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Tag: retirement planning

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.

Why You Should Plan for Early Retirement Even If You Don’t Plan to Retire Early

I recently met with two clients who completely changed how I think about retirement planning. Both were retiring much earlier than they had anticipated, and both situations were related to unexpected health issues. One client is now on disability, though thankfully, his wife is still working for a few more years, and he does have a disability policy in place. The other received a cancer diagnosis and is potentially retiring much earlier than planned as well.

These conversations took me back to my days studying for the RICP (Retirement Income Certified Professional) designation. There was a statistic that really resonated with me. After reviewing my coursework and notes, I found it: 51% of retirees retired earlier than anticipated. That’s right! There’s a better than 50% chance that whatever age you think you’re going to retire, you’re going to retire earlier.

The number one reason? Health issues. This reality made me realize something important. We need to stop planning for a “normal” retirement age in our assumptions, even if we end up working until 70 or 65.

The Reality of Uncontrollable Retirement Factors

Let me share another example. I’m working with a client right now who’s 62. He plans to work at least until 65, when he becomes eligible for Medicare. During the pandemic, he moved from New York to Florida. The plan was to work remotely, feel good, and coast into retirement while continuing to build his assets.

Unfortunately, the company is bringing everyone back to the office. He has two choices.

  1. Move back to New York
  2. Pick a random satellite location in Florida to work in

Neither of these is convenient based on where he now resides. So, he might retire this year.

My point is that things outside our control often lead people to retire earlier than planned. The inputs you give your financial advisor, including “I want to work until 70,” significantly impact the calculations on:

  • How much you need to save for retirement
  • How much risk you need to take
  • How long your portfolio needs to last while you’re spending it down

I don’t think it’s prudent to build those optimistic assumptions into your plan.

I recommend assuming you’ll retire at 62, 63, or 64, even if you love what you do, and genuinely want to work until 70. Then control what you can control.

Understanding Why People Retire Early

The research shows us exactly why 51% of people retire earlier than expected. Here’s the breakdown:

46% cited health reasons – This is the largest category and completely uncontrollable. Whether it’s a sudden diagnosis, chronic condition, or physical limitations, health issues force many people out of the workforce earlier than planned.

30% were laid off or offered an early retirement package – Again, this is largely uncontrollable. Company restructuring, economic downturns, or industry changes can force your hand regardless of your personal timeline.

11% needed to care for a loved one – Caring for aging parents, a sick spouse, or other family members is another uncontrollable factor that can derail retirement plans.

When you add these three categories together, that’s 87% of early retirees who left work due to circumstances beyond their control. This is why early retirement planning makes sense for everyone, not just those dreaming of early retirement.

What Changes When You Plan for Early Retirement

If you’re 55 and had been planning to work until 70, you probably had a pretty nice-looking financial plan. You’d get maximum Social Security benefits at 70, which would line up perfectly with when you start portfolio withdrawals, creating no income gap. But what happens when you plan to retire at 60 or 62 instead? Several things change, and you need to prepare for them.

1. You Need to Save More and Invest More

This one’s pretty straightforward. A good saver typically saves about 10-15% of their gross income. But if you’re planning for early retirement – even if you don’t actually retire early – I’d argue you need to save closer to 20-25% of your gross income.

I’m personally planning to have financial independence before I turn 55. Now, I love what I do and don’t see myself at 60 doing nothing. I’m having more fun in my career today than I ever have. But by planning for retirement significantly earlier, I’m building the option to quit if I want to or sell my business if I want to. That’s the power of early retirement planning – it gives you choices.

2. Healthcare Before Medicare

Medicare eligibility starts at 65, and many people work until then specifically because they’re afraid of what they’ll do for health insurance if they retire at 60, 61, or 62. But here’s what most people don’t realize: buying private health insurance or through the Affordable Care Act isn’t that complicated.

I do it with my family. It’s not cheap, but if you’re retired, your taxable income is going to be pretty low. You might have some interest income from bonds or high-yield savings accounts, maybe dividends from stocks or ETFs, perhaps Social Security or a pension. But generally, folks who retire at 60-62 have relatively low taxable income.

This low income often qualifies you for ACA subsidies. If your income is relatively low, your health insurance costs could be next to nothing – possibly less expensive than what you were paying when you were working. Don’t let healthcare force you into a job you hate until 65 just because everyone else talks about working until Medicare kicks in.

3. Stay Aggressive with Your Investment Strategy Longer

This is a mistake I see repeatedly. People preparing for retirement think, “I need this money in one, two, three, or four years, so I need to dial back my risk.” Or worse, they pick a target-date fund for 2025 because they want to retire in 2025, and these funds force you into being super conservative.

By doing this, you’re bringing inflation and longevity risk into the picture more than necessary. When I say stay aggressive, I’m not talking about putting 100% in stocks or betting everything on high-risk investments. I’m talking about maintaining a higher equity allocation than traditional retirement advice suggests.

If the benchmark portfolio for retirees is 60% equities and 40% fixed income, maybe you stay at 75% or 80% equities for the first phase of retirement. This helps you capture returns early on (assuming the market cooperates), continue building your portfolio, and protect against inflation and longevity risks that come with retiring earlier.

4. Plan for Longevity

If you retire at 60 and have longevity in your genes or excellent health, there’s a possibility you or your spouse may live 30-35 years in retirement. This goes hand in hand with staying aggressive longer – you may need to maintain a fairly aggressive investment approach throughout your retirement years to protect against inflation and longevity risks.

You also need a sound Social Security strategy to maximize survivor benefits should one spouse pass away before the other. That Social Security benefit will be one of the best inflation hedges in your retirement income plan, so you’d better maximize it if you plan to live a long life.

5. Develop a Sound Income Distribution Plan

If you plan to delay Social Security until 70 to get maximum benefits but retire at 60, that’s a potential 10-year gap where you’ll have no Social Security income. You need to replace that income with portfolio withdrawals and distributions.

Preparing your portfolio for income distributions is critical. You need a disciplined, unemotional, repeatable process to generate cash flow monthly or quarterly. We’ve all heard about buying low and selling high. When you’re accumulating wealth and saving in your 401(k) or IRA, it’s all buying – you’re purchasing shares of investments.

But in the distribution phase, you’re not just buying anymore. You’re turning the portfolio on for income. Some will come from cash flows such as interest and dividends, but others will come from selling investments each month, quarter, or year. Having a disciplined process so you’re not selling the wrong thing at the wrong time is critical for maintaining portfolio longevity when retiring early.

What Happens If You Plan Early But Don’t Retire Early?

Let’s say you do all these things and prepare to retire early, but you don’t actually retire early. What’s the impact? Nothing really negative that I can think of.

The main drawback is that you might need to tighten your belt more. If you’re struggling to save 10-15% and early retirement planning calls for 20-25%, that might be tough without working a second job or getting a significant pay raise. But if you have the capacity to save and invest more, there are only benefits.

You could potentially spend or gift more in retirement. Maybe you could build your dream home or have a vacation home free and clear. You might have better opportunities to leave a financial legacy for your children and grandchildren. You could have different risk capacity – maybe you’ve saved more than enough for retirement, which allows you to take on more investment risk to build an even larger legacy for the next generation or for charitable goals.

Maybe this also allows you to set aside funds for self-funding long-term care. Long-term care risk is one of the top risks for any retiree today – those healthcare costs at the end of life and the potential burden on loved ones. If you’ve saved more than you need for your own retirement, you can potentially self-fund long-term care.

The Benefits of Early Retirement Planning for Everyone

The beauty of early retirement planning is that it benefits everyone, regardless of when you actually retire. It’s about building financial security and creating options in your life.

When you follow early retirement planning principles, you’re essentially stress-testing your financial plan. Instead of assuming everything will go perfectly – that you’ll work until 70, stay healthy, never get laid off, and never need to care for family members – you’re planning for reality.

This approach gives you financial flexibility. If you do face unexpected health issues, job loss, or family caregiving responsibilities, you’ll have options. You won’t be forced into desperate financial decisions because you’ll have built a solid foundation.

Even if none of these challenges arise and you work until your planned retirement age, you’ll be in a much stronger financial position. You’ll have more saved, better investment strategies, and multiple backup plans. That’s not a bad problem to have.

Taking Control of What You Can Control

The key insight from all of this is focusing on what you can control versus what you can’t.

You can’t control whether you’ll have health issues, whether your company will downsize, or whether you’ll need to care for aging parents. But you can control your savings rate, your investment strategy, your distribution process, and your ability to manage risk before and during retirement.

Let’s control what we can and plan for the worst while hoping for the best. That’s what smart early retirement planning is really about – not necessarily retiring early, but being prepared for whatever life throws your way.

