #9: Tax-Inefficient Investment Positioning

The way you position your investments across different account types can significantly impact your conversion capacity. Asset location—where you hold specific investments—is just as important as asset allocation for tax planning purposes.

For example, if you hold tax-inefficient investments in taxable accounts, they generate additional taxable income that reduces your conversion room. I’ve worked with clients whose legacy mutual funds generated substantial phantom capital gains each year, even without selling anything. These capital gains get added to adjusted gross income, filling up tax brackets that could otherwise be used for conversions.

Similarly, holding large cash positions in high-yield savings accounts generates interest income that impacts conversion capacity. If you have $1 million earning 4% in cash, that’s $40,000 of additional income that impacts your overall tax situation. 

The solution involves strategic asset location: holding tax-inefficient investments in tax-deferred or tax-free accounts while keeping tax-efficient investments in taxable accounts. This positioning can free up significant room for conversions.

Obstacle #10: Inheritance Timing and the 10-Year Rule

Inheriting retirement accounts can completely disrupt your conversion plans due to the 10-year rule that eliminated stretch IRAs for most beneficiaries. If you inherit a traditional IRA, you must fully liquidate the account by the end of the 10th year after the original owner’s death.

For example, if you inherit a $1 million traditional IRA and the original owner was already taking required distributions, you must continue taking at least those minimum distributions each year, then fully liquidate the account by year 10. This creates substantial additional income during what might otherwise be your optimal conversion window.

The timing of inheritances is obviously beyond your control, but understanding the potential impact helps with planning. You might need to adjust your conversion strategy based on inherited account distributions, or time withdrawals from inherited accounts strategically to preserve some conversion capacity in later years.

Obstacle #11: ACA Premium Tax Credits and Early Retirement

If you retire before age 65 and rely on Affordable Care Act marketplace insurance, premium tax credits can significantly impact your conversion strategy. For 2026, the income cliff returns, meaning if your income exceeds 400% of the federal poverty line (about $86k/year for married couples) you lose all premium tax credits.

These premium tax credits can be worth $2,000-$3,000 or more per month, making them extremely valuable. In many cases, the value of maximizing these credits exceeds the long-term tax savings from aggressive conversions. This creates a situation where you might want to keep income low to maximize credits before age 65, then increase Roth conversions once you’re eligible for Medicare.

Obstacle #12: The Senior Bonus Deduction

The Senior Bonus Deduction, introduced through recent legislation, provides up to $6,000 in additional deductions for individuals turning 65 between 2025 and 2028 ($12,000 for married couples where both spouses qualify). This deduction phases out based on income levels, with a complete phase-out at $175,000 for singles and $250,000 for married couples.

While this is a deduction rather than a credit, it still represents a tax benefit that you might lose by doing aggressive conversions during the eligible years. The cost of losing this deduction should be factored into your conversion calculations, though it shouldn’t necessarily prevent conversions altogether.

Planning Around These Roth Conversion Obstacles

Understanding these obstacles is the first step in developing an effective conversion strategy. The key is comprehensive planning that considers all potential income sources and their timing. This includes Social Security optimization, pension timing decisions, spousal income coordination, and strategic asset location.

Building tax diversification early in your career creates more flexibility for conversions later. Having after-tax funds available to pay conversion taxes makes the strategy more attractive. Understanding your specific conversion window based on your birth year and retirement timing helps you plan the optimal conversion schedule.

Most importantly, remember that Roth conversions should be evaluated as part of your overall retirement strategy, not in isolation. The obstacles we’ve discussed don’t necessarily eliminate conversions as a strategy. Still, they do require careful planning and coordination to navigate successfully.

If you’re approaching retirement with substantial tax-deferred accounts, working with a qualified financial advisor who specializes in retirement tax planning can help you identify and navigate these potential obstacles while optimizing your overall retirement income strategy.

At Imagine Financial Security, we help individuals over 50 who have at least $1 million saved navigate these complex retirement decisions. If you are looking to

  • Maximize your retirement spending
  • Minimize your lifetime tax bill
  • Worry less about money

You can start by taking our Retirement Readiness Questionnaire on our website at www.imaginefinancialsecurity.com, so we can learn more about how we can help you on your journey to and through retirement.

Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel.

This is for general education purposes only and should not be considered as tax, legal, or investment advice.

TIAA Traditional Withdrawal Options: Your Complete Guide to Four Payout Choices

If you have money in TIAA Traditional, you’ve probably wondered what your options are when it’s time to take your money out for retirement. Understanding your TIAA Traditional withdrawal options is one of the most important decisions you’ll make in your retirement planning journey. Yet, it’s also one of the most confusing aspects of TIAA retirement accounts.

What is TIAA Traditional?

It’s a fixed annuity that’s part of your 403(b) retirement account, specifically designed for employees of:

  • Non-profit organizations
  • Hospitals
  • Universities
  • Schools

Unlike variable investments that fluctuate with market performance, your TIAA traditional annuity provides stability through guaranteed minimum interest rates and participation in TIAA’s carefully managed general account.

Retirement planning decisions involving TIAA Traditional are particularly complex because it’s a unique product with specific rules and options. While this guide covers the four main payout choices available, it’s important to consider how these options align with your overall financial picture, including:

  • Other income sources
  • Other investments
  • Retirement timing
  • Risk tolerance
  • Legacy goals.

Understanding Your TIAA Traditional Options

TIAA Traditional is different from the variable annuity options in your 403(b) account, such as CREF stock, CREF growth, or CREF bond. While those investments tie your returns to market performance, TIAA Traditional provides returns based on TIAA’s general account performance. This massive, conservatively managed portfolio includes traditional bonds, commercial real estate, agriculture, timber, and other stable investments that TIAA has been managing for over 150 years.

There are several types of TIAA traditional contracts, and each has different rules and interest rates. You might have older contracts from contributions made decades ago, or newer contracts from recent contributions. Some contracts are fully liquid (marked with an “S” for supplemental), while others have liquidity restrictions. Furthermore, there are even certain “Plan Rules” within your organization that might create additional complexity around the availability and liquidity of funds.  Understanding which type of contract you have and your plan’s rules is crucial for determining your available options.

Option 1: Required Minimum Distribution (RMD) or Minimum Distribution Option (MDO)

The first way to access your TIAA traditional funds is through the required minimum distribution option, also called the minimum distribution option by TIAA. This option becomes available when you reach the age when the IRS requires you to start taking distributions from your tax-deferred retirement accounts.  If you miss an RMD, you could be subject to a 25% penalty! 

The RMD age has changed over the years due to legislation. Previously set at 70.5, it was raised to 72 by the SECURE Act. RMD now stands at 73 or 75, depending on your birth year. If you were born in 1960 or later, your required minimum distribution age is 75.

How the Math Works

The IRS provides a life expectancy table that determines your distribution factor based on your age. For example, if you turn 75 in 2025, your life expectancy factor is 24.6. You divide your account balance by this factor to determine your required distribution amount.

Example

Let’s say you have $1 million in a TIAA traditional account. At age 75, you would divide $1 million by 24.6, resulting in a required distribution of approximately $40,650, or about 4% of your account balance. As you age, your life expectancy decreases, which means your required distributions increase. By age 90, with a life expectancy factor of 12.2, that same $1 million would require a distribution of nearly $82,000.

This creates what I like to call the “Tax Trap of 401ks and IRAs.” If you have substantial Social Security payments and perhaps a pension, and you don’t need these tax-deferred assets for current income, those increasing RMDs can push you into higher tax brackets and trigger additional costs like Medicare surcharges or IRMAA.

The advantage of this option is continued tax deferral while pulling out the minimum required by the IRS. Before reaching RMD age, you can let your account continue growing tax-deferred without being forced into any payout structure. You can also change to other options later if your needs evolve.

Option 2: Interest-Only Withdrawals

The second option allows you to withdraw only the interest your TIAA traditional account earns while leaving your principal intact. Each of your TIAA traditional accounts has an associated interest rate that depends on when you made the contributions and what type of contract you have.

Contributions made in the 1970s, 1980s, and 1990s typically carry much higher interest rates than contributions made after 2009, when interest rates dropped to near zero following the Great Recession. However, even recent TIAA traditional contributions often provide interest rates of 4% to 4.5% or higher, which compare favorably to traditional bond investments that have averaged less than 2% annually over the past 10-15 years.

The interest rates also vary by contract type. Contracts without an “S” designation (such as RA and GRA contracts) typically offer higher interest rates but come with liquidity restrictions. These are usually funded by employer contributions. Contracts with an “S” designation (SRA and GSRA contracts) are supplemental contracts funded primarily by your own contributions. They offer slightly lower interest rates but provide full liquidity.

Example

Using our $1 million example with a combined interest rate of 4.5%, your account would generate approximately $45,000 in annual interest. With the interest-only option, you could receive this $45,000 as income while preserving your $1 million principal balance. You can typically choose to receive these payments monthly, quarterly, semi-annually, or annually, depending on your cash flow needs.

This option works well if you need supplemental income but want to preserve your principal for future needs or to leave as a legacy. The interest payments from pre-tax 403b accounts are treated as taxable income in the year you receive them, just like any other distribution from a tax-deferred account. However, there are usually restrictions on how frequently you can start and stop these payments. You’ll want to confirm the specific rules for your contracts.

Option 3: Annuitization – Creating a Lifetime Income Stream

The third option, and what many experts consider the most underutilized, is annuitization. This means exchanging your account balance for a guaranteed income payment that will continue for as long as you live, or for as long as you and your spouse live if you choose a joint option.

When you annuitize your TIAA traditional account, you’re essentially trading your account balance for an income stream you can never outlive. The amount of income depends on several factors:

  • Your age
  • Your account balance
  • The interest rates of your various contracts
  • The payout option you select

Real Example

A 67-year-old client with various TIAA traditional contracts dating back decades received an illustration showing a single life payout rate of 8.81% with a 10-year guarantee period. This means that for every $100,000 annuitized, this client would receive $8,810 annually for life.

