Retirement Planning

You might expect your basic expenses to drop in retirement, but that’s not always the case. While some costs, like mortgage or car payments may decrease, others could rise. Inflation is a major concern, as it erodes purchasing power, affecting essentials like groceries and utilities. A nationwide survey of retirees found that they spend over half of their income on basic expenses, while non-retirees expect to spend less.

Unexpected costs, like medical emergencies or home repairs, can also strain your budget. Discretionary spending may increase too, with more travel or home improvements.

Additionally, you may lose tax breaks without dependents or a mortgage, and tax rates can rise over time. It's important to track your spending now and anticipate future expenses when planning for retirement.

As a working adult, you contribute to Social Security for years, but will it be enough to sustain you in retirement? Not quite. On average, Social Security replaces only about 37% of past earnings for those retiring at 65. Additionally, more than one-third of retirees receive less in benefits than they expected.

Without Congressional action, Social Security benefits could be cut by approximately 23% starting in 2033. Nearly three-quarters of retirees said such a cut would significantly impact their retirement.

Many older adults underestimate their health care costs in retirement, often believing that Medicare covers everything with no out-of-pocket expenses. However, that’s not the case.

Whether you opt for Original Medicare (Parts A & B) or Medicare Advantage, you'll still face costs like premiums, deductibles, and co-payments, which can add up quickly.

To avoid health care expenses draining your retirement savings, consider these strategies:

• Budgeting for predictable medical expenses

• Contributing to a health savings account (HSA)

• Purchasing long-term care insurance

• Selecting the Medicare plan that best suits your needs and lifestyle

"Medicare might seem like a maze, but finding the right people to help you navigate it is key," says Greatstone co-founder, Autumn Ruch. " The right support ensures you make informed decisions and secure the coverage that best fits your needs."

It's easy to believe you'll have control over how long you stay in the workforce, but life can have unexpected plans. Health issues, caregiving responsibilities, and the job market changes can all impact your ability to work in later years.

64% of current retirees surveyed ended up retiring earlier than they had planned.

The takeaway? Don’t count on working indefinitely. If you find yourself unable to work and lacking sufficient savings, you may be forced to cut back on spending.

Planning for the worst while hoping for the best can help ensure you’re financially prepared—even if retirement comes sooner than expected.

Many people assume their tax bill will decrease in retirement, but this isn't always the case. Your tax situation in retirement can be more complex and might not result in lower taxes.

While some retirees may see a reduction in taxes due to lower income, others may encounter unexpected tax liabilities from Required Minimum Distributions (RMDs) and other income sources.

High-net-worth individuals often have substantial savings in tax-deferred accounts like 401(k)s and IRAs. Withdrawals from these accounts in retirement can trigger significant tax liabilities.

To manage this, consider a diversified tax strategy that balances tax-deferred, tax-free, and taxable accounts. We can assist clients nearing retirement or already retired with a tax-efficient drawdown approach. This strategy aims to maximize after-tax wealth by strategically planning upfront tax payments, potentially reducing your overall tax burden.

Staying in the lowest tax bracket each year might seem like a good strategy, but it may not be optimal in the long run. A multi-year approach can sometimes be more beneficial, as paying higher taxes in one year might lead to lower taxes in subsequent years. In some cases, paying at a higher rate now can reduce your overall tax burden over time.

Focusing solely on maintaining the lowest tax bracket could limit your financial flexibility and cause you to miss out on opportunities for more effective tax planning.

One of the biggest misconceptions about retirement is thinking you can just figure it out as you go. That's where a planner comes in—helping you build a solid retirement plan. Without a well-defined strategy, you risk making costly errors that could jeopardize your financial future.

Life is unpredictable, and relying on catching up on retirement savings later is risky. Unexpected expenses, family responsibilities, and other financial demands can disrupt your plans. Procrastination can also be detrimental. It's crucial to save consistently and as much as possible throughout your career.

Every $1 invested at 20 years old has the potential to become $88 by the time you're 65. If you invest that same $1 staring at 30 years old, that drops to $23.

It might be tempting to handle your retirement planning on your own, but it’s a complex process with many moving parts that require careful thought and continual adjustments. You may not have considered possible market crashes, tax efficiencies, or tax inefficiencies. Expert guidance can be invaluable in this process.