And if you want help planning for your retirement, we’d love to help you.  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.

9 Pieces of Questionable Retirement Planning Financial Advice to Avoid

Retirement should be the golden years of your life, but following the wrong retirement financial advice can turn your dream into a financial nightmare. Every day, well-meaning friends, family members, and even financial professionals share advice that sounds reasonable on the surface but can destroy your financial security.

When it comes to retirement planning financial advice, not all guidance is created equal. You’ve probably heard countless “rules” about how to prepare for retirement. The world of retirement planning financial advice is filled with oversimplified rules that ignore your unique circumstances, goals, and risk tolerance.

As someone planning for retirement, you deserve better than cookie-cutter advice that treats every situation the same. The retirement planning strategies that work for your neighbor might be completely wrong for you. That’s why it’s crucial to understand which pieces of commonly shared advice should be approached with caution—or avoided altogether.

In this article, we’ll examine nine pieces of questionable financial advice for retirement planning that you’ve likely encountered. More importantly, we’ll explain why these suggestions can be problematic and what you should consider instead.

1. “Don’t Pay Off Your Mortgage Early — Invest the Difference!”

This advice sounds mathematically sound on the surface. If your mortgage rate is 4% and you can earn 7% in the stock market, investing seems like the obvious choice. However, this retirement planning financial advice ignores several critical factors that could make it dangerous for your financial security.

The problem with this approach is that it assumes market returns are guaranteed and consistent. In reality, market volatility can devastate your portfolio just when you need the money most. If you’re approaching retirement and the market crashes, you could find yourself with both a mortgage payment and a depleted investment account.

There’s also the psychological benefit of owning your home outright. Having no mortgage payment in retirement provides tremendous peace of mind and reduces your required monthly income. This flexibility can be invaluable if you face unexpected health expenses or market downturns.  I’ve advised clients on paying off the mortgage simply because of the mental win they experience by having no debt in retirement. 

A better approach considers your complete financial picture. If you have substantial retirement savings and can handle market volatility, investing might make sense. However, ignoring the behavioral component of paying off the mortgage might do more harm than good. 

2. “Always Delay Social Security Until 70.”

This piece of retirement planning financial advice has become gospel in many financial circles, but it’s far from universally applicable. While delaying Social Security until age 70 can increase your monthly benefit by up to 32% compared to claiming at full retirement age, this strategy isn’t right for everyone.

Your health status plays a crucial role in this decision. If you have serious health conditions or a family history of shorter lifespans, claiming earlier might provide more total lifetime benefits. The break-even point for delaying benefits typically occurs around age 80-82, so you need to live well beyond that to maximize the advantage.

Financial circumstances also matter significantly. If you need income immediately and don’t have sufficient retirement savings to bridge the gap until 70, claiming earlier makes perfect sense. There’s no point in depleting your retirement accounts to delay Social Security if it leaves you financially stressed.

Market conditions and your other retirement planning strategies should also influence this decision. If you’re still working and earning a high income, delaying Social Security while contributing to retirement accounts might be beneficial. However, if you’re unemployed or underemployed in your 60s, claiming benefits could provide necessary financial stability.

3. “Buy Permanent Life Insurance as a Savings Vehicle.”

This advice often comes from insurance agents who earn substantial commissions on permanent life insurance policies, but it’s rarely the best retirement planning strategy for most people. While permanent life insurance does offer tax-deferred growth and a death benefit, the costs and complexity usually outweigh the benefits.

Permanent life insurance policies come with high fees, including mortality charges, administrative costs, and surrender charges that can persist for many years. These fees significantly reduce your investment returns, especially in the early years of the policy. You might find that the cash value grows much slower than expected due to these ongoing expenses.

The investment options within permanent life insurance policies are typically limited and may underperform compared to what you could achieve with direct investments in mutual funds or ETFs. You’re essentially paying for insurance coverage you might not need while accepting inferior investment performance.

A more effective approach for most people involves buying term life insurance for protection needs and investing the difference in tax-advantaged retirement accounts like 401(k)s and IRAs. This strategy typically provides better investment returns and more flexibility while costing significantly less.

4. “You Don’t Need a Roth…You’ll Be in a Lower Tax Bracket in Retirement.”

This assumption about tax brackets in retirement has become increasingly questionable, making it potentially harmful retirement planning financial advice. Many retirees discover that their tax situation in retirement is more complex than they anticipated, and they may not be in the lower tax bracket they expected.

Required Minimum Distributions (RMDs) from traditional retirement accounts can push retirees into higher tax brackets than they experienced during their working years. When you add Social Security benefits, pension income, and investment gains, your taxable income in retirement might be substantial.

Tax laws are also subject to change, and current historically low tax rates may not persist throughout your retirement. Having tax diversification through both traditional and Roth accounts provides flexibility to manage your tax burden regardless of future tax law changes.

The best retirement planning advice regarding Roth accounts considers your current tax situation, expected future tax situation, and the potential for tax law changes. Many people benefit from having both traditional and Roth retirement accounts, allowing them to optimize their tax strategy based on their circumstances each year in retirement.

5. Chasing Investment Fads

Investment fad-chasing represents one of the most dangerous retirement planning mistakes to avoid. Whether it’s cryptocurrency, meme stocks, or the latest “hot” sector, chasing performance can devastate retirement portfolios, especially for those approaching or in retirement.

The problem with chasing fads is timing. By the time an investment becomes popular enough for mainstream attention, early investors have often already captured most of the gains. Late investors frequently buy at or near peak prices, setting themselves up for significant losses when the fad inevitably cools.

Sequence of returns risk makes this particularly dangerous for retirees. If you chase a fad that crashes early in your retirement, you might never recover the losses because you’re simultaneously withdrawing money for living expenses. This double hit of poor returns and withdrawals can permanently damage your portfolio’s ability to support your retirement.

Successful retirement planning strategies focus on diversification, consistent contributions, and staying the course through market cycles. Rather than chasing the latest trend, build a balanced portfolio aligned with your risk tolerance and time horizon.

6. “Just Self-Fund Long-Term Care. Insurance is a Ripoff.”

This advice might seem logical if you have substantial assets, but it ignores the potentially catastrophic costs of long-term care. The median annual cost for a private nursing home room exceeds $127,750, while home health services average $77,792 annually. These costs can quickly deplete even substantial retirement savings.

Medicare provides only limited long-term care coverage, typically up to 100 days in a skilled nursing facility under specific conditions. Most long-term care needs don’t qualify for Medicare coverage, leaving you responsible for the full cost.

Self-funding long-term care also assumes you’ll have family members available and willing to provide care. This assumption may not hold true, especially as families become more geographically dispersed and adult children face their own career and family obligations.

Long-term care insurance isn’t perfect, but it can provide valuable protection against catastrophic care costs. Hybrid life insurance policies with long-term care riders offer another option, providing benefits whether you need care or not. The key is evaluating your specific situation rather than dismissing insurance entirely.

7. “Annuities Are Bad,” AND “Annuities Are the Be-All End-All.”

Both extreme positions on annuities represent poor financial advice for retirement planning. Like most financial products, annuities have both advantages and disadvantages that make them appropriate for some situations but not others.

The “annuities are bad” crowd often focuses on high fees, limited liquidity, and complex contract terms. These are legitimate concerns, especially with variable annuities that can carry annual fees exceeding 3%. However, this perspective ignores situations where guaranteed income might be valuable.

Conversely, the “annuities solve everything” approach oversells their benefits while downplaying significant drawbacks. Some financial professionals push annuities because of high commissions rather than client suitability.

The reality is that annuities can provide valuable guaranteed income for retirees who prioritize security over growth potential. Simple immediate annuities or deferred income annuities can be appropriate for a portion of retirement assets, especially for people without pensions who want guaranteed income beyond Social Security.

8. “Follow the 4% Rule and You’ll Be Fine.”

The 4% withdrawal rule has become one of the most widely cited pieces of retirement planning financial advice, but treating it as gospel can be dangerous. This rule suggests you can safely withdraw 4% of your portfolio value in the first year of retirement, then adjust that amount for inflation each subsequent year.

The 4% rule assumes a specific portfolio allocation (50% in stocks and 50% in bonds) and doesn’t account for personalized risk tolerance and asset allocation strategy.

The rule also assumes constant spending throughout retirement, which doesn’t reflect reality for most retirees. Spending typically decreases in later retirement years, except for potential healthcare costs. A more flexible approach might allow for higher withdrawals in early retirement when you’re more active.