The 10-year guarantee provides protection if you die early in retirement. If you pass away within 10 years of starting the annuity, payments continue to your beneficiary for the remainder of the guarantee period. So, if you die after five years, your beneficiary receives payments for five more years.  But if you outlive the 10-year guarantee period, there is no death benefit.

You can also choose joint life options that continue payments as long as either you or your spouse is alive. These typically offer lower payout rates because they’re expected to pay out longer, but they provide valuable protection for surviving spouses.

Payout rates vary significantly depending on when you made your contributions. Older contracts often have much higher payout rates. I’ve seen TIAA Traditional payout rates as high as 10% per year on older contracts from the 80s and 90s. 

TIAA’s long history and conservative management approach allows them to offer competitive rates to existing participants.

It’s important to understand that annuitization is an irrevocable decision. Once you exchange your account balance for the income stream, you cannot change your mind or access the principal. Additionally, these annuities are generally designed to be fixed with no guarantee of increased payments over time. 

This brings inflation risk into play more so than other investments.  However, the high baseline guaranteed income can stack on top of Social Security and allow for your more aggressive investments to compound longer.  Many are surprised that this can result in a higher legacy amount despite the lack of a death benefit.

Option 4: Transfer, Rollover, or Liquidation

The fourth option is to move your money out of TIAA Traditional entirely. Your ability to do this depends on what type of contracts you have.

If your TIAA traditional is in supplemental contracts (SRA, GSRA, and RCP), you have full liquidity. You can

  • Take the money out as a lump sum
  • Roll it into your own IRA
  • Transfer it to other investments within your 403(b) plan without restrictions.

However, if your money is in non-supplemental contracts (RA, GRA, or RC), you face liquidity restrictions because these contracts were funded primarily by employer contributions. For these illiquid contracts, you can use what’s called a Transfer Payout Annuity (TPA). A TPA provides your money in equal installments for a term determined by the type of contract.

  • RA Contracts: 10 payments over nine years
  • RC Contracts: 7 payments over 6 years
  • GRA Contracts: 5 payments over 4 years

If you elect to receive these payments as cash, each payment is taxable income. If you roll the TPA payments to an IRA or other qualified account, there are no immediate tax consequences.  You’ll need to check with TIAA to understand the specific rules for your contracts.

Many people choose this option because they’re frustrated with TIAA Traditional’s complexity or because they want to consolidate and simplify their retirement accounts. However, this decision deserves careful consideration because you’re giving up some unique benefits that are difficult to replicate elsewhere.

The Most Overlooked Option: Why Annuitization Deserves Serious Consideration

After working with hundreds of TIAA participants over the years, one pattern became clear.

Most people immediately gravitate toward option four (getting their money out) without seriously considering annuitization. This happens for several understandable reasons.

First, annuities have developed a negative reputation in the financial industry. Much of this stems from how annuities are often sold in the marketplace. Some salespeople are taking advantage of seniors and retirees, focusing on their own commissions rather than clients’ needs. This has created widespread distrust of anything labeled as an “annuity.”

Second, TIAA Traditional is genuinely complex, and many people simply want to move their money to something they understand better. The various contract types, liquidity restrictions, and payout options can feel overwhelming.

However, this rush to liquidate often overlooks the significant value that TIAA Traditional can provide in a well-designed retirement plan. Consider these advantages:

Bond Alternative

Over the past 10-15 years, traditional bonds have provided returns of less than 2% annually while experiencing significant volatility. TIAA traditional accounts typically earn 4% to 4.5% or more annually and never decrease in value. They can serve as an excellent bond alternative, allowing you to be more aggressive with your other investments.

Guaranteed Income Foundation

The annuitization option provides a guaranteed income foundation that reduces pressure on your other investments. With a baseline income from Social Security and a TIAA traditional annuity, you can afford to take more risk with your remaining investments to capture potential upside.

Superior Payout Rates

The payout rates available through TIAA traditional annuitization often exceed what you can obtain by purchasing commercial annuities in today’s market. The 8.81% payout rate in our example would be very difficult to replicate elsewhere.

Longevity Insurance

If you expect longevity for you or your spouse, the annuity continues paying regardless of how long you live. TIAA reportedly has clients in their hundreds who are still receiving payments.

The key is not to annuitize everything, but to consider using TIAA Traditional as one component of a diversified retirement income strategy. You might annuitize a portion of your TIAA Traditional to create a guaranteed income floor, while keeping other assets liquid for emergencies and growth potential.

Making the Right Choice for Your Situation

Choosing among these four options requires careful consideration of your complete financial picture. Here are some key factors to evaluate:

Income Needs

How much income will you need from your retirement accounts? If you have substantial Social Security and pension income, you might prefer to let the TIAA traditional continue growing tax-deferred. If you need current income, the interest-only or annuitization options might be more appropriate.

Other Assets

What other liquid assets do you have available for emergencies? If most of your wealth is in retirement accounts, maintaining some liquidity is important. But if you have substantial taxable investments or other liquid assets, you might be more comfortable annuitizing a portion of your TIAA Traditional.

Risk Tolerance

How comfortable are you with market volatility in your other investments? If TIAA Traditional serves as your bond allocation, you might be able to invest more aggressively elsewhere.

Legacy Goals

Do you want to leave assets to heirs? Annuitization reduces the assets available for inheritance, whereas the other options preserve more of the principal.  With that said, if you do live a long time, the benefits of annuitization could allow for your growth assets to compound without selling at the wrong time.

Tax Considerations

How will each option affect your overall tax situation? Large RMDs might push you into higher tax brackets, while annuity payments provide predictable taxable income.

Health and Longevity

Your health status and family history of longevity should influence your decision. If you expect a long retirement, annuitization becomes more attractive.

Conclusion

Your TIAA traditional account represents a valuable and unique retirement asset that deserves careful consideration. While the complexity can be frustrating, understanding your four main options – RMD/MDO, interest-only, annuitization, and rollover/liquidation – helps you make an informed decision that aligns with your retirement goals.

The most important takeaway is not to rush into liquidating your TIAA traditional simply because it’s complex. The guaranteed annuity rate and lifetime income options available through TIAA Traditional are increasingly rare in today’s financial marketplace. These benefits, combined with TIAA’s 150+ years of experience and conservative management approach, make TIAA Traditional a potentially valuable component of your retirement income strategy.

Before making any decisions, consider how each option fits within your overall financial plan. Think about your income needs, risk tolerance, legacy goals, and tax situation. If you’re unsure, consider working with a fee-only financial planner who can provide objective guidance without trying to sell you additional products.

Remember, you don’t have to choose just one option or make all decisions at once. You might use different options for different portions of your TIAA Traditional balance, or adjust your approach as your needs evolve in retirement. The key is understanding your choices so you can make decisions that support your long-term financial security and retirement goals.

At Imagine Financial Security, we help individuals over 50 with at least a million dollars saved navigate these complex retirement decisions. If you are looking to

  • Maximize your retirement spending
  • Minimize your lifetime tax bill
  • Worry less about money

You can start by taking our Retirement Readiness Questionnaire on our website at www.imaginefinancialsecurity.com, so we can learn more about how we can help you on your journey to and through retirement.

Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel.

This is for general education purposes only and should not be considered as tax, legal, or investment advice.

One More Year Syndrome: The Hidden Trap Keeping You from Retirement

If you’ve been researching retirement lately, you’ve probably encountered content about something called “one more year syndrome.” This concept has been gaining traction across YouTube channels, podcasts, and financial forums, but what exactly is it, and why should you care?

One more year syndrome describes the tendency for pre-retirees to continuously postpone their retirement by convincing themselves they need to work “just one more year.” Sound familiar? You’re not alone. This pattern affects countless people who are financially ready to retire but keep finding reasons to delay.

What Is One More Year Syndrome?

One more year syndrome occurs when you give yourself excuses to work another year, even though you have the financial capacity to retire. These excuses might sound like:

  • “I need to add more money to my portfolio.”
  • “The market valuations look scary right now.”
  • “Inflation is making me nervous.”
  • “There are tariffs looming on the horizon.”
  • “Healthcare costs before Medicare eligibility worry me.”
  • “I don’t know what I’ll do with my time in retirement.”

The truth is, there’s always something uncertain on the horizon. Think about any time you’ve challenged yourself to try something new – that feeling of unease before stepping into uncharted territory is completely natural. Just like a child reciting a poem in front of their peers feels terrified for weeks beforehand, but once they’re doing it, they realize it wasn’t so scary after all.

For many pre-retirees, you’ve spent your career being the go-to person. You’re the problem solver, the one putting out fires, the person others turn to for advice and help. You have meaning, purpose, and respect in your field and community. The idea of leaving that behind for an uncertain next chapter can feel genuinely frightening.

Understanding the Content Creator’s Angle in Retirement Planning

Here’s something important you need to understand: many people creating content about one more year syndrome are retirement planners and financial advisors. They want people to retire, or at least seriously consider retiring soon, because that creates business opportunities for them.  This is coming from a fellow content creator and retirement planner!  (At least I’m upfront about it).

This doesn’t mean their advice is wrong, but you need to understand the incentive structure. When you see content saying, “don’t work another year, you’re wasting your time, stop slaving away for the man,” ask yourself who is packaging that message and what their angle might be.

Every content creator has an angle. The key is being aware of where the content is coming from so you can evaluate it appropriately. This awareness doesn’t invalidate the message – it might still be exactly what you need to hear – but it helps you consume it more thoughtfully.

Why Mortality Makes Us Rethink When to Retire

Sometimes life provides wake-up calls that force us to reconsider our retirement timing. Recently, a podcast listener reached out to see if he could retire earlier than he had planned.  The reason?  He lost 3 of his close friends over the last year. That kind of mortality reminder hits differently than abstract retirement planning discussions.

