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Retirement planning is always nuanced, but today’s retirees face unique challenges. Market volatility, political changes, rising expenses, and healthcare considerations make careful planning essential. According to a study by Allianz Life, 64% of Americans worry more about running out of money than death.
As financial advisors, we can help our clients map out a retirement strategy for today’s world.
Key Takeaways
- Financial Advisors should prepare their clients for the emotional shift that comes with leaving the workforce.
- Clients should create a realistic, dynamic budget that reflects actual lifestyle spending patterns, healthcare costs, and unexpected expenses.
- Help clients build a flexible investment strategy with ample cash reserves to weather market volatility.
- Advisors should remind their clients to leverage the early retirement window for tax planning with tools like Roth conversions and income smoothing to reduce lifetime tax and Medicare costs.
What I’m Telling My Clients
1. Prepare for the Emotional Shift
Retirement isn’t just a financial transition; it’s an emotional one.
I hold a “Flourish Meeting” with our financial behavior specialist to help clients navigate the identity shift that comes from leaving the workforce. This conversation helps clarify goals, values, money beliefs, and priorities for the next chapter.
2. Get Real About Your Retirement Budget
One of the biggest myths about retirement is that spending decreases. While some costs may go down, overall spending often follows a “smile” pattern: higher in early retirement when travel and activities peak, stabilizing in middle retirement, and rising again later due to healthcare needs.
I encourage clients to analyze the real numbers rather than rely on assumptions about what they think they should be spending.
3. Reassess Risk Tolerance and Build a Cash Reserve
A good retirement financial plan will create enough liquidity to avoid selling investments at a loss during market downturns. A healthy cash reserve in a high-yield savings or money market account provides flexibility.
Diversification is key in this phase. You want to balance growth potential for the later years of retirement while managing risk.
4. Plan for Health Care Costs
Health care is one of the most significant expenses in retirement. For clients retiring before age 65, explore COBRA options, ACA marketplace plans, and any other options that could be available to them. Determine if bringing their income low to receive health care subsidy credits is worthwhile in the plan if there is income source flexibility.
Partnering with a trusted Medicare broker can help clients choose the right coverage, from Advantage vs. Supplement plans to prescription and dental options.
Important
If you’re over 65, you can withdraw money from your HSA for any reason without paying a tax penalty.
5. Optimize Taxes
Early retirement offers one of the best windows for proactive tax planning. Unlike working years, there is more control over taxable income.
This is a prime opportunity to manage tax brackets, minimize IRMAA (Income-Related Monthly Adjustment Amount) surcharges to Medicare, and execute tax-efficient withdrawal strategies.
IRMAA surcharges begin at a Modified Adjusted Gross Income of $106,000 for single filers in 2025 and $212,000 for married filers, so careful income planning can help avoid unnecessary costs.
Tip
Roth conversions, strategic IRA withdrawals, and optimizing the deaccumulation strategy can make a six-figure difference in lifetime taxes and healthcare surcharges for some clients.
6. Review Estate Planning and Organize Key Documents
Retirement is an ideal time to ensure that estate planning documents are current. Clients often finally have the time to sit down and document their wishes, organize their financial records, and pesky tasks like setting up password keepers.
It’s helpful to complete legacy planner books, organize family photos, and hold crucial conversations about financial affairs with family members and loved ones.
The Bottom Line
Retiring in 2025 has unique financial and emotional challenges, but proactive planning can ease the transition. Guide clients through a process to tune up their budget, reassess their risk tolerance, optimize their taxes, and dream about what comes next to create a stable, happy, healthy, and confident retirement.
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