Dynamic withdrawal strategies offer better alternatives to the rigid 4% rule. These approaches adjust withdrawal rates based on portfolio performance, market conditions, and remaining life expectancy. While more complex, they can provide better outcomes in various market scenarios.

9. “Convert All of Your IRA to Roth!”

This advice has gained popularity as Roth accounts have become mainstream, but converting your entire traditional IRA to Roth can be a costly mistake. Large conversions can push you into higher tax brackets, resulting in unnecessary tax payments.

The tax impact of massive Roth conversions can be severe. If you convert $500,000 in a single year, you might jump from the 22% tax bracket to 37%, paying far more in taxes than necessary. This defeats the purpose of tax-efficient retirement planning strategies.

Market timing also affects conversion decisions. Converting when your account values are depressed due to market downturns can be smart, but converting at market peaks means paying taxes on inflated values that might subsequently decline.

A better approach involves strategic partial conversions spread over multiple years. Convert amounts that keep you within your current tax bracket or fill up lower tax brackets. This strategy provides tax diversification while minimizing the immediate tax impact.

Why These Common Retirement Planning Strategies Can Backfire

Understanding why certain retirement planning strategies can backfire helps you make better decisions about your financial future. The common thread among problematic advice is the assumption that one-size-fits-all solutions work for everyone’s unique situation.

The best retirement planning advice recognizes that your situation is unique and requires personalized strategies rather than universal rules. Effective retirement planning considers your health, family situation, risk tolerance, and financial goals.

Professional guidance becomes valuable when navigating these complex decisions. A qualified retirement financial advisor can help you evaluate trade-offs and develop strategies tailored to your circumstances. They can also help you avoid the retirement planning mistakes to avoid that we’ve discussed.

Conclusion

Retirement planning is too important to rely on oversimplified rules or one-size-fits-all advice. The nine pieces of questionable retirement planning financial advice we’ve examined all share a common flaw: they ignore individual circumstances in favor of universal solutions.

Your retirement planning strategies should reflect your unique situation, goals, and risk tolerance. What works for your friends, family members, or coworkers might not be appropriate for you. Take time to understand the reasoning behind any advice you receive, and don’t hesitate to seek second opinions on major financial decisions.

Remember that the best retirement planning advice considers multiple factors and provides flexibility to adapt as circumstances change. By avoiding these common pitfalls and focusing on personalized strategies, you’ll be better positioned to achieve your retirement goals and maintain financial security throughout your golden years.

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 with our Retirement Readiness Questionnaire linked on our website at www.imaginefinancialsecurity.com, so we can learn more about how we can help in 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.


Ep. 99: How Do We Design a Plan When My Spouse And I Feel Differently About Retirement Income? How Do I Possibly Calculate How Much For Long-Term Care, Medicare, Health Care? (Retirement Q&A)

PFR Nation,

As you know, we are well underway with our free giveawaysfrom a couple of weeks ago. And as I mentioned last week, we received a lot of great comments in that YouTube thread! So last week, I touched on three of the questions in a Q&A format.  Today, I’ll address three more! 

Here they are:

1.       “So how do you actually build a retirement income plan that both people can sleep at night with when one side wants market exposure and the other wants safety?”

2.       “I’ve set aside (spreadsheet) my calculated number to self-fund my long-term care, but the variables and assumptions concern me.”

3.       “How do we pay for health care before Medicare?”

You’re not going to want to miss this one, and hope you find it useful!  Thanks for tuning in.

-Kevin

Resources Mentioned in this Episode:

  • Genworthand Carescout Cost of Care
  • The ACA Premium Tax Credits AreChanging in 2026! (PFR Video)

Are you interested in working with me 1 on 1?⁠⁠⁠⁠⁠⁠⁠⁠ 

⁠⁠⁠⁠⁠⁠⁠⁠You can start with our Retirement Readiness Questionnaire linked on our website, so we can learn more about how we can help in your journey to and through retirement.

Connect with me here:

Or, ⁠⁠⁠⁠⁠⁠⁠⁠visit my website

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

6 Smart Retirement Strategies When You’ve Oversaved

If you’re like most high achievers I work with, you probably spend way too much time comparing yourself to others. Maybe you’re scrolling through social media, seeing someone’s luxury vacation photos, or reading anonymous posts about retirement savings that make you question whether you’ve done enough. But what if I told you that many successful people face the opposite problem—they’ve actually saved too much for retirement?

The Gap and the Gain

This reminds me of a powerful concept I discovered in Dan Sullivan’s book “The Gap and the Gain.” Most of us live in “the gap.” We’re constantly measuring where we are against where we want to be in the future. We’re always chasing the next milestone, the next savings target, the next achievement. But there’s another way to think about your progress: measuring backwards from where you started.

When I think about my own business journey, I can either

  • Focus on how far we still need to go to reach our future goals
  • Celebrate many of the achievements that seemed impossible when we started in February 2021

The same principle applies to your retirement planning. Instead of worrying about whether you have “enough,” consider how far you’ve come from your starting point.

Many successful professionals find themselves overfunding their retirement accounts without realizing it. You’ve been disciplined savers for decades, making sacrifices and staying focused on your goals. The challenge with overfunding isn’t having too much money. It’s knowing how to optimize it for maximum impact during your lifetime and beyond.

What Does It Mean to Be Overfunded for Retirement?

Being overfunded for retirement means your financial plan shows you have significantly more resources than you need to maintain your desired lifestyle throughout retirement. In technical terms, this typically means having a Monte Carlo simulation success rate of 90% or higher.

What Is A Monte Carlo Simulation?

A Monte Carlo simulation runs 1,000 different hypothetical scenarios with varying market returns to stress-test your retirement plan. If you’re at 90%, that means in 900 out of 1,000 scenarios, you never need to make lifestyle adjustments. The remaining 100 scenarios represent extreme market conditions. For example, the “lost decade” from 2000 to 2010, when U.S. stocks were negative due to the dot-com crash and Great Recession.

Using Monte Carlo simulation results, many retirees and pre-retirees discover they have more capacity than expected. What’s particularly telling is looking at the median trial—scenario number 500—which shows your likely portfolio value at the end of your life. For overfunded retirees, this number is often two to three times their starting portfolio value, even after decades of spending on travel, gifts, and lifestyle expenses.

Here’s what this means in practical terms. If you have $2 million today, and your median ending portfolio value is $4-6 million, you’re leaving substantial wealth on the table during your lifetime. That money could be used to

  • Make memories with loved ones
  • Support family members
  • Make charitable impacts while you’re alive to see them

The reality is that $2 million today doesn’t feel as wealthy as it once did. Inflation has changed the purchasing power dramatically. In many parts of the country, a million dollars barely covers a starter home. But when your financial plan shows you’ll likely end with significantly more than you started with, despite living well, you have options that most retirees don’t.

Strategy 1: Retire Earlier Than You Initially Planned

The most obvious benefit of overfunding is the ability to retire earlier than you originally planned. I recently worked with a client in their 50s who assumed they needed to work until 62 to maximize their pension and start Social Security early. After running their numbers, we discovered they could retire today if they wanted to.

Now, I’m not suggesting you should retire just because you can financially. Retirement creates a lot of free time and mental space that needs to be filled with purpose. When you’re on the treadmill of working life, it’s difficult to step back and really think about what you want to do in your next chapter. Who do you want to spend time with? Where do you want to live? What kind of impact do you want to make?

But knowing you have the financial freedom to retire early opens up possibilities you might not have considered. Maybe you’ve always wanted to start that business venture, write a book, or serve on a nonprofit board. Perhaps you want to pursue a “second act” that’s more about passion than paycheck. When you’re focused on retirement planning over 50, overfunding becomes a real possibility that can fund these dreams.

Early retirement also allows you to gradually dial back your work commitments rather than stopping abruptly. You might

  • Reduce your hours
  • Take on consulting projects
  • Redirect the money you were saving for retirement toward other goals

The key is having a plan for what you’re retiring to, not just what you’re retiring from.

Strategy 2: Spend More Intentionally Without Guilt

You’ve earned the right to spend without guilt. After decades of disciplined saving and careful budgeting, it’s time to upgrade your experiences and lifestyle in meaningful ways.

This might mean flying first class instead of coach, especially on longer trips where comfort makes a real difference. Or staying longer at destinations—turning a week-long vacation into a month-long adventure. Many of my clients discover they can book nicer accommodations, take their entire family on trips, and create experiences they’ll remember forever.

The concept of “giving with a warm hand versus a cold one” also applies to experiences. Instead of just leaving money to your children and grandchildren, create memories together while you’re alive to enjoy them. Things like

  • Taking your family to Europe
  • Renting a house for everyone at the beach
  • Funding educational trips for grandchildren

These experiences often mean more than a future inheritance.