I remember back in my TIAA days, I worked with a sweet math professor looking for help with retirement planning.  She planned to work until 65 to become eligible for Medicare, and she was incredibly excited about traveling the world. For three years, her excitement built with each planning meeting. Then, unexpectedly, she passed away at 64 – just months before her planned retirement.

These stories aren’t meant to create fear, but they highlight an important reality: time isn’t guaranteed. When you see people around you pass away, get sick, or become frail, it naturally makes you reevaluate what you’re doing today. This response is completely normal and healthy.

Three Questions to Evaluate Your Retirement Readiness

To address one more year syndrome effectively, ask yourself these three critical questions:

Question 1: The Financial Standstill Test

Assuming nothing changed financially over the next year – even if the markets didn’t cooperate and your portfolio balance stayed exactly the same 12 months from now – would you still work that one more year?

What if you had a crystal ball showing your net worth wouldn’t change despite working another year, would you still choose to work? If the only reason you’re working is to add more money to your portfolio, even though you already have the capacity to retire today, you might be suffering from one more year syndrome.

Question 2: The Money-No-Object Test

If money weren’t an issue and you didn’t need to add more to your portfolio, would you still be doing what you’re doing today?

Remember, retirement doesn’t have to mean sitting in a rocking chair sipping drinks all day. Maybe you’d work occasionally as a consultant, volunteer, travel, or start a nonprofit. But the question is: if you didn’t need your job financially, would you still choose to spend most of your day and week doing that job?

If the answer is yes, and you can still pursue other important activities and relationships, then keep working. But remember – nothing is guaranteed.

Question 3: The Five-Year Horizon Test

If you were told today that you had five more good, healthy “go-go” years left, would you still work that one more year?

How would this knowledge change your decision about working another year?

Finding Purpose Beyond Traditional Retirement

The concern about losing purpose in retirement is valid and important. In 1 Peter 4:10, it says, “Each one should use whatever gift he has received to serve others, faithfully administering God’s grace in its various forms.”

This doesn’t suggest that retirement is bad; rather, it asks whether you’re using your gifts to serve others. If work is preventing you from doing that, maybe you should consider retiring sooner than planned. However, if you have no purpose planned for retirement, you’re likely to feel lost.

Retirees who feel lost don’t feel good, and people who don’t feel good aren’t enjoyable to be around. You need purpose, meaning, fulfillment, and energy in retirement. But there are many ways to make an impact and put your time, talents, and treasures to work beyond traditional employment.

Making Your Decision About One More Year Syndrome

Here’s what to take away from this discussion:

First, when you encounter content about one more year syndrome, understand where it’s coming from. Consider who is delivering the message, how they’re packaging it, and what their angle might be. Everyone has motivations, and being aware of them helps you evaluate advice more effectively.

Second, recognize that despite potential biases, this message might still be exactly what you need to hear today. Time isn’t guaranteed, and you can’t predict how many good years you have remaining. This reality has played out countless times throughout retirement planning careers.

Third, use those three questions to guide your thinking. They might lead you to conclude that you should continue working – maybe for five more years instead of one. Or you might realize you hate what you’re doing and need to figure out a plan to transition now, even if it’s not full retirement.

If money isn’t the issue and you dislike your job, it’s probably time to reevaluate what you’re doing. There are plenty of ways to make an impact and use your skills meaningfully.

Moving Forward with Your Retirement Decision

One more year syndrome is real, and it affects many people who are actually ready to retire but keep finding reasons to delay. The key is honest self-reflection about your true motivations.

Are you working another year because you genuinely need the money, or because you’re afraid of the unknown? Do you love what you do and find meaning in it, or are you staying because it feels safe and familiar?

Your retirement planning should go beyond financial calculations to include questions of purpose, meaning, and how you want to spend your remaining healthy years. Whether you decide to retire now, work one more year, or continue for several more years, make sure that decision is based on thoughtful consideration rather than fear or habit.

The goal isn’t to minimize your retirement years but to maximize the meaningful use of whatever time you have left. Sometimes that means working longer, and sometimes it means taking the leap into retirement sooner than you initially planned.

At Imagine Financial Security, we help individuals over 50 with at least a million dollars saved navigate these complex retirement decisions. If you are looking to

  • Maximize your retirement spending
  • Minimize your lifetime tax bill
  • Worry less about money

You can start by taking our Retirement Readiness Questionnaire on our website at www.imaginefinancialsecurity.com, so we can learn more about how we can help you on your journey to and through retirement.

Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel. This is for general education purposes only and should not be considered as tax, legal, or investment advice.

Retirement Planning Opportunities If You’re in the Top 20% of Savers (Ages 55–70)

If you’ve ever Googled “retirement savings by age,” you’ve probably seen those benchmark numbers that either made you panic or feel like you’re crushing it. But here’s the thing – both reactions might be completely wrong.

Understanding retirement savings by age is something many people get hung up on, but the reality is that these average numbers rarely tell the complete story. Today, we’ll dive into real data from major financial institutions and explain why, if you’re reading this, you’re probably already in the top tier of savers.  And if you’re in that top tier, we’ll discuss specific planning opportunities to help you optimize your retirement. 

What the Average Retirement Savings Data Really Shows

Let’s start by looking at what the major studies actually reveal about retirement account balances across different age groups.

401k Balance by Age: Fidelity’s Latest Numbers

Fidelity releases quarterly benchmarking studies that track average retirement account balances by age. Their data shows that for people in their peak earning years (55-70), the average 401(k) balance hovers around $250,000.

Financial planner in Chattanooga, TN

But here’s the problem with this data: it only includes accounts held at Fidelity. It completely excludes external accounts, creating a major blind spot. There are no taxable brokerage accounts, no HSAs, and no retirement accounts held at other institutions, such as Vanguard or Schwab. This means Fidelity’s numbers aren’t really representative of the entire U.S. retirement landscape – especially not for people who are serious about their financial planning.

The Federal Reserve’s Complete Picture

The Federal Reserve’s Survey of Consumer Finances, conducted every few years, gives us the closest thing to a national financial scoreboard. The 2022 data reveals some eye-opening statistics.

For households in the 55-64 age range:

  • About 8% have retirement account balances between $500,000 and $1 million
  • Roughly 9% have over $1 million in retirement accounts
  • This means approximately 17% of U.S. households in this age group have retirement savings exceeding $500,000

If you’re reading this article and have accumulated at least $500,000 in retirement accounts by your late 50s or early 60s, you’re already in the top 20% nationally. Many readers are likely in that top 10% tier with over a million dollars saved.

The Fed’s survey includes a broad sample of American households – from lower wealth to middle class to high net worth families. Many of the households surveyed may have very little, if any, assets in 401(k)s or IRAs, which skews the averages significantly lower.

Empower’s More Complete Data Set

Empower’s data provides both average and median retirement account balances, which matters because averages can be skewed by ultra-high savers with multiple seven-figure accounts.

For people in their 50s and 60s, Empower shows:

  • Average retirement account balance: roughly $1 million
  • Median balance: about 50% of that average

What makes Empower’s data more valuable is that it doesn’t just include accounts held directly with them. It also incorporates retirement accounts imported through their personal dashboard tool. If someone has accounts at Fidelity, Vanguard, or other institutions, those balances get aggregated into the study, making it more representative of people who actively manage their finances across multiple platforms.

However, even Empower’s data has limitations – it still doesn’t include other retirement assets like taxable brokerage accounts, business investments, or real estate.

Why You’re Probably Not Average

Here’s the reality: if you’re actively researching retirement savings by age and reading detailed financial content, you’re already demonstrating behavior that puts you in a completely different category than the “average” American saver.

The average retirement savings by age data includes everyone, including people who have never opened a 401(k), those who cash out their retirement accounts when changing jobs, and households that prioritize other financial goals over retirement savings.

But you’re different. You’re likely someone who:

  • Has built substantial retirement account balances
  • Maintains accounts across multiple institutions
  • Has diversified beyond just retirement accounts into taxable investments
  • Owns real estate or business assets not captured in these studies

Someone might have $400,000 in a 401(k), but another $1-2 million in taxable brokerage accounts or $3 million in real estate investments. If you’re only comparing retirement accounts, you’re missing half the picture.

This is the key point: if you’re consuming this type of content, you’re probably already in that top 20% of households. You’ve likely saved at least $500,000, and many readers have accumulated seven figures or even multiple seven figures for retirement. You’re playing a completely different retirement game than the average American.

Essential Retirement Planning Strategies for Top-Tier Savers

When you’re in the top tier of savers, your biggest risk isn’t running out of money – it’s retirement planning inefficiency. Here are the critical strategies you need to consider:

Tax Planning: Your Biggest Opportunity

Taxes can actually be one of your biggest expenses in retirement – often ranking as the number one, two, or three largest annual expenses for retirees.

Large pre-tax account balances mean large future required minimum distributions (RMDs). These large RMDs can potentially push you into higher income tax brackets, trigger higher taxes on Social Security income, increase capital gains rates, and activate other hidden taxes. These tax hits compound over time.

If you retire early, you may have lower income years before RMDs kick in at age 73 or 75. This window represents one of the best tax planning opportunities of your lifetime–what’s called the “Roth conversion window.”

Maximizing Roth Conversion Strategies in Early Retirement

During your early retirement years, before RMDs begin, you have the opportunity to strategically convert pre-tax retirement funds to Roth accounts. This means paying taxes now at potentially lower rates to minimize the impact of those ballooning RMDs later.

Roth conversion strategies can also help you:

  • Minimize IRMAA surcharges (hidden taxes on Medicare premiums based on income)
  • Make Social Security income more tax-efficient
  • Create tax-free legacy assets for your heirs

Once this conversion window closes, it shuts for good, making this timing critical for long-term tax efficiency.

Optimizing Your Retirement Withdrawal Strategies

When you have substantial assets across multiple account types–taxable accounts, tax-deferred accounts, and tax-free accounts–the order you withdraw money matters enormously for the longevity of your retirement plan.

