Our List Of The Top 5 Financial Planning Challenges In The First 10 Years Of Retirement

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By Brett Gottlieb 

You’ve had your retirement party, cleaned out your desk, and are enjoying your long-awaited retirement years. Lots of things end when you retire and enter a new phase of life. But do you know one thing that shouldn’t end? Financial planning. That’s right. You may have thought that years of saving, investing, calculating, and planning are over now that you’ve reached your goal, but that’s just not true. You still have decisions to make, actions to take, and plans to strategize so that you can experience a fulfilling retirement.

We’ve found that most retirees face the same 5 financial planning challenges during the first 10 years of retirement. Read on to learn what they are so you can be prepared.

1. Not Creating A Withdrawal Strategy

You’ve saved for years, and now you need that money to live on. How you take it out is just as important as how you put it in. That’s why you should capitalize on your wealth by determining a tax-efficient way to withdraw funds in your golden years. 

Different financial accounts are taxed at different rates. Traditional IRAs and 401(k)s get taxed at the ordinary income tax rate when you withdraw. Roth IRAs and Roth 401(k)s are taxed beforehand, so the money is withdrawn tax-free. Funds in a taxable investment account are taxed at the capital gains tax rate, which is different than your ordinary income tax rate. 

Calculating when might be the best time to pull from each account is enough to give anyone a headache. But the last thing you want is to get hit with a hefty tax bill when you’re trying to stretch your money for decades. 

Create a withdrawal strategy with the help of a trusted professional who can help ensure you’re withdrawing funds at a sustainable rate and that you’re doing it in a tax-efficient way.

2. Throwing The Budget Away

Many people spend their retirement years doing all the things they never got to do when they were working—starting a passion project, remodeling the house, traveling the world, and more.

It’s easy to underestimate the amount of money you’ll spend during those first few years when you don’t account for all these “extras.” Overspending, even for a short period, can shave years off the longevity of your assets. The solution? Create a spending plan. Calculate your monthly income given your withdrawal strategy and then create a budget, tracking your money along the way so you stick to your goals. 

3. Ignoring Inflation

Another major challenge we see new retirees face is the desire to play it safe in the stock market. This can do more harm than good as it can lead to inflation risk. 

The long-term average inflation rate for healthcare expenditures is 5.28%, (1) compared to the current average inflation rate of 2.3%. (2) What does this mean? Retirees are more likely to feel the effects of inflation due to necessary expenses, such as healthcare costs. 

As tempting as it may be, resisting the urge to worry about short-term stock market volatility may be a good option. With a retirement that could easily last 20 to 30 years, inflation is still a significant threat to your nest egg. Sit down with a trusted professional who can help you strike a balance between principal protection and growth. 

4. Neglecting To Create An Emergency Fund

Could you comfortably pay for an unexpected, major expense in retirement without jeopardizing your financial future? For most of us, the answer is no. Just as you were taught to have an emergency fund in your formative years, it’s even more critical to have one in your retirement years. 

Most professionals recommend having at least 12 to 18 months of expenses in an easily accessible savings account. (3) This may sound like a lot, but an emergency fund serves two purposes: it covers unexpected expenses and it can provide stability during economic downturns. This means you can optimize your portfolio to help beat inflation, as suggested above, while having a safety net to fall back on. 

5. Planning On Your Own

It took decades of strategizing to grow your wealth up until this point. Don’t just wing it in retirement and try to manage your money alone. Having a trusted financial advisor by your side can be the difference between having a retirement fund that dries up and having one you can’t outlive. If you want help with your goal to experience a confident retirement, let us help. Email us at info@ComprehensiveAdvisor.com or call (760) 813-2125 to schedule a no-obligation conversation.

About Our Advisors

Brett Gottlieb is the founder of Comprehensive Advisor and a financial advisor with nearly two decades of industry experience. He graduated from California State University-Chico with two bachelor’s degrees in Business Administration and Economics. Brett is Life Insurance licensed in several states. He is passionate about guiding his clients on retirement income planning, helping each client pursue their specific retirement goals and defending the assets his clients have worked so hard to achieve. Brett is a California native and currently resides in San Elijo Hills with his beautiful wife and three children.

With a combined experience of over three decades in the financial services industry, our advisors hail from some of the largest independent broker/dealers and banking institutions in the country. They have dedicated their professional careers to creating personalized financial solutions for individuals and families who seek successful retirement planning and currently offer investment advisory services through AE Wealth Management, LLC. Our advisors take a common-sense approach to the planning process and work with clients to create a retirement road map to help ensure their assets are protected and they receive the income needed to enjoy their future. Based in Carlsbad, California, they work with clients throughout San Diego County and beyond. Learn more by connecting with Brett on LinkedIn or email them at info@ComprehensiveAdvisor.com.

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Comprehensive Advisor are not affiliated companies. C.A. Financial & Insurance Services, CA Ins. Lic. #6000262. This material is intended to provide general information and is believed to be reliable, but accuracy and completeness cannot be guaranteed. Neither the firm nor its representatives may give tax or legal advice. Investing involves risk, including the potential loss of principal. Any references to protection benefits, safety, security, lifetime income, etc. generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. 644340 – 6/20

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(1) https://ycharts.com/indicators/us_health_care_inflation_rate

(2) https://www.usinflationcalculator.com/inflation/current-inflation-rates/

(3) https://www.thebalance.com/how-much-emergency-savings-do-retirees-need-4582473

We are an independent financial services firm helping individuals create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives.

Investment Advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). Comprehensive Advisor and AEWM are not affiliated companies.

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. None of the information contained on this website shall constitute an offer to sell or solicit any offer to buy a security or any insurance product.

Any references to [protection benefits, safety, security, or steady and reliable income, etc] streams on this website refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products. Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Annuities are insurance products that may be subject to fees, surrender charges and holding periods which vary by insurance company. Annuities are not FDIC insured.

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