Intentional spending also includes services that free up your time for more important activities. Maybe you hire a housekeeper, landscaping service, or personal assistant. If you love golf but hate yard work, paying someone else to maintain your lawn gives you more time on the course. These services aren’t luxuries when they allow you to focus on what truly matters to you.

The psychological shift from “I can’t afford that” to “Is this worth it to me?” is profound. When your financial plan shows you have more than enough, spending decisions become about value and priorities rather than affordability.

Strategy 3: Take More Investment Risk for Greater Returns

What I’m about to say may seem counterintuitive. Having excess retirement funds actually gives you the capacity to take on more investment risk if you choose. When your Monte Carlo simulation shows you’ll be fine, even in market downturns lasting five or six years, you can potentially earn higher long-term returns.

Higher returns over 10, 15, or 20 years can significantly increase your ability to make an impact during your lifetime and leave a larger legacy. More money means more options for family gifts, charitable giving, and lifestyle enhancement.

This doesn’t mean being reckless with your investments. It means understanding that you have the financial capacity to weather market volatility because your spending needs are well-covered even in worst-case scenarios. You can potentially allocate more to growth investments and less to conservative bonds or cash.

The key is matching your risk capacity (what you can afford to lose) with your risk tolerance (what you’re comfortable losing). Being overfunded gives you more flexibility in this equation.

Strategy 4: Take Less Investment Risk and Sleep Better

On the flip side, being overfunded also gives you the option to reduce investment risk significantly. If you’ve been riding the market roller coaster for 30 years and you’re tired of the volatility, you’ve earned the right to step off.

This is the “if you’ve won the game, stop playing” approach. You can

  • Dial back your stock allocation
  • Increase bonds and cash
  • Focus on preserving what you’ve built rather than growing it aggressively

Sure, your returns might be lower. However, they’ll be more predictable, and you’ll still have more than enough to fund your lifestyle.

Many clients find this approach appealing as they get deeper into retirement. The peace of mind that comes from knowing your portfolio won’t drop 30% in a market crash can be worth more than the potential for higher returns.

Additionally, if you have guaranteed income from pensions or Social Security covering your basic expenses, you have even more flexibility with your investment portfolio.

Strategy 5: Gift More During Your Lifetime

The ability to make a meaningful impact on your family while you’re alive to see it is where overfunded retirement really shines. For 2025, you can gift up to $19,000 per year per recipient without filing any gift tax forms. For married couples, that’s $38,000 per recipient, and if you have multiple children and grandchildren, the numbers add up quickly.

But lifetime gifting isn’t just about the money—it’s about the conversations and lessons that come with it. When you give your adult children or grandchildren money, use it as an opportunity to teach them the financial principles that got you to where you are today. Explain

  1. Why you’re gifting the funds
  2. What you hope they’ll do with the money
  3. How you built the wealth you’re now sharing

These conversations help you understand what kind of stewards your beneficiaries will be with larger inheritances. If you gift money for a down payment but they spend it on luxury items instead, that tells you something important about their financial maturity and decision-making.

Charitable Giving

Charitable giving is another powerful option. If you’re over 70½, you can make qualified charitable distributions directly from your IRA up to $107,000 annually (in 2025) without paying taxes on the withdrawal. This is particularly valuable if you don’t need your required minimum distributions for living expenses but are forced to take them anyway.

Donor-Advised Funds

Donor-advised funds offer another flexible approach. You can bunch several years of charitable gifts into one tax year to

  1. Exceed the standard deduction threshold
  2. Get the immediate tax benefit
  3. Distribute the funds to charities over time

Strategy 6: Leave a Multi-Generational Impact

Some people prefer not to make their children’s lives “too easy” during their lifetime. It’s the belief that a healthy dose of struggle builds character. If this describes your philosophy, being overfunded gives you the opportunity to impact multiple generations with the wealth you’ve created.

Think about the power of compound growth over decades. A $2 million portfolio that grows to $8-10 million by the time you’re 90 could

  • Fund college educations for great-grandchildren not yet born
  • Start family businesses
  • Create charitable foundations that operate in perpetuity

If this is your plan, you need to be extremely thoughtful about the structure.

  1. How will the money be distributed?
  2. At what ages can beneficiaries access funds?
  3. What are the funds intended for?
  4. Should assets be held in trust with professional management?

More importantly, you need to have conversations with your family about how you built this wealth and what it represents. Share the story of your sacrifices, discipline, and decision-making. Help them understand that this money isn’t just a windfall—it’s the result of decades of intentional choices.

I think about my great-grandfather, who built a rice mill business in China and Burma. His multi-generational impact allowed my father to attend prestigious schools in India and eventually immigrate to the United States. That legacy shaped our entire family’s trajectory across multiple generations.

However, be aware of the tax implications of leaving large retirement accounts to the next generation. With the 10-year distribution rule for inherited IRAs, your beneficiaries may face substantial tax bills if they’re successful in their own careers. Strategic Roth conversions during your lifetime can help minimize this tax burden and preserve more wealth for your family.

Making the Most of Your Overfunded Retirement

If you find yourself being someone who has saved diligently and has more than enough for retirement, you have options that most people don’t. The key is shifting from a scarcity mindset to one of abundance and intentionality.

Remember the Gap and the Gain concept. Instead of constantly measuring yourself against others or future goals, take time to appreciate how far you’ve come. You’ve achieved something remarkable through decades of discipline and smart decisions.

You may choose to

  • Retire early
  • Spend more intentionally
  • Adjust your investment risk
  • Increase your gifting
  • Plan for multi-generational impact

The most important thing is making conscious choices about your wealth rather than letting it accumulate by default.

Your financial plan isn’t a one-time event. It’s an ongoing process that should evolve as your circumstances and priorities change. What feels right in your first year of retirement might be different after five or ten years of experiencing financial security.

The goal isn’t just to have enough money for retirement. The goal is to use your resources in ways that align with your values and create the kind of impact you want to make during your lifetime and beyond. When you’re overfunding retirement, you have the luxury of choice. Make sure you’re making those choices intentionally.

Ready to discover if you’re overfunded for retirement? A comprehensive financial plan can help you understand your true capacity and explore strategies to optimize your wealth for maximum impact during your lifetime.

How We Can Help

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

  1. Maximize your retirement spending
  2. Minimize your lifetime tax bill
  3. Worry less about money

You can start with our Retirement Readiness Questionnaire linked on our website at www.imaginefinancialsecurity.com. Click the “Start Now” button to learn more about our process and how we might be able to help you achieve a more confident 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.

Sequence of Returns Risk: 7 Strategies to Protect Your Retirement

Recently, I talked about the 4% rule and how it’s historically conservative, with average withdrawal rates potentially as high as 7% annually. But here’s the kicker: averages hide the risk of when bad returns happen.

This is what we call sequence of returns risk. Imagine retiring at the end of 2007 with $2 million saved. You’re ready for the good life, ready to enjoy retirement. Then the market drops 51%. Suddenly, that $140,000 withdrawal doesn’t look very safe anymore. 

In today’s article, we’ll highlight some major market downturns over the last few decades and discuss seven real strategies to help you protect against this dreaded sequence of returns risk. 

What is Sequence of Returns Risk? 

Sequence of returns risk is the danger that the timing of withdrawals from your retirement account could negatively impact your portfolio’s overall rate of return. This risk becomes particularly significant when you begin withdrawing funds from your investment portfolio in retirement. 

The sequence of returns in the first few years of retirement can determine whether your savings last a lifetime. Unlike pre-retirement years, when you’re accumulating assets, the sequence of returns matters significantly once you start withdrawing money. 

For example, two retirees with identical portfolios and withdrawal rates can have dramatically different outcomes based solely on when they retire. If you retire just before a market downturn, your portfolio may never recover, even if the market eventually rebounds. 

Historical Market Downturns: A Look at Bear Markets 

To understand the real impact of sequence of returns risk, let’s examine some significant market downturns that could have affected retirees. 

The Dot-Com Bubble (2000-2002) 

This period was particularly painful because there were actually two separate bear markets in a three year span: 

  • In March 2000, there was a total drawdown of 36% over 18 months 
  • After a brief rally from January 2002 through October 2002, prices dropped another 33% 

This means you had two 30+ percent drops in basically a three-year period. This is why this time is often called “the lost decade.” The markets were flying in the 90s because of the dot-com boom. Anything with a dot-com at the end of its name was soaring in price, and people were feeling euphoric. 

I guarantee some folks tried to retire around 2000 after seeing their 401(k) grow to $2 million. They were feeling confident until they experienced a 36% drop at the beginning of 2000 and then another 33% drop in 2002. 