The classic approach follows this sequence:

  1. Taxable accounts first
  2. Tax-deferred accounts second
  3. Tax-free accounts last

This default strategy makes sense for many people, but it’s not always optimal. Sometimes it makes more sense to tap Roth accounts first and let tax-deferred accounts continue compounding. Other times, a multi-pronged approach works best–taking baseline distributions from taxable accounts while filling remaining income needs from tax-deferred accounts, even before RMDs begin.

The key insight: retirement withdrawal strategies shouldn’t follow a one-size-fits-all approach. Each year brings a new tax situation that needs to be evaluated and optimized based on your specific circumstances.

Investment Strategy: Risk Capacity vs. Risk Tolerance

Most retirees and many financial advisors focus solely on risk tolerance–how aggressive you feel comfortable being emotionally. But for higher net worth households, we need to discuss something different: risk capacity.

Understanding the Difference

Risk tolerance is emotional and psychological. It’s about how you feel when the market drops 20%. Do you panic? Can you sleep well at night? Can you stay disciplined?

Risk capacity is different – it’s not about feelings, it’s about what your plan can mathematically survive. Can you afford to take on risk in retirement?

Here’s the counterintuitive part: a retiree with a smaller portfolio may actually have less risk capacity than someone with a larger balance.

A Real-World Example

Consider a retiree with $500,000 who needs $30,000 annually (6% withdrawal rate). If the market drops 25%, their portfolio becomes $375,000, but they still need that $30,000. Now their withdrawal rate jumps to 8% – entering the danger zone where retirement plans can fail due to the sequence of returns risk.

Compare this to someone with $2 million who needs $80,000 annually (4% withdrawal rate). If their portfolio drops 25% to $1.5 million, their withdrawal rate only increases to 5.3%. They have margin for error. They can reduce withdrawals, skip inflation adjustments, rebalance, or even take advantage of the downturn.

This is risk capacity: how much volatility can your plan absorb before forcing you to make bad financial decisions?

Where You Hold Investments Matters

Asset location is different from asset allocation. Asset allocation is what you’re invested in. It’s your mix of stocks, bonds, real estate, and cash. Asset location is where you hold those investments.

When you have substantial balances across taxable, tax-deferred, and tax-free accounts, where you locate specific investments can significantly impact your after-tax returns.

The Tax Drag Problem

Taxable accounts face ongoing tax drag. Investments may pay quarterly dividends, generate interest income, or distribute capital gains even when you’re not selling anything. When you’re in higher tax brackets, this drag becomes significant and represents one of the most overlooked ways wealth gets eroded–not from market performance, but from unnecessary taxes.

If your taxable account holds high-yield bonds, REITs, and high-turnover funds, you might pay substantial taxes annually even if you’re not spending that income. Meanwhile, your IRA and Roth accounts might be better locations for these less tax-efficient investments.

The goal of asset location is simple: ensure your taxable accounts aren’t dragging down your net after-tax returns. You don’t just need good performance. You need good after-tax performance. It’s not about what you earn; it’s about what you keep.

Legacy Planning for High-Net-Worth Families

If you’re in the top tier of savers, there’s a good chance you won’t spend down all your assets, even if your goal is to “die with zero.” This means you’re optimizing not just for lifetime income, but also for legacy–specifically, tax-efficient legacy.

This becomes especially important if your heirs are high earners themselves: doctors, entrepreneurs, attorneys, or other professionals. What you leave behind matters significantly.

Leaving a pre-tax IRA or 401 (k) to high-income beneficiaries creates a different tax impact than leaving a Roth account or a taxable brokerage account. The most effective planning involves being strategic about which assets to spend aggressively during your lifetime versus which to preserve for beneficiaries.

The Real Takeaway for Top-Tier Savers

If you’ve built substantial wealth and find yourself in the top 20% of U.S. households, your retirement plan is no longer about chasing returns or worrying about having “enough” money. Instead, your focus should shift to:

  • Maximizing retirement plan efficiency
  • Controlling the timing and tax impact of distributions
  • Minimizing lifetime taxes through strategic planning
  • Managing Medicare thresholds and IRMAA surcharges
  • Optimizing Social Security income timing and taxation
  • Taking advantage of Roth conversion windows
  • Planning for tax-efficient legacy transfer

Once you’ve done the hard part–saving and investing to reach financial independence–the game becomes about keeping more of what you’ve built. The strategies that got you to this point aren’t necessarily the same ones that will optimize your wealth throughout retirement.

The Bottom Line

Stop comparing yourself to average retirement savings by age. If you’re actively planning and have accumulated substantial assets, you’re already playing in a different league. Your focus should be on advanced strategies that maximize the efficiency of the wealth you’ve built, not on whether you’re “keeping up” with benchmarks that don’t reflect your reality.

Remember, retirement planning for high-net-worth individuals isn’t about accumulating more. It’s about optimizing what you have for the best possible outcomes throughout your retirement years and beyond.

At Imagine Financial Security, we help individuals over 50 with at least a million dollars saved navigate these complex retirement decisions. If you are looking to

  • Maximize your retirement spending
  • Minimize your lifetime tax bill
  • Worry less about money

You can start by taking our Retirement Readiness Questionnaire on our website at www.imaginefinancialsecurity.com, so we can learn more about how we can help you on your journey to and through retirement.

Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel.

This is for general education purposes only and should not be considered as tax, legal, or investment advice.

Retirement Planning for Longevity: What If You Live to 100?

What if you retired at 60 and lived to 100? That’s a 40-year time horizon in retirement – meaning you could be retired longer than you were in the workforce. While this sounds amazing on paper, it brings about an entirely different set of challenges that most people aren’t prepared for.

Most people planning for retirement think they need their portfolio to last 15, 20, or maybe 25 years. Some conservative planners might even stretch it to 30 years. But here’s the reality: if current trends in technology and medicine continue, living to 100 might not be as far-fetched as it seems.

With AI and technology potentially helping us live longer, retirement planning for longevity becomes critical. You don’t need to save less because you might live longer – you need to be more thoughtful about how you set up your retirement plan. Longevity will be one of the biggest risks for people retiring in 2026 and beyond.

Let’s explore five specific retirement planning considerations if you’re planning for a 40-year retirement.

Building Retirement Income Planning That Lasts 40 Years

The foundation of any solid retirement plan is creating paychecks in retirement. Effective retirement income planning focuses on generating cash flow because assets that don’t generate income won’t help you pay your bills.

Your retirement plan isn’t just about your portfolio – it’s about building lifetime income that never runs out. Retirement becomes much easier when your baseline necessities and fixed expenses are covered by guaranteed income sources. People who have this foundation sleep well at night, especially when markets are volatile.

Maximizing Social Security Benefits

Social Security will likely be the biggest guaranteed lifetime income stream for most retirement plans. When considering retirement planning for longevity, delaying your benefits until age 70 becomes even more valuable. This is especially important for married couples: delaying the larger benefit maximizes the surviving spouse’s income.

Remember, when one spouse dies, the surviving spouse doesn’t receive both Social Security checks. They receive the larger of the two benefits. If you’re planning for one spouse to potentially live until 100, maximizing that larger benefit becomes critical.

Pension Survivor Benefits

If you have a pension, survivor benefit options require careful consideration. Many people want to maximize what they receive during their lifetime and select a 25% or 50% survivor benefit option.  Sometimes, NO survivor benefit is selected at all. But if one spouse passes away, not only does Social Security drop, but the pension could also drop by 50% or more.

This results in a significant reduction in income for the surviving spouse, who might live another 15-20 years. When planning for longevity, protecting the surviving spouse’s income becomes paramount.

The Role of Annuities in Guaranteed Retirement Income

Annuities have become a four-letter word for many people, but they deserve consideration in retirement planning for longevity. While there are bad products and bad salespeople in this space, the concept of guaranteed income has real value.

Here’s what’s interesting: clients who have annuities never say they wish they didn’t have that guaranteed paycheck coming in. It’s usually the opposite – during market volatility, people wish they had something safe and guaranteed that they could never outlive.

Consider breaking down your expenses into needs, wants, and wishes – or simply fixed expenses and discretionary expenses. Then figure out what percentage of your fixed expenses are covered by guaranteed income sources. If Social Security covers everything, you might not need additional guaranteed income. But if your guaranteed sources only cover 30-40% of your total expenses, that could be concerning during market downturns.

Optimizing Your Retirement Portfolio Allocation for Longevity

Traditional thinking pushes retirees into conservative portfolios because they’re “living on their portfolio.” But you’re not living on 100% of your portfolio in year one – you might be withdrawing 4-7% annually. Being too conservative creates other risks, particularly inflation and longevity risk.

The Inflation Challenge

The longer you live, the more inflation compounds. Over a 40-year retirement, inflation becomes a massive risk. The best hedge against inflation is equities – traditional stocks in your portfolio. If you trim your equity allocation too much, you might not keep pace with inflation, which could be a bigger risk than market volatility.

Rethinking the 60-40 Portfolio

The traditional 60% stocks, 40% bonds allocation has been popular for retirees, but you need to stress-test it for a 40-year retirement. Bill Bengen, the creator of the famous 4% rule, recommended a minimum of 50% in stocks, with as close to 75% stocks and 25% fixed income as possible for optimal results.

When stress testing retirement portfolio allocation strategies for extended retirements, a 60-40 portfolio sometimes carries more risk than a slightly more aggressive allocation. This isn’t about putting everything in AI stocks – it’s about a well-diversified pool of equities that can hedge against inflation and longevity concerns.

Implementing Guardrails

If you choose a more aggressive allocation, you face sequence of returns risk – the danger of a bear market in your first few years of retirement. Since nobody can time the market, guardrails become essential.

Guyton and Klinger developed four decision rules for portfolio management:

  1. The inflation rule
  2. The prosperity rule
  3. The portfolio rescue rule
  4. The portfolio management rule

Following these rules throughout retirement can dramatically increase your starting withdrawal rate while reducing the risk of running out of money. The most dangerous retirement portfolio might be the one that feels safe on paper but quietly lags behind inflation for 35-40 years.