The Great Recession (2008-2009) 

From October 2007 through November 2008, prices dropped 51%. Then, after a brief rally at the end of 2008, from January 2009 through March 2009 (ultimately hitting bottom on March 9, 2009), prices dropped another 27%. 

I’ve talked to people who retired around this time. Thankfully, many stayed retired, which was great. But I also know people who were planning to retire in 2008, 2009, or 2010 who couldn’t. They wanted to retire but weren’t able to, whether because of fear or their portfolios dropping significantly.  

COVID-19 Sell-Off (2020)

Who would have predicted a pandemic at the beginning of 2020 and the markets dropping 30% over just five weeks? For me, this was the most dramatic sell-off because of its speed.

I remember talking to a friend who worked at Google whose coworker’s wife was a doctor. At the beginning of the pandemic, she knew what was happening and moved their 401(k) to cash.

They were right for a period—the 30% drop happened. But the crazy part was that we hit bottom on March 23, 2020, and the markets fully recovered all those losses by May, only 2 months later. The S&P 500 ended that year up 18% after being down 30% in March. 

This illustrates why I caution people against trying to time the market. You can’t predict these things, which is why you shouldn’t get too high in the highs or too low in the lows. 

The Triple Bear Market (2022) 

The 2022 downturn was different from anything I’d experienced in my career. I call it the “triple bear market” because it affected stocks, bonds, and cash: 

  • Stocks were down 25% over about nine months 
  • Bonds were down 15% due to aggressive interest rate hikes 
  • Cash was essentially returning a negative yield because interest rates on cash lagged behind inflation 

This triple threat created a challenging environment for retirees, as all three major asset classes were negatively impacted simultaneously. 

7 Strategies to Protect Against Sequence of Returns Risk

Retiring into these markets is largely uncontrollable. What you can control is having a plan for your portfolio management and withdrawal strategy to protect against sequence of returns risk. Here are seven effective approaches: 

1. Implement Guardrails (Dynamic Withdrawals) 

One of my favorite strategies is the concept of guardrails or dynamic withdrawals. Instead of sticking to a fixed percentage rate like the 4% rule, you adjust your withdrawals based on portfolio performance. 

Guardrails, made famous by Guyton and Klinger, establish decision rules for when to make adjustments to your withdrawal rate. There are four primary decision rules: 

  1. Portfolio Management Rule: Pull funds from overweight asset classes. If stocks are up, trim stocks to get back to your target allocation. If stocks are down and bonds are up, trim from bonds.
  2. Inflation Rule: Give yourself an inflation raise every year, similar to the traditional 4% rule.
  3. Capital Preservation Rule (Portfolio Rescue Rule): If your withdrawal rate increases by 20% because your portfolio value decreased, cut your spending by 10%. 
  4. Prosperity Rule: If your withdrawal rate decreases by 20% because your portfolio value increased, give yourself a 10% raise. 

By implementing these four rules, you can potentially increase your starting withdrawal percentage by 20-25% while maintaining the same or better probability of success compared to the traditional 4% rule. 

This strategy works best for those with flexibility in their spending. If you break down your expenses and find that 50% is discretionary, you could be a great candidate for guardrails because you have the capacity to cut spending during market downturns. 

2. Create a Bucket Strategy 

The bucketing concept involves having a dedicated pool of assets you tap into for withdrawals. This might include: 

  • Cash reserves 
  • CDs 
  • Short-term bonds 
  • Individual bonds like short-term treasuries 
  • Short-term bond funds or ETFs 
  • Intermediate-term bond funds 

There’s no scientific formula for how much to keep in these buckets. Some advisors recommend 1-2 years of expenses based on the average duration of bear markets. Others suggest up to 5 years of expenses, considering that the Great Recession took about five years to fully recover from the bottom in 2009. 

The right amount depends on your risk tolerance. Someone with higher risk tolerance might be comfortable with just 1-2 years in cash or cash equivalents. Someone more concerned about market volatility might prefer 5 years in a CD ladder or individual bond ladder. 

For our clients, we use a combination of money market funds, individual bonds, short-term bond ETFs, and intermediate-term bond ETFs. This typically provides liquidity for 2-5 years of expenses, depending on risk tolerance and other income sources. 

3. Categorize Your Spending (Needs, Wants, Wishes) 

Breaking your spending into three distinct categories—needs, wants, and wishes—helps identify what you can potentially cut during market downturns. 

This approach helps determine: 

  • How much of your spending is truly discretionary
  • Whether you have the flexibility to cut spending by 10% if needed 
  • How much to allocate to your bucketing strategy 

For example, I recently worked with a couple planning to retire in their 50s with a 7% initial withdrawal rate until they begin Social Security. By analyzing their spending, we determined they had enough discretionary expenses to implement guardrails successfully. 

4. Consider Partial Annuitization 

Annuitization involves turning some of your assets into a lifetime income stream. While annuities can be a controversial topic, they have a place in retirement income planning when used appropriately. 

The benefit of partial annuitization is that it puts less pressure on your volatile assets (stocks and bonds). This allows those investments to potentially grow at a higher rate because you’re withdrawing less from them while maximizing income from the annuity. 

I’ve said this before: you will not out-withdraw an annuity in your lifetime. I recently had a client with TIAA who received an annuitization schedule showing a payout rate close to 8% annually. Few advisors would recommend withdrawing 8% from a portfolio due to sequence of returns risk. 

To determine if annuitization makes sense for you: 

  1. Identify your essential spending needs. 
  2. Compare those needs to guaranteed income sources like Social Security or pensions. 
  3. If there’s a gap, consider annuitizing enough assets to fill that gap.

5. Earn Additional Income 

Similar to annuitization, earning part-time income early in retirement can significantly reduce sequence of returns risk. This strategy can be implemented reactively to a market downturn—if we enter a bear market, you could work part-time and reduce your portfolio withdrawals. 

This works best if you: 

  • Enjoyed aspects of your career
  • Are willing to work a couple of days a week 
  • Would consider consulting or a completely different field 

I’m working with a couple who initially planned to retire several years from now, but after seeing friends get sick or pass away, they want to retire sooner. The wife has a side hustle, and they’re considering renting out an ADU (additional dwelling unit) on their property through Airbnb. These two income sources could potentially allow them to retire 4-5 years earlier than planned. 

6. Adjust Your Social Security Strategy 

You may have plans to delay Social Security as long as possible to maximize lifetime benefits. However, if you’re experiencing a significant market downturn early in retirement, starting Social Security earlier than planned could reduce pressure on your portfolio. 

While this might reduce your lifetime Social Security income, it could be worth considering if it helps preserve your portfolio during a critical period. What’s helpful is that if you start Social Security before your full retirement age, you have a one-time option to stop it at your full retirement age and then delay until 70 (or as long as you want) to receive delayed credits. 

7. Implement an Asset Allocation Glide Path 

Different phases of retirement have different income needs and sources. Your investment strategy should be dynamic, not set-it-and-forget-it. 

Early in retirement, during what I call the “bridge period” (from retirement until you start Social Security), you may have no guaranteed income and might be less risk-tolerant. During this phase, you might have more in your cash bucket—perhaps that five years in cash, cash equivalents, or short-term bonds. 

Once you start Social Security, you’ll have guaranteed income covering your fixed expenses. At this point, you can potentially take on more risk because your withdrawal rate might drop significantly—from 5% to 1%, for example. This increased risk capacity could allow for a more growth-oriented portfolio allocation. 

Preparing for the Next Downturn

I don’t know when the next market downturn will be—I don’t have a crystal ball. If I did, I probably wouldn’t be working at all! But the most important thing is to have a plan in place before the next downturn occurs.

Right now, markets are looking pretty good. This is the perfect time to set your plan. We may be heading into a recession, the Fed may be too late with cutting rates, unemployment might tick up with tariffs and uncertainty—I don’t know. But set up your plan before the next downturn so you can implement it unemotionally rather than reactively. 

Be proactive instead of reactive. What are you doing to reduce your sequence of returns risk? If you’re approaching retirement or already retired, now is the time to review your strategy and ensure you’re protected against this significant risk to your retirement security. 

Remember, sequence of returns risk can devastate your retirement savings if you don’t have a protection strategy in place. The strategies outlined above—guardrails, bucketing, spending categorization, partial annuitization, part-time income, Social Security timing, and dynamic asset allocation—provide a framework for building that protection. 

By implementing these approaches before market volatility strikes, you’ll be better positioned to enjoy a secure retirement regardless of what the markets do in those crucial early years. 