Long Term Care Planning: Protecting Your Future

Nobody likes thinking about getting old and frail, but Father Time is undefeated. Some of us will need help with daily living activities at the end of life. Long-term care planning isn’t just about buying insurance – it’s about having a comprehensive plan.

The Reality of Care Needs

About 70% of people will need some sort of care, but the duration and type vary greatly. It might be cognitive or physical care lasting two years or ten years. This uncertainty makes planning challenging but necessary.

Beyond Just Insurance

Long-term care planning involves several strategies:

  • Dedicated pools of funds
  • Long-term care insurance
  • Home equity utilization
  • Self-funding approaches

Even Warren Buffett has long-term care insurance, despite having enough wealth to self-fund care for 100 years. Why? He doesn’t want his heirs to go through a fire sale of investments to pay for care. Insurance creates a dedicated pool of funds and allows caregivers to hire help.

The Burden Factor

One common concern among retirees is: “I never want to be a burden on my loved ones.” Many people have plenty of money for retirement and care expenses, but are afraid to spend because they worry about unexpected healthcare costs.

Long-term care insurance can give people the freedom to spend their assets and enjoy retirement, knowing they have protection against care expenses. It removes the financial and logistical burden from spouses and adult children who are also worried about their own financial security.

Understanding Retirement Spending Phases

If you’re retiring at 60 and living until 100, assuming your expenses will inflate at 3% annually for 40 years might cause you to retire too late or underspend in your Go-Go Years. Retirement actually has three distinct phases with different spending patterns.

The Go-Go Years

Early retirement represents the honeymoon phase when you’re still active and physically able to do what you want. This is when you hit those bucket list golf trips, travel the world, and experience things you wanted to do while working but didn’t have time for.

Expenses might actually increase during the go-go years due to pent-up demand for activities and experiences. This is when health is in your favor, and you can be most active.

The Slow-Go Years

After checking off major bucket list items, you enter the slow-go years. You’re still traveling and active, but maybe not as frequently. Lifestyle stabilizes, and spending typically moderates from the go-go years.

The No-Go Years

Later in retirement, you enter the no-go years when physical limitations increase. While healthcare costs might spike during this phase (hence the need for long-term care planning), studies show that retirees actually experience inflation that’s about 1% lower than general inflation over their entire retirement.

Planning for Spending Changes

This spending pattern – higher in go-go years, moderate in slow-go years, and potentially lower but different in no-go years – should influence your retirement planning for longevity. Don’t assume linear expense growth for 40 years, as this might cause you to retire later than necessary.

However, if you plan to spend aggressively in your go-go years, those portfolio guardrails become critical. You need flexibility to adjust your withdrawal rate based on market performance, especially if you retire during a downturn.

Retirement Legacy Planning and Gifting Strategies

When planning for longevity, consider that if you live until 100, your adult children might be 70-80 years old when they inherit. This reality should influence your thinking about legacy and the utility of money.

The Concept of Diminishing Utility

Money has diminishing returns as you age. If you don’t enjoy money during your go-go years, you lose the utility of those dollars. The same applies to legacy. There’s a difference between giving money when your children are struggling with mortgages, private school costs, or starting businesses versus when they’re already retired.

Giving with a Warm Hand

Consider the benefits of lifetime giving versus leaving everything as an inheritance. Wouldn’t it be meaningful to see what your beneficiaries do with gifts during your lifetime? This also helps you understand their money management skills, which can inform your estate planning decisions.

If you’re gifting money and your children are using it wisely – contributing to retirement accounts, buying homes, funding education – that validates leaving them more when you’re gone. If they’re making poor financial decisions, you might want to restructure your estate plan with more protections.  Or better yet, have some meaningful conversations with those beneficiaries while you’re still alive.

Current Gifting Opportunities

The annual exclusion allows each taxpayer to give $19,000 per recipient in 2026 without filing gift tax returns. For married couples with married children, this can add up to substantial annual gifts. These gifts also remove future growth from your estate, which is particularly valuable if you face potential estate tax issues.

The key question is: when does your legacy have the greatest utility? During your lifetime, when you can see its impact, after you’re gone, or some combination of both?

Taking Action on Your Longevity Plan

Living longer can be a blessing, but it creates significant challenges for people retiring today. With technology and medicine evolving rapidly, longevity planning becomes essential for anyone approaching retirement.

Review Your Foundation

Start by reviewing your guaranteed income sources. Look at your Social Security strategy and make sure you’re maximizing not only lifetime benefits but also surviving spouse benefits. If you have a pension, carefully consider survivor benefit options.

Stress Test Your Plan

Run scenarios assuming you live until 100. Would your current plan hold up? Does a traditional 60-40 portfolio work, or do you need 75-25 or even 80-20? Test different allocations considering both your risk tolerance and risk capacity.

Address Long-Term Care

Regardless of your wealth level, you need a long-term care plan. This includes communication about who will do what, where funds will come from, and how you’ll pay for care. The goal is to remove financial and logistical burdens from your loved ones.

Plan Your Spending Strategy

Don’t assume linear expense growth for 40 years. Plan for the realities of retirement spending phases, and if you want to spend more aggressively in your go-go years, implement guardrails to protect against sequence-of-returns risk.

Consider Your Legacy Impact

Think about when your legacy will be most useful. Consider lifetime giving strategies that allow you to see the impact of your generosity while potentially providing valuable teaching opportunities for your beneficiaries.

Retirement planning for longevity requires a different approach than traditional retirement planning. The stakes are higher, the time horizon is longer, and the strategies need to be more sophisticated. But with proper planning, a 40-year retirement can be not just financially sustainable, but truly fulfilling.

If you’re looking for help creating a retirement plan that accounts for longevity, consider working with a financial advisor who specializes in retirement income planning. The complexity of planning for a 40-year retirement makes professional guidance more valuable than ever.

At Imagine Financial Security, we help individuals over 50 with at least a million dollars saved navigate these complex retirement decisions. If you are looking to

  • Maximize your retirement spending
  • Minimize your lifetime tax bill
  • Worry less about money

You can start by taking our Retirement Readiness Questionnaire on our website at www.imaginefinancialsecurity.com, so we can learn more about how we can help you on your journey to and through retirement.

Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel.

This is for general education purposes only and should not be considered as tax, legal, or investment advice.

6 Essential Coverage Options Before Medicare for Early Retirees

If you’re planning to retire before you turn 65 and you’re not yet eligible for Medicare, one of the biggest questions on your mind is probably: What am I going to do about health insurance? Planning for early retirement health insurance requires careful consideration of multiple coverage options. The decisions you make can significantly impact both your health and your finances.

The biggest challenge with early retirement health insurance is bridging the gap until Medicare eligibility. This gap can last several years, and without proper planning, it can become one of your largest retirement expenses. Understanding your options can save thousands in premium costs and ensure you maintain the coverage you need.

The reality is that health insurance before Medicare has become increasingly expensive. Many early retirees are experiencing premium increases of 20-40%, with some seeing jumps as high as 70%. For example, one early retiree saw their premium skyrocket from $2,200 to $3,700 per month starting in January – a staggering increase that forced them to explore alternatives.

Let’s explore six potential paths to healthcare coverage that can help you navigate this challenging period before Medicare becomes available.

COBRA Health Insurance: Extending Your Employer Coverage

COBRA (Consolidated Omnibus Budget Reconciliation Act) health insurance allows you to keep your exact employer plan for up to 18 months after leaving your job. It’s a federal law that provides this continuation coverage for individuals who were laid off, voluntarily left, or had their hours reduced below the threshold for benefits eligibility.

The main advantage of COBRA health insurance is continuity. You can keep your exact health insurance policy, which means no disruption to your doctors, your network, or your coverage. This stability can be invaluable during the already stressful transition into retirement.

However, there’s a significant catch with COBRA health insurance: you’ll be responsible for the full premium cost. While you were employed, your employer likely subsidized a large portion of your health insurance costs. For instance, if your policy costs $1,000 per month, your employer might pay $750, leaving your out-of-pocket premium at $250/month. Under COBRA, you’ll pay the full $1,000 per month.

COBRA coverage can extend beyond 18 months in certain circumstances. If you become sick or disabled, or in cases of divorce where you were covered under your spouse’s plan, COBRA health insurance can continue for up to 36 months. This extended coverage can be crucial if you’re dealing with ongoing health issues or major life changes.

COBRA health insurance serves as an excellent bridge option during career transitions. You’re not obligated to keep it for the full 18 months. This makes it a great option for temporary coverage while you research and transition to a longer-term solution. This flexibility makes it particularly valuable for early retirees who need time to evaluate their options.

Employment-Based Health Insurance Options

Before exploring more complex alternatives, consider some straightforward employment-based solutions for health insurance before Medicare. These options might be simpler than you think and could provide the coverage you need while maintaining some income.

Part-time employment with health benefits is becoming more common. Many companies now offer health insurance coverage to employees working as little as 20 hours per week. This could be an ideal solution if you’re not ready to fully retire and want to stay active while securing health coverage.

The beauty of part-time work for early retirement health insurance is that it can provide multiple benefits.

  • Maintaining some income
  • Staying engaged and active
  • Potentially enjoying less stressful work than your previous career
  • Securing health insurance coverage

Many retirees find part-time work in completely different fields. Perhaps something outdoors, in retail, or in areas they’re passionate about but never had time to pursue during their primary career.

If you’re married, spousal coverage represents another straightforward option. If your spouse continues working while you retire, you can typically join their employer’s health insurance plan. This arrangement is common in households where one spouse retires earlier than the other, providing a natural bridge to Medicare eligibility.

These employment-based health insurance options are the first to consider for early retirees. They often offer the most comprehensive coverage at reasonable costs thanks to employer subsidies.