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, and worry less about money, you can start with our Retirement Readiness Questionnaire linked on our website at www.imaginefinancialsecurity.com. Click the “Start Now” button to learn more about our process and how we might be able to help you achieve a more confident 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.

Bear Market Preparation: 14 Retirement Planning Moves to Protect Your Wealth

The markets have recovered all of the losses from “Liberation Day,” AND SOME, so far in 2025.  Many investors have stopped worrying about tariffs, and are now looking at a high likelihood of the Fed cutting interest rates at their next meeting in September.

However, it’s crucial to begin preparing for the next bear market or recession before they actually happen. You’d rather be in proactive mode, rather than reactive mode!  In this article, I’ll discuss 14 retirement planning moves to help you prepare for the next bear market because it’s not a question of if, but when.

What Is a Bear Market?

Before diving into preparation strategies, let’s clarify what a bear market actually means. A bear market is defined by a decline of 20% or more in one of the major stock indexes over at least two months. A correction, on the other hand, is a 10% decline from previous highs.

Since 1964, the S&P 500 has experienced 27 corrections. In eight of those 27 instances (about 30%), the correction led to a bear market. Typically, bear markets last about 10 months on average, though some have lasted significantly longer.

Some notable bear markets include:

  • The Great Depression (1929-1932): The Dow dropped 86%
  • The Global Financial Crisis (2008): The S&P 500 declined by about 56%
  • The Dot-com Bubble (2001-2002): The S&P 500 fell about 50%, while the NASDAQ dropped almost 78%
  • The COVID-19 Pandemic (2020): The S&P 500 declined about 34% but fully recovered two months later
  • The Triple Bear Market (2022):  Stocks, bonds and cash were all in bear market territory as of June of 2022.  It lasted about 9 months, but the inflation effects are still lingering. 

Bear markets are part of the economic cycle. We experience booms and busts, expansions and contractions, peaks and troughs. With current concerns about tariffs, geopolitical conflicts, inflation, and interest rates, there’s significant uncertainty in the markets.

Now, let’s explore 14 strategies to prepare for the next bear market.

1. Prepare Your Mindset

Bear market preparation begins with your mindset. Bear markets are a normal part of investing. You didn’t accumulate seven figures by being scared of investing. You took on risk to achieve your desired returns.

The challenge is that as you get closer to retirement, volatility becomes more concerning because you’re transitioning from accumulation to needing to live on your portfolio. This is completely normal.

Remember that bear markets happen on average about every five years. Even when you retire, you’ll need to keep some money invested in the stock market to keep pace with inflation. If you have a 30-year retirement horizon, you can expect to live through approximately six bear markets during retirement.

2. Prepare Your Investment Portfolio

One of the most critical aspects of preparing for a bear market is having a properly structured investment portfolio. It’s easier to think about this during periods of volatility, but it’s even more important to implement when things are going well.

Think back to 2023 and 2024, when the S&P 500 delivered back-to-back returns exceeding 20%. After Trump won the election in late 2024, there was almost a euphoria in the markets with expectations of reduced regulations, tax cuts, and increased domestic manufacturing. This “Trump bump” created a situation where things were running hot—a common occurrence toward the end of a boom cycle.

Instead of riding that wave based on emotion, a disciplined, unemotional, repeatable process of rebalancing can prevent you from becoming overexposed to risk. This means:

  • Having specific targets for each asset class
  • Trimming winners and taking gains off the table
  • Buying underweight positions that might be underperforming

You can’t magically implement this in the middle of a bear market. You need to enter each year with a defined investment policy statement and strategy for each account—your taxable brokerage account, traditional IRA, 401(k), and Roth accounts.

For example, if your S&P 500 allocation increases significantly due to strong performance, consider reallocating some of those gains to areas that may have underperformed, such as fixed income or cash. This disciplined approach helps prevent emotional decisions when markets turn, which typically happens quickly.

3. Build Your War Chest

Investing in a down market requires having cash available. Building up your “war chest” is crucial for both protection and opportunity.

If we enter a bear market, there’s a decent chance we’re already in a recession or heading into one. The market is a leading indicator, typically declining before economic data confirms a recession. Having cash on hand helps if you lose your job or face reduced income during economic downturns.

But if you’re fortunate enough to keep your job during a bear market, cash becomes king for finding buying opportunities. As Warren Buffett famously said, “Be fearful when others are greedy and be greedy when others are fearful.”

Consider this eye-opening statistic: 56% of the best days in the S&P 500 occur during bear markets. Another 32% happen in the first two months of a bull market. That means 88% of the best market days happen when most people aren’t feeling optimistic about investing.

This war chest could be:

  • Cash within your investment portfolio
  • Cash alternatives in your investment portfolio
  • Increased contributions to retirement accounts during downturns
  • Front-loading contributions to take advantage of buying opportunities

It won’t feel natural to add money when markets are down. Imagine being told to add more money to your portfolio during the pandemic, when it had already dropped 30-40%. Most people want to take money out, not put more in. But that’s precisely when the greatest opportunities arise.

4. Plan Your Retirement Cash Flow Sources

Having a plan for where your retirement cash flows will come from is essential during market volatility. Let’s use a simple example:

If you have a $1 million portfolio with a 60/40 split ($600,000 in equities and $400,000 in fixed income), and you need $40,000 annually (a 4% withdrawal rate), you effectively have 10 years of income in fixed income without touching your stock portfolio.

Given that bear markets typically last about 10 months, with the longest in our lifetime being around five years, having 10 years of income in fixed income should provide significant peace of mind.

Additionally, if your portfolio generates income through interest and dividends—let’s say 2.5% overall—and your withdrawal rate is 4%, you only need to rely on capital sales for about 1.5% of your portfolio. That’s manageable even during market downturns.

During strong markets, like 2024, you can generate income by trimming gains from equities. When markets turn, as in early 2025, you can draw from fixed income or cash alternatives while waiting for stocks to recover.

5. Optimize Your Social Security Strategy

Social security planning is a critical component of retirement in a bear market. The timing of when to claim Social Security can significantly impact your retirement income floor.

If you delay Social Security until full retirement age or age 70, you’ll have a higher benefit base that will also receive cost-of-living adjustments. This creates a higher guaranteed income floor in retirement, which provides peace of mind during market volatility.

For example, if 60% of your cash flow needs come from fixed income sources like Social Security, you won’t need to rely as heavily on your investment portfolio during volatile periods.

If you’ve already retired and planned to delay Social Security until 70, but then face a bear market or recession, you have options. You could elect to start benefits earlier and then:

  1. Continue them indefinitely, or
  2. Stop them at full retirement age and then preserve delayed retirement credits until age 70

This flexibility allows you to adapt your strategy based on market conditions while still maintaining long-term income security.

6. Consider Part-Time Work

While not everyone’s favorite suggestion, considering part-time work during market downturns can be a valuable option. The goal in retirement is for work to be optional, not mandatory. However, even if you don’t mathematically need to work to preserve your portfolio, it might provide peace of mind.

Instead of drawing down your portfolio during a bear market or recession, finding fulfilling part-time work or a side hustle can reduce your withdrawal rate and put less pressure on your investments while they recover.

7. Evaluate Roth Conversion Opportunities

Roth conversions during market downturns present an interesting opportunity. When converting from pre-tax to Roth accounts, you pay taxes on the converted amount. If market values are down, you can convert the same number of shares at a lower tax cost.

If you believe in the long-term prospects of your investments, converting when valuations are down allows the eventual recovery to happen in the tax-free Roth environment rather than in your tax-deferred accounts.

The challenge is timing—you want to convert at the right moment. If you convert and the market continues to decline, you’ve paid taxes on a higher value. Typically, Roth conversions are best done toward the end of the year when you have a clearer picture of your annual income and tax situation.

8. Consider Gifting Securities at a Discount

Similar to Roth conversions, gifting stock or securities during market downturns can be advantageous if you regularly gift to family members or irrevocable trusts. Instead of gifting securities at higher values, you can gift them when values are down, allowing for a lower gift amount.

The eventual appreciation will be on the recipient’s balance sheet rather than yours. The value of this strategy depends on how much you’re gifting and the long-term outlook for the investments.

9. Implement Tax Loss Harvesting

Tax loss harvesting is a powerful strategy during market downturns. This involves selling investments at a loss in a taxable brokerage account (not retirement accounts like IRAs or 401(k)s) to realize the loss for tax purposes.

These realized losses can offset capital gains in the current year or be carried forward to offset gains in future years. If you have no capital gains, you can deduct up to $3,000 against ordinary income annually.