ACA Health Insurance Early Retirement: Affordable Care Act Options

Early retirement health insurance under the ACA has been the default choice for many people seeking coverage before Medicare. The Affordable Care Act marketplace, accessible through healthcare.gov, offers several advantages that make it attractive to early retirees.

The most significant benefit of ACA health insurance is the potential for premium tax credits. These credits can be substantial – some couples receive thousands in monthly premium subsidies. The key is keeping your modified adjusted gross income under 400% of the federal poverty line.

Upcoming Changes

However, there’s a critical change starting in 2026 that affects ACA health insurance early retirement planning. The “cliff” is returning. This means that if your income exceeds 400% of the federal poverty line, by even one dollar, you lose all premium tax credits. From 2021 to 2025, there was a gradual slope where credits decreased slowly. The hard cutoff is back starting this year. 

This change is particularly important for early retirees who might have multiple income sources. Social Security, pension payments, investment income, and distributions from retirement accounts can all push you over the 400% threshold.

Example:

A couple receiving $3,000 in monthly premium tax credits could suddenly receive $0 if they underestimate their income by just a few hundred dollars.  If you want to learn more about how these premium tax credits work, check out this YouTube video (The ACA Premium Tax Credits Are Changing In 2026).

ACA policies are guaranteed issue, meaning they cannot deny you coverage regardless of pre-existing conditions. This protection is valuable, but it’s also why premiums are increasing dramatically. The insurance pools include many people with chronic illnesses and high medical costs, driving up costs for everyone.

The policies available through ACA health insurance early retirement are typically high-deductible plans, often with deductibles of $3,000 or more. While the coverage is comprehensive once you meet the deductible, the high upfront costs mean you’ll pay significant out-of-pocket expenses for routine care.

Open enrollment for ACA health insurance early retirement runs from November 1st through January 15th each year. Missing this window means you’ll need a qualifying life event to enroll, making timing crucial for your retirement planning.

Direct Purchase Health Insurance Options Retirees Should Consider

Direct purchase health insurance options involve buying policies directly from insurance companies rather than through the ACA marketplace. This approach can offer significant savings for healthy individuals willing to go through medical underwriting.

Some options for direct purchase insurance include

  • UnitedHealthcare
  • Blue Cross Blue Shield
  • Cigna
  • Ambetter

When you go directly to insurance companies, you can access both on-exchange and off-exchange policies. Off-exchange policies, sometimes called private policies, don’t have to comply with all ACA regulations and can offer greater flexibility and lower costs.

The key difference with direct purchase health insurance options that retirees should understand is the underwriting process. Unlike ACA policies that are guaranteed issue, these private policies require you to complete a health questionnaire. If you’re healthy and have no major pre-existing conditions, this works in your favor and can lower your premiums.

Example

A family policy with a $10,000 deductible through direct purchase might cost around $850 per month, compared to $3,700 for a similar ACA policy. This dramatic difference reflects the healthier risk pool in underwritten policies versus the guaranteed issue ACA marketplace.

However, direct purchase policies do have limitations. Pre-existing conditions are typically excluded for 6-12 months after your policy starts. If you need ongoing treatment for a chronic condition, you may need to pay out of pocket during this waiting period.

Lifetime Benefit Limits

Another important consideration is lifetime benefit limits. While ACA policies offer unlimited lifetime benefits, many direct purchase policies cap benefits at $1-2 million per person. For most people, this is adequate, but if someone in your family develops a serious chronic illness requiring years of expensive treatment, you could reach this limit.

The solution for lifetime benefit limits is to remove the affected family member from the group policy and enroll them in an ACA policy (during the open enrollment period), which offers unlimited benefits and guaranteed issue coverage. The rest of the family can remain on the lower-cost direct purchase plan.

Many direct purchase policies and ACA-issued policies are HSA-eligible, which is a significant advantage for tax planning. If you’ve been unable to contribute to an HSA due to low-deductible employer coverage, returning to HSA eligibility can provide valuable tax benefits and retirement healthcare savings.  Of course, you must be eligible to contribute to an HSA!

Medishare: Christian Health Sharing Alternative

Medishare represents a unique alternative to traditional health insurance before Medicare. As a Christian health-sharing organization operating since 1995, Medishare has paid out significant lifetime claims and offers a faith-based approach to healthcare coverage.

It’s important to understand that Medishare is not health insurance. They operate as a nonprofit organization in which members share healthcare costs according to biblical principles. Instead of paying premiums, you pay a “monthly share amount,” and instead of deductibles, there’s an “annual household portion.”

Medishare’s cost structure can be more attractive than traditional insurance. They offer four annual household portions ranging from $3,000 to $12,000, with monthly share amounts typically lower than comparable insurance premiums.

Unlike direct purchase policies, Medishare requires adherence to certain lifestyle principles.  Similar to direct purchase plans, Medishare does have waiting periods for pre-existing conditions. The organization will exclude or limit coverage for pre-existing conditions for 6-12 months, depending on the specific condition and whether it involves prescriptions or medical treatments.

Medishare’s claims approval process can be more stringent than traditional insurance. The organization strictly enforces its biblical principles, which means claims related to activities like drunk driving, tobacco use, or other lifestyle choices that violate their stated principles can be denied. This strict adherence to principles has led to negative experiences for members whose claims were unexpectedly denied.

Medishare’s network differs from traditional insurance networks. They use the PHCS (Private Healthcare Systems) network, so you’ll need to verify that your preferred doctors and hospitals participate before enrolling.

Tax Disadvantages of Medishare

Two significant tax disadvantages of Medishare are worth noting. First, because it’s not technically health insurance, you cannot use it with an HSA. Second, the monthly share amounts are not deductible as medical expenses, even for self-employed individuals who can typically deduct health insurance premiums.

Despite these limitations, many Medishare members report positive experiences, particularly those who appreciate the faith-based community aspect and find the cost savings significant enough to outweigh the restrictions.

Farm Bureau Health Insurance: An Unexpected Option

Farm Bureau health insurance represents one of the most surprising health insurance options retirees can access, even if you’re not involved in farming. The Farm Bureau is a nationwide network of state farm bureaus that serves as the unified voice for farmers and ranchers, but its insurance options are available to non-farmers in many states.

What makes Farm Bureau particularly interesting is that its health insurance policies are underwritten by major insurers like UnitedHealthcare. However, when you call UnitedHealthcare directly, their agents may not even know about the Farm Bureau option, making this a hidden alternative worth exploring.

The underwriting process for Farm Bureau health insurance is more thorough than direct purchase policies. If you’re over 40, they typically require medical records from your most recent physical and prescription records from the last 12 months. This additional scrutiny allows them to offer competitive pricing for qualified applicants.

Like other underwritten policies, Farm Bureau can rate you based on your health profile, meaning you could qualify for their lowest premium category if you’re healthy. You could also potentially be denied coverage if you have significant health issues. The policies are not guaranteed issue.

The premium structure for Farm Bureau health insurance is typically comparable to direct purchase policies, offering significant savings compared to ACA marketplace plans for healthy individuals. They offer both low and high-deductible options, with many policies being HSA-eligible.

One potential advantage of Farm Bureau policies is unlimited lifetime benefits per insured person, compared to the $1-2 million caps common in direct purchase policies. However, this benefit needs verification, as policy details can vary by state and specific plan.

The network and coverage options through Farm Bureau health insurance are typically robust, backed by major insurance companies with established provider networks and claims processing systems.

Medicare Gap Coverage: Planning Your Transition

Understanding health insurance before Medicare requires planning for the eventual transition to Medicare coverage. The gap between early retirement and Medicare eligibility at 65 can span several years, making it crucial to choose coverage that provides both adequate protection and financial sustainability.

Early retiree health plans should be evaluated not just on current costs, but on their sustainability over multiple years. Premium increases are common across all types of coverage. It’s essential to build some inflation buffer into your healthcare budget.

Consider the total cost of ownership for each option, including premiums, deductibles, out-of-pocket maximums, and any excluded services. A lower premium plan might cost more overall if it has high deductibles and limited coverage.

Making Your Early Retirement Health Insurance Decision

Choosing the right health insurance option for early retirement depends on several key factors:

  1. Your health status
  2. Risk tolerance
  3. Budget
  4. Personal preferences

Here’s how to evaluate your options:

If you’re in excellent health with no ongoing medical needs, direct purchase policies or Farm Bureau options might offer the best value. The underwriting process works in your favor, and the premium savings can be substantial.

If you have pre-existing conditions or prefer guaranteed coverage, ACA marketplace plans provide the security of guaranteed issue coverage, though at higher costs. The premium tax credits can make these plans affordable if your income qualifies.

If you value continuity during your transition to retirement, COBRA health insurance provides the least disruption while you evaluate longer-term options.

For those with strong faith-based preferences and healthy lifestyles, Medishare offers a community-oriented alternative with potential cost savings.

Remember that you’re not permanently locked into any single option. You can use COBRA as a bridge while researching other alternatives, or switch between different types of coverage as your circumstances change.

Taking Action on Your Early Retirement Health Insurance Plan

Health insurance before Medicare requires proactive planning and regular evaluation. Premium increases, changing health needs, and evolving regulations mean your optimal choice today might not be your best choice next year.

Start by getting quotes from multiple sources:

  • ACA marketplace plans
  • Direct purchase policies from major insurers
  • Medishare
  • Your state’s Farm Bureau

Compare not just premiums, but total potential costs including deductibles and out-of-pocket maximums.

Consider working with a financial advisor who specializes in retirement planning to ensure your health insurance choices align with your overall retirement and tax strategies. Healthcare costs are often one of the largest expenses in retirement, making proper planning essential for your financial security.

The key to successful early retirement health insurance planning is

  • Understanding all your options
  • Evaluating them based on your specific situation
  • Remaining flexible as circumstances change

With proper planning, you can bridge the gap to Medicare while protecting both your health and your retirement savings.