The key is to replace the sold security with something similar immediately but not “substantially identical” to maintain your market exposure. For example:

  • You can’t sell Apple and buy Apple back (that’s substantially identical)
  • You could sell Apple and buy Microsoft (not substantially identical)
  • For funds, you might switch from a Fidelity S&P 500 fund to a Vanguard Large Cap stock fund (also not substantially identical).

The “wash sale rule” prevents you from claiming the loss if you buy the same or substantially identical security within 30 days before or after the sale.

During the 2022 bear market, our clients built up significant tax-loss “war chests” that they’re still using to offset gains or reduce ordinary income.

10. Create Guaranteed Income with Fixed Annuities

Leveraging annuities to create guaranteed income can provide significant psychological benefits during market volatility. Social Security is essentially an annuity, but additional guaranteed income sources can enhance your retirement security.

The higher your guaranteed income floor, the more peace of mind you’ll have when markets are volatile. If guaranteed sources cover 60-70% of your income needs, short-term market fluctuations become less concerning.

For example, one client recently activated an annuity income stream with a 7.6% payout rate—significantly higher than what would be prudent to withdraw from an investment portfolio. This guaranteed income, combined with Social Security, covers about 70% of her cash flow needs, providing tremendous peace of mind during market volatility.

11. Leverage Cash Value Life Insurance

If you already have cash value life insurance, it can serve as a valuable resource during market downturns. It takes years or decades to build significant cash value, but once established, it can be a stable asset during volatility.

Unlike stocks or bonds, cash value in traditional life insurance policies typically doesn’t decrease in value during market downturns. You can access this cash through withdrawals, partial surrenders, or policy loans while waiting for markets to recover.

During the March 2020 market bottom, some investors used policy loans from their life insurance to invest in the market at discounted prices, capitalizing on the opportunity while maintaining their existing investments. Or if retired, they used that cash value as income instead of tapping into their stock allocations.

12. Consider Home Equity Options

Your home equity can serve as a last line of defense during severe market downturns. Options include:

  • Home Equity Line of Credit (HELOC): Opening a HELOC before things get bad provides access to a cash reserve that you don’t have to use unless necessary. While there are interest costs if you tap into it, having $100,000-$200,000 available can provide significant peace of mind.
  • Reverse Mortgage (if over 62): This can create a cash bucket similar to a HELOC without requiring monthly payments.

Home equity is often an underutilized asset class. Creating liquidity within your home equity can provide additional security if stock and bond markets experience severe downturns.

13. Trim Concentrated Stock Positions

Market downturns can present good opportunities to reduce concentrated stock positions. Many clients have significant concentrations in individual stocks, often from employer stock plans. These positions can be difficult to sell for two reasons:

  1. Behavioral attachment: The stock helped build their wealth, and they’re emotionally connected to it.
  2. Tax consequences: Selling may trigger significant capital gains taxes.

During market volatility, stock prices decline, making the tax consequences less painful. A position that might have generated $100,000 in taxes during a bull market might only generate $50,000 in taxes after a decline.

For example, a client with 45% of their portfolio in Microsoft stock is using the recent volatility to reduce their concentration to 30% with minimal capital gains due to the market decline.

If you have concentrated positions (generally defined as over 5% exposure to a single stock), market downturns can be an opportune time to rebalance toward a more diversified allocation with a lower tax bill.

14. Do Nothing

Sometimes, the best strategy during market volatility is to do nothing. Acting on emotion or making rash decisions during volatile periods can significantly damage your long-term plan.

If you’re uncomfortable with the 13 strategies mentioned above, it might be better to simply wait it out rather than make emotional decisions—unless you completely lack a financial planning strategy to begin with. In that case, consulting with a professional advisor would be beneficial.

Doing nothing is certainly better than abandoning a well-diversified, thoughtful investment strategy due to short-term market movements.

Final Thoughts on Bear Market Preparation

I don’t want to dismiss anyone’s emotions during volatile markets. Transitioning from working to retirement is already emotionally charged, with concerns about aging, health, and this next chapter of life. Market volatility adds another layer of stress.

However, having a trusted partner to lean on during these times can make all the difference. Someone who can coach you to stick to a long-term, disciplined strategy can help you navigate market turbulence with confidence.

Remember, bear markets are not a function of if, but when. With proper bear market preparation, you can not only protect your retirement savings but also potentially capitalize on opportunities that arise during market downturns.

As market volatility continues to make headlines, there’s no better time than now to evaluate which of these bear market preparation strategies align with your retirement goals and take decisive action to protect the financial future you’ve worked so hard to build.

This is for general education purposes only and should not be considered as tax, legal or investment advice. 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, and worry less about money, you can start with our Retirement Readiness Questionnaire linked on our website at www.imaginefinancialsecurity.com. Click the “Start Now” button to learn more about our process and how we might be able to help you achieve a more confident 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.




6 Retirement Planning Strategies for When You’re Feeling Behind

Are you feeling a little bit behind regarding your retirement plans? Well, you are not alone. In fact, over 57% of Americans today are feeling behind relative to their goals for retirement. In this blog post, we’re going to talk about six retirement planning strategies that may improve your potential outcomes for a successful retirement.

Retirement Planning: Why 57% of Americans Feel Behind

I’m sure each participant in this study has their own story.  However, the fact is that we live in a world of comparing ourselves to others, unfortunately.  Therefore, regardless of how well you’ve saved and invested up to this point, it’s completely normal to feel “behind.”  With that said, some of you truly are behind. Whether you were focused on

  • Building your careers or businesses
  • Raising children (which are VERY expensive)
  • Paying for private school or college
  • Caring for aging parents

There are countless reasons as to why you might be behind. 

However, implementing effective retirement planning strategies can significantly improve your financial outlook, even if you’re starting late. The transition from active income to passive income can be scary for many people. Additionally, it’s the fear of spending down the portfolio and worrying about uncertain events down the road that leads to serious anxiety as you approach quitting your day job.

At the same time, many folks tend to sacrifice those early years of retirement, what I like to call the “Go-Go Years.” This period of time is when you’re healthy and physically able to do the things you may want to do – traveling the world or spending precious time with your grandkids, whatever that might be.

I believe there must be a healthy dose of cautious optimism to implement a successful retirement plan. 

Let’s dive into six strategies that can help improve your retirement outcomes, give you greater peace of mind, and provide greater confidence as you approach this next chapter.

Strategy 1: Increase Savings Rate and Maximize Contributions

Let’s start with the low-hanging fruit.  Saving more is something primarily in our control, and certainly can move the needle if you have a few years left until you plan to retire.  Catch-up contributions are powerful retirement savings strategies for those over 50 who need to accelerate their nest egg growth. If you’re over 50, there are catch-up retirement plan contributions available for 401(k) plans as well as individual retirement accounts. Once you hit 55, there’s also a catch-up for Health Savings Accounts (HSAs).

401(k) Contribution Limits

If you’re over 50, you can contribute $31,000 into a 401(k) plan for employee contributions in 2025 (this includes the $7,500 catch-up for ages 50+). That’s important to note because I’ve seen people make this mistake before. They say, “I’m putting in $20,000 and my employer matches me $11,000, so I’m maxing my 401(k).”

That’s actually not true. The $31,000 is only related to employee contributions. Employer contributions are on top of that.

The total contribution limit in 2025 for ALL sources (employee, employer, and voluntary after-tax) is $77,500 for 2025.  This includes the $7,500 age 50+ catch-up contribution.

This applies to 401(k)s, 403(b)s, Thrift Savings Plans if you’re in the federal government, and 457 plans if you have one available.

Super Catch-Up Contributions

Thanks to the Secure Act 2.0, there’s now a “super catch-up contribution” available. Instead of the $7,500 extra that you can put into these plans, you can put in $11,250 if you’ve turned 60, 61, 62, or 63 in 2025 and beyond. That’s an additional $3,750 on top of the regular catch-up.

IRA Catch-Up Contributions

An Individual Retirement Account has a maximum contribution of $7,000 per year, whether it’s a Traditional or Roth account. If you put $3,500 into a traditional IRA, you can only put $3,500 into a Roth IRA.

If you’re over 50, you get an extra $1,000 catch-up, bringing your total to $8,000.

There are income thresholds you need to consider if you are looking to contribute to a Roth IRA or make a tax-deductible contribution into a Traditional IRA.  So, make sure to consult with your tax professional and financial advisor to confirm these limits.

Mega After-Tax Contributions

Many employers today are adopting what’s called the Mega After-tax Roth Contribution in their 401(k) plans. This allows for additional contributions beyond the employee and employer amounts, up to the total limit of $77,500 (for folks over 50).

Example:

If you’re putting in the max employee contribution of $31,000 and your employer matches $10,000, you’re at $41,000. You could potentially put up to an additional $36,500 into the 401(k) plan on an after-tax basis. 