At Imagine Financial Security, we help individuals over 50 with at least a million dollars saved navigate these complex retirement decisions. If you are looking to

  • Maximize your retirement spending
  • Minimize your lifetime tax bill
  • Worry less about money

You can start by taking our Retirement Readiness Questionnaire on our website at www.imaginefinancialsecurity.com, so we can learn more about how we can help you on your journey to and through retirement.

Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel.

This is for general education purposes only

50 Essential Retirement Planning Truths Every Future Retiree Should Know

Have you ever wished you could peek inside the minds of people who’ve already retired to learn from their experiences? After 16 years as a financial advisor and countless conversations with retirees, I’ve compiled the most important insights that people wish they had known before leaving their careers behind.

These aren’t theoretical concepts from textbooks—they’re real truths from real people who’ve navigated the transition from working life to retirement. Whether you’re decades away from retirement or planning to leave your job soon, these insights will help you avoid common pitfalls and make more informed decisions about your future.

Effective retirement planning goes beyond just saving money in a 401(k). It involves understanding what retirement actually looks like, preparing for unexpected challenges, and making decisions that will serve you well for potentially 20 to 30 years of retirement.

Finding Your Purpose and Planning Your Transition

1. Work on Finding Purpose Well Before You Retire

Most people focus entirely on the financial aspects of retirement planning, but ask yourself: What are you retiring to? This might seem elementary, but most retirees haven’t given this enough thought. They’re so busy on the treadmill of life that they haven’t really considered what their day-to-day will look like.

How will you find purpose when you no longer have the structure of a full-time job? Take time now to think about what activities will give your life meaning. Whether it’s volunteering, pursuing hobbies, spending time with family, or starting a small business, having a clear vision of your retirement purpose is crucial.

2. Retirement Doesn’t Have to Be Black or White

You don’t have to go from working 50-60 hours a week to having nothing on your calendar overnight. Many companies now offer phased retirement options, or you might work part-time for your existing employer or try something completely different.

Test drive retirement by exploring what you might want to do with your free time. If you’re unsure about stopping work completely, consider a gradual transition that lets you maintain some income while exploring your retirement interests.

3. The Rules of Thumb for Retirement Planning Are All Wrong for You

When planning for retirement, people often treat rules of thumb, such as the 4% withdrawal rule, as gospel. They don’t understand that these are just benchmarks, not absolute limits. On one end of the spectrum, I work with clients who are trying to “die with zero” and recommend withdrawal rates well above 4%/year.  At the same time, we work with retirees who want to maximize their financial legacy to children or grandchildren. 

Use these rules as starting points, but remember that your situation is unique. Your withdrawal rate should be based on your specific circumstances, not a one-size-fits-all formula.

4. There Are Multiple Ways to Achieve Your Goals

Just like in golf, there are multiple ways to make par. You might shank your drive into the woods but recover with a great approach shot, or you might hit the fairway and two-putt for the same score. The best retirement planning strategies often involve the simplest path, not necessarily the most financially optimal one.

Don’t feel pressured to copy your friend’s investment strategy or income plan. What works for them might not work for you, and sometimes the best approach is the one you can understand and stick with consistently.

Health and Longevity Realities

5. Health is Wealth

Instead of waiting until retirement to get in shape, establish regular workout habits now. The older you get, the more difficult it becomes to develop new routines. Plus, the better shape you’re in, the longer you’ll be able to enjoy activities that require physical fitness, like international travel or hiking in national parks.

6. Get a Handle on Your Diet

Your health is your wealth, and diet is one of the few things you can completely control. The healthier you eat, the less you’ll likely pay for medical costs in retirement. This connects directly to the next point about healthcare expenses.

7. Healthcare Costs Are Shockingly High Despite Medicare

According to Fidelity’s annual healthcare cost report, a single person aged 65 may need approximately $157,000 saved after taxes to cover healthcare costs in retirement. For couples, that number jumps to around $315,000.

These costs include Medicare premiums (which you do pay, despite contributing to Medicare during your working years), copayments, deductibles, prescription drugs, and other out-of-pocket expenses. Importantly, this estimate doesn’t include long-term care expenses, which can be substantial.

8. Retirees Continuously Underestimate Their Longevity

According to a TIAA study, the average 60-year-old underestimates their future longevity by six years. People often do this because they’re worried about running out of money, so they mentally shorten their life expectancy to feel better about their financial situation.

Despite this underestimation, people still procrastinate on their bucket list items. There are 16,000 golf courses in the US—it would take 43 years to play every single one if you played a new course every day. Instead of waiting, create a realistic list of experiences you want to have and start making them happen now.

9. Don’t Forget to Exercise Your Brain

Just like your physical muscles, your brain needs regular stimulation to stay sharp. During your working years, your job likely provided mental challenges. In retirement, you need to find new ways to keep your mind active through reading, puzzles, learning new skills, or taking on mentally stimulating hobbies.

10. Long-Term Care Costs Are Not Covered by Medicare

This is a crucial distinction many people miss. While Medicaid does cover long-term care, it’s a federal entitlement program with strict income and asset requirements. Most people listening to retirement planning advice won’t qualify for Medicaid because they have too many assets.

You need a plan for potential long-term care costs, whether that’s self-funding, purchasing insurance, or a combination of both.

Financial Realities and Spending Patterns

11. Most People Think Expenses Will Go Down in Retirement

The common rule of thumb suggests you’ll need 80% of your pre-retirement income, but many retirees actually experience increased expenses, especially in the early years. When every day is Saturday, you’re traveling more, playing more golf, and spending more time on leisure activities that cost money.

Don’t be surprised if your spending actually increases in those first few years of retirement as you finally have time to do all the things you’ve been putting off.

12. Retirees End Up Lagging Inflation Relative to the General Population

This depends on your lifestyle, but studies show retirees typically experience about 1% less inflation annually than the general population. If your major expenses are fixed (like a paid-off mortgage) and you’re not heavily exposed to volatile costs like travel, you might not feel inflation as acutely as working people.

However, if travel is a big part of your retirement plans, you’ve likely experienced significant inflation in those costs over recent years.

13. International Travel Fatigue Is Real

Many retirees get excited about extensive overseas travel, but the reality of planning trips, dealing with jet lag, and the physical demands of travel can wear on you. Often, people discover there are plenty of amazing places to explore in the United States.

This doesn’t mean you shouldn’t travel internationally, but don’t build your entire retirement budget around expensive overseas trips if you might end up preferring domestic travel or an RV lifestyle.

14. Understand the Three Primary Spending Stages

Retirement typically involves three distinct phases: the “go-go” years at the beginning, when you’re active and spending more, the “slow-go” years when you start to reduce activities, and the “no-go” years when health issues limit your mobility.

Each stage generally results in reduced spending, except for healthcare costs that may increase in the final stage due to long-term care needs.

15. Most Retirees Regret Underspending in the Go-Go Years

Time and again, retirees tell me they wish they hadn’t acted with so much fear early in retirement. If you have a solid plan that shows you can afford certain activities or expenses, don’t let fear of market volatility or inflation keep you from enjoying your healthiest retirement years.

Things tend to work out, and most people regret not doing more when they were physically able rather than regretting spending too much early on.

16. “Unexpected” Expenses Are Not Actually Unexpected

These are simply expenses that don’t occur monthly but are recurring over time. The biggest surprise for many retirees is the cost of home maintenance—new roofs, HVAC systems, flooring, or kitchen renovations.

Budget at least 1% of your home’s value annually for maintenance and repairs. Set this money aside in a dedicated account so you’re not scrambling to find $15,000 for a new air conditioning system.

Housing Decisions and Home Equity

17. Many Retirees Face the Difficult Decision of Staying Put or Moving

Don’t stress about making the first move your final move. Many people try out a new location by renting for a year or two before buying. This gives you time to figure out which neighborhood or even which city you really prefer.

Keep the proceeds from selling your primary residence easily accessible rather than investing it aggressively, since you’ll likely need it to purchase your next home within a few years.

18. Many Retirees Are Surprised by Their Need for a Sizable Home

While downsizing sounds appealing in theory, consider practical questions: Where will your children and grandchildren stay when they visit? Do you want to host family gatherings?

Don’t necessarily cater all your housing decisions to your children’s needs, but if entertaining and hosting family is important to you, factor that into your retirement home decision.

19. CCRCs Are Popular but Costly

Continuing Care Retirement Communities (CCRCs) are increasingly popular, but they require substantial upfront payments—often $400,000 or more—plus monthly fees of several thousand dollars. The home isn’t yours when you pass away, and there are often lengthy waiting lists.

If you’re interested in a CCRC, get on waiting lists early, as it can take five years or more to get accepted.

20. Home Equity Is a Very Underutilized Asset

Whether you’re downsizing and using the equity for retirement income, paying off debt, or keeping it as an emergency fund for potential long-term care costs, don’t overlook the value locked up in your home. This can be a significant source of retirement security that many people fail to incorporate into their planning.

Lifestyle and Activity Realities

21. You Could Be Busier in Retirement Than When Working

This depends on what you did for work, but many retirees find themselves busier than expected. If you’re retiring to meaningful activities—travel, volunteering, spending time with grandchildren, or part-time work—you might find your calendar fuller than when you were working.

Sometimes this busyness isn’t entirely positive, such as caring for aging parents or adult children. Protect your time and don’t over-commit to obligations that prevent you from enjoying the retirement you planned for.

22. Having Too Much Time Can Lead to Bad Habits

The flip side of being too busy is having too much unstructured time, which can lead to mental health challenges. Studies suggest that 60% of retirees with mental health issues never seek help because they feel they should be happy in retirement.

That lack of purpose and structure that work provided needs to be replaced with meaningful activities and social connections.

23. Most Retirees Underestimate How Important Technology Is

Technology is constantly changing, and many businesses rely heavily on it. This can be challenging for retirees who didn’t grow up with smartphones and social media.

The good news is that YouTube has become a university for learning new technology. If you’re struggling with Zoom, online banking, or any other technology, there’s likely a tutorial video that can help.

24. Retirees Are Huge Targets for Scammers

Be very skeptical of any scheme that comes your way, whether through email or phone calls. With AI technology, scammers can now create fake voices that sound like your family members asking for money or help.

If you receive an urgent call from someone claiming to be a family member in trouble, hang up and call that person directly on a number you know is theirs.

Investment and Financial Management

25. You’re Likely Getting Too Conservative Too Early

Retirement isn’t one year long—it could be 20 to 30 years. If you position your portfolio too conservatively, you run the risk of inflation eroding your purchasing power over time.

Just because you’re retired doesn’t mean you should move everything to bonds and CDs. You still need growth to maintain your lifestyle over a potentially long retirement.

26. Conservative Portfolios Carry Significant Risk Too

As we saw in 2022, when interest rates skyrocketed, bonds fell 15% while stocks dropped 25%. Conservative doesn’t mean risk-free, and you can still experience significant volatility in a “safe” portfolio.

27. Don’t Underestimate the Importance of Turning Assets Into Income

After decades of accumulating wealth, the decumulation phase requires a different skill set. Many retirees continue reinvesting all their investment earnings instead of using them to fund their lifestyle.

If you have enough to retire and never work again, why are you reinvesting all your profits? Take some money off the table to fund your retirement activities. If you don’t need it all, give it to your children or favorite charities.

28. Annuity Biases Prevent Retirees From Purchasing Them

I’ve never had a client regret purchasing a life income annuity. Having guaranteed income from Social Security and an annuity provides peace of mind and allows you to take more risk with your remaining investment portfolio.

When you know your basic expenses are covered by guaranteed income sources, you can sleep better at night regardless of market volatility.

29. Controlling Taxes and Fees Can Easily Improve Performance

Look under the hood of your investment portfolio and examine expense ratios. You might find you’re paying 0.50% or 0.60% for an S&P 500 index fund when you could buy the same fund for 0.05%. That 0.5% difference compounds significantly over 10, 15, or 20 years.

The same principle applies to tax management—minimizing taxes through strategic planning can significantly improve your net returns.

30. Many People Forgo Hiring Advisors Because of Cost

By trying to do everything yourself, you might end up spending more time and making more costly mistakes than if you hired professional help. You don’t know what you don’t know, and missing opportunities or making errors can cost more than advisory fees.

Focus on what’s important to you and delegate the rest to qualified professionals.

Tax Planning and Social Security

31. Most People Think Financial Advisors Are There to Time Markets

This couldn’t be further from the truth. Investment management should be just one component of a comprehensive financial plan. Your retirement planning financial advisor should help with tax optimization, income distribution planning, estate planning, and charitable giving strategies.

If your advisor only manages investments, it might be time to find someone who provides more comprehensive planning services.

32. The Media Is Not Your Friend

Financial media wants to sell fear and greed, neither of which is good for making sound long-term investment decisions. Limit your consumption of financial news and focus on your long-term plan rather than daily market movements.

33. Taxes Might Be Your Largest Annual Expense

Required minimum distributions, IRMAA, taxes on Social Security, Capital Gains, Interest Income, Dividends, or even the Surviving Spouse Tax Trap.  All of these ‘problems’ are the result of disciplined saving and investing for decades.  The challenge is that taxes might become one of your largest (if not THE largest) expenses in retirement.  The good news is, you can do something about it by being proactive instead of reactive!

34. The RMD Trap Can Blow Up Your Tax Plan

Required Minimum Distributions (RMDs) start at age 73 or 75 for most people. If not properly planned for, these can significantly increase your tax burden and potentially trigger higher Medicare premiums.

35. Roth Conversions Can Help Mitigate the RMD Tax Trap

When you retire and your income drops, you might have several years of lower tax brackets before RMDs or Social Security kick in. This period of time is what I like to call “The Roth Conversion Window.”  This could be an ideal time to convert traditional IRA funds to Roth IRAs, which don’t have RMDs.

36. Don’t Over-Convert Your IRA

If you plan to leave money to charity, don’t convert everything to Roth. Charities don’t pay taxes anyway, so there’s no benefit to leaving them Roth IRA assets instead of traditional IRA assets.

37. Social Security Benefits Are Taxed at Different Rates

Depending on your modified adjusted gross income, you might pay 0% tax on Social Security benefits, or you might pay taxes on up to 85% of your Social Security benefits. Managing your taxable income strategically can help minimize taxes on your Social Security benefits.

38. IRMAA Is the Tax Hurricane Retirees Don’t See Coming

Income Related Monthly Adjustment Amount (IRMAA) is essentially a Medicare surcharge that kicks in when your income exceeds certain thresholds. This can add up to $16,000 annually for a couple in additional Medicare premiums for both Part B and Part D.

Factor IRMAA into your tax planning, especially when considering Roth conversions or managing taxable investment income.

Estate Planning and Legacy Considerations

39. Retirees Tell Themselves They’ll Self-Fund Long-Term Care

Seventy percent of long-term caregiving is done by unpaid family members. If you plan to self-fund long-term care, make sure your decision-makers know this and give them permission to spend the money you’ve set aside for this purpose.

Don’t tell only your financial advisor about your self-funding plan—make sure your spouse and children understand your wishes.

40. You May Not Need Life Insurance, But You May Want It

If leaving a legacy is important to you, life insurance can provide a “legacy floor” that allows you to spend down your other assets more freely. Knowing you have a guaranteed death benefit can give you permission to enjoy your retirement savings rather than hoarding them for your heirs.

41. Don’t Forget Your Umbrella

Umbrella liability insurance becomes more important as your net worth grows. While retirement accounts generally have creditor protection built in, your taxable investment accounts, real estate, and other assets might be vulnerable to lawsuits.

Consider umbrella insurance combined with proper estate planning structures to protect your wealth.

42. If You Survive Your Spouse, You’ll Likely Live Much Longer

Despite similar life expectancies for new retirees (about 84 for women and 82 for men), women have a 63% chance of outliving their spouses. If a woman outlives her husband, her life expectancy is an additional 12.5 years.

Plan for joint life expectancy and understand how Social Security benefits and taxes will change when one spouse passes away.

43. Watch Out for the Surviving Spouse Tax Penalty

When a spouse dies, the surviving spouse files their final joint tax return that year. The following year, they must file as single, which often results in higher tax rates on the same income.

Consider strategies to mitigate this tax increase as part of your retirement income planning.

44. Having a Strong Sense of Community Is Crucial

Whether you move to a new city or leave work friends behind, building and maintaining social connections is vital for happiness and longevity in retirement. Retirees with strong community ties report significantly higher levels of satisfaction and tend to live longer.

45. Choosing Someone to Manage Your Affairs Is Difficult

This is especially challenging for single people or couples without children. If you choose a sibling as your power of attorney, consider that they might be the same age and could face their own health challenges.

Create backup plans and consider corporate trustees if you’re concerned about having appropriate decision-makers.

46. How You’re Remembered Depends on the Mess You Leave Behind

One job you don’t want to leave your spouse or kids with is ‘Full Time Detective’ when you’re gone. Stay organized, provide clear direction, and start decluttering now. Begin giving things away, selling items you don’t need, and don’t be offended if your children don’t want your vintage furniture—they have limited space too.

47. Financial Legacy Doesn’t Have to Wait Until You’re Dead

“Giving with a warm hand is much more enjoyable than giving with a cold one.” Consider making gifts to children or charities while you’re alive to see the impact of your generosity. Money today is more valuable than money in the future.

48. Don’t Forget to Review and Update Beneficiaries

Review all your beneficiary designations regularly. It’s surprisingly common to find ex-spouses still listed as primary beneficiaries on retirement accounts or life insurance policies.

49. Trusts Are Not Just for the Ultra-Wealthy

Trusts aren’t just about how much money you have—they’re about what you’re trying to accomplish. If you have concerns about a child’s spending habits or addiction issues, a trust might be appropriate even with a modest estate.

Conversely, you might have $10 million and not need a trust if your beneficiaries are responsible and you’re not concerned about estate taxes.

50. Time Flies Faster Than You Can Imagine

In retirement, days tend to blend together, and time passes incredibly quickly. The things you’re worried about now probably won’t matter when you’re 85 or 95. You can’t take your money with you, so stop obsessing over every financial detail. 

Make a solid plan, execute it with discipline, and then focus on what’s most important to you—whether that’s faith, family, friends, fitness, or other priorities. Use these as filters for what gets added to your calendar.

Don’t spend your retirement years glued to CNBC worrying about what the Federal Reserve will do with interest rates. The things you’re truly worried about today likely won’t be relevant in 15-20 years, but the experiences you miss while your grandchildren are young or while you’re healthy enough to travel—those are the regrets you’ll carry.

Your Next Steps in Retirement Planning

These 50 truths represent real insights from thousands of conversations with retirees over 16 years of financial planning experience. The goal isn’t to overwhelm you with concerns, but to help you prepare for the realities of retirement so you can make informed decisions.

The most important takeaway is this: once you have a solid retirement plan, execute it with discipline and then focus on living your life. Control what you can control—your health, your faith, your relationships, your purpose—and don’t let financial anxiety rob you of the retirement you’ve worked so hard to achieve.

Remember, retirement planning involves legitimate risks like market volatility, inflation, healthcare costs, and longevity. But once you’ve planned for these risks appropriately, shift your focus to the experiences and relationships that will make your retirement truly fulfilling.

At Imagine Financial Security, we help individuals over 50 with at least a million dollars saved navigate these complex retirement decisions. If you are looking to

  • Maximize your retirement spending
  • Minimize your lifetime tax bill
  • Worry less about money

You can start by taking our Retirement Readiness Questionnaire on our website at www.imaginefinancialsecurity.com, so we can learn more about how we can help you on your journey to and through retirement.

Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel.

This is for general education purposes only and should not be considered as tax, legal, or investment advice.

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