The key factor, however, is making sure that after-tax contribution can be converted to Roth immediately!  This can often be done within the 401 (k) or to your Roth IRA.  Additionally, your plan administrators will calculate the exact amount allowed to the after-tax side, and this will be spelled out in your benefits details. 

This essentially allows a highly compensated employee to contribute tens of thousands of dollars into the Roth portion of their assets without worrying about the income phaseouts associated with Roth IRA contributions. 

HSA Contributions

HSAs are my favorite investment account for retirement because you get the trifecta tax benefit:

  • Pre-tax contributions (fully deductible regardless of income)
  • Tax-free growth
  • Tax-free distributions (as long as they’re used for qualified medical expenses)

Once you turn 55, you get an extra $1,000 catch-up. In 2025, for individual plans, you can contribute $4,300 plus $1,000, totaling $5,300. For family plans, it’s $8,550 plus $1,000, totaling $9,550.

Unlike a Flexible Spending Account (FSA), these accounts do not need to be emptied on an annual basis.  Therefore, if you can pay medical costs out of pocket for the year, it’s wise to allow the triple tax benefits to work in your favor until you fire your boss and retire.  This will serve as a nice tax-free income during retirement, or even perhaps serve as a self-funding mechanism for long-term care costs. 

Just make sure you spend these accounts during your lifetime, as any amounts left to children will be a tax bomb for them!

Strategy 2: Working Longer to Improve Retirement Outcomes

Working longer probably makes more of an impact than any of these other strategies in the long term. Delaying retirement by just one, two, or three years can significantly improve your financial outlook.

This doesn’t have to be in your current job. Maybe you’re a physician, working an intense tech job, or in a physically demanding blue-collar position that you can’t continue much longer. You could retire from your current role but transition to something else, perhaps even part-time.

Having one or both spouses doing something part-time to earn extra income can help bridge the gap years—the period between when you retire and when you start taking guaranteed income sources like Social Security or pension income. Those gap years can be stressful if you have no income coming in and are relying entirely on your portfolio, especially during times of market volatility.

The extra income allows you to delay portfolio withdrawals or reduce them, maximizing your Social Security benefits and allowing your tax-deferred and tax-free savings to continue growing.

Strategy 3: Review Your Spending Assumptions and Retirement Budget

Many people assume they’ll need their current spending level, adjusted for inflation, throughout their entire retirement. But retirement spending typically occurs in three distinct phases:

  1. The Go-Go Years: When you’re active and traveling
  2. The Slow-Go Years: When you start to slow down
  3. The No-Go Years: When mobility becomes more limited

In the go-go years, your spending may even go up compared to your working years.  After all, every day is Saturday. But these years probably won’t last forever. Therefore, it likely doesn’t make sense to assume that level of spending forever.

There is an argument that healthcare costs might be lower at the beginning of retirement, while discretionary expenses are higher. Then, over time, discretionary spending decreases while healthcare costs rise, particularly for long-term care. If you have unexpected healthcare costs later in retirement, you want to be prepared to maintain your independence and dignity without relying on family members.

This is where long-term care insurance can be valuable. It eliminates the potential risk of needing to spend down your portfolio for care, which could impact your spouse’s financial security, especially considering women typically outlive men.

Studies have shown that retirees lag inflation by about 1% a year over time. If general inflation is 2%, your experienced inflation might only be 1% because many of your expenses are fixed. Your mortgage might be paid off, or your property taxes might be homesteaded and not increase at the full rate of inflation.  The inflation assumption might be one of the most critical variables when you are mapping out your spending needs and the viability of retirement success.

Strategy 4: Finding the Right Asset Allocation for Retirement Investing

Adjusting your retirement investing approach as you age is crucial for balancing growth potential with risk management. One of the things you can control is your long-term asset allocation. The higher exposure you have to equities (stocks), the higher long-term rate of return you should expect, though it’s not guaranteed.

One of the biggest mistakes I see retirees make is getting too conservative too early in retirement. They reach 60 or 65 and think, “I’m done accumulating, now I’m transitioning to the distribution phase. I was 70% in the stock market, I’m going to go down to 20% or 25%.”

That’s a no-no, especially if you’re borderline in terms of being funded or not well-funded. The higher expected rate of return you have in your portfolio, the more likely you are to achieve your long-term goals.

However, there’s a fine line. If you go 100% in stocks and retire into a market downturn, that’s not good either, because you’ll have to sell stocks at the wrong time.

Bill Bengen’s 4% rule assumed an asset allocation of 50% equities (S&P 500) and 50% in government bonds (10-year Treasury). However, he suggested that as the minimum equity exposure, but actually leaned toward 75% in equities if you have the risk tolerance.

If you’re a bit behind for retirement, you don’t have the capacity to get ultra-conservative. Going too conservative brings other risks into play:

  • Interest rate risk
  • Inflation risk
  • Longevity risk.

Consider a bucketing strategy where you align your asset allocation with different accounts:

  • More conservative investments in your taxable accounts that you’ll tap first
  • Moderate risk in your tax-deferred accounts
  • More aggressive investments in your Roth accounts that you’ll access later

Strategy 5: Consider Relocating for Financial Benefits

Considering relocation could be a strategy to boost your chances of success. This retirement planning strategy can be particularly effective if you’re moving from a high-cost-of-living area to a lower-cost one.

For example, suppose you’re selling a house in New York worth $1.2 million and moving to Florida or Tennessee. In that case, you might be able to buy a comparable or better home for $700,000, leaving you with $400,000 to invest (after accounting for closing costs and taxes).

This cost-of-living arbitrage can significantly improve your retirement outlook. However, it’s essential to consider more than just the financial aspects:

  • Where are your adult children and grandkids?
  • Where is your circle of friends?
  • What about healthcare facilities and doctors?
  • Is the infrastructure (roads, schools, hospitals) adequate?

Before making a permanent move, consider renting for six months or a year to make sure the location is right for you.

Strategy 6: Utilize Home Equity

Don’t be afraid to use your home equity in retirement. I often see folks whose largest asset is their paid-off home, worth $750,000, $1 million, or more. They don’t want to sell it because they like it and want to age in place there.

However, if that home equity is added to their financial legacy upon passing, and it impacts their standard of living during retirement, they may have missed out on valuable experiences, opportunities to gift to their children, travel, or access to better healthcare.

One way to tap into home equity without selling is through a reverse mortgage, available once you turn 62. This gives you access to your home equity as an emergency fund, line of credit, or even income payments for life. It will reduce the equity you leave behind, but you can age in place and won’t have to pay back the loan during your lifetime.

Home equity can also be a great source for funding long-term care if you can’t buy insurance due to pre-existing conditions. Using home equity for this purpose can free up your retirement assets for lifestyle expenses rather than reserving them for potential care needs or financial legacy goals.

Additional Retirement Planning Strategies to Consider

Maximize Social Security Benefits

If you’re feeling a bit underfunded, maximizing your Social Security benefit can do wonders. Delaying until 70 (the latest retirement age) or at least until full retirement age gives you a higher baseline that adjusts with inflation long-term.

Consider Life Annuities

A life annuity that continues paying for as long as you live can provide peace of mind, especially if you’re concerned about market downturns affecting your portfolio.

Rethink Roth Conversions

Roth conversions may not be right for you if you’re behind on retirement savings. They require front-loading taxes early on, which could impact your breakeven long-term, especially with an underfunded plan. You can’t convert your way to a successful retirement.

Implement Tax-Efficient Withdrawal Planning

Which accounts you tap first matters. The traditional approach is taxable first, then tax-deferred, then tax-free. But you might consider a combination approach to maximize certain tax brackets, or even prioritize spending down tax-free assets if you plan to leave tax-deferred accounts to heirs in lower tax brackets or to charity.

Stress Test Your Plan

Use Monte Carlo simulations to test different scenarios, including bear markets at the beginning of retirement and different inflation rates. Be flexible and fluid with your plan, making adjustments as needed.

Consider using “guardrails,” where you start with a certain withdrawal rate and adjust spending accordingly if markets perform poorly or better than expected.

Financial Planning for Retirement: Getting Professional Help

Retirement planning requires a comprehensive approach that considers savings, investments, and potential lifestyle changes. With these six retirement planning strategies, you can improve your retirement outlook even if you’re feeling behind right now.

If you’re unsure whether you’re on track and don’t want to figure it all out yourself, consider working with a financial planner. 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, and worry less about money, you can start with our Retirement Readiness Questionnaire linked on our website at www.imaginefinancialsecurity.com. Click the “Start Now” button to learn more about our process and how we might be able to help you achieve a more confident 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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