Retirement

New Realities of Retirement: Top 10 Tips to Successfully Navigate the Transition

In recent years, the cost of living the American Dream has skyrocketed. According to recent reports, the cost to achieve typical milestones—like owning a home, raising children, and funding a comfortable retirement—has surged by nearly 50% in just five years. In 2020, the cost was $78,000. Today, it’s $117,000. (Investopedia 4.24) This sharp jump may seem unexpected given historical inflation averages of about 3% annually, but it reflects a new economic reality.

Whether you’re retiring in Boca Raton, South Florida, or a more affordable area like Asheville, factors such as housing, and healthcare have risen well above the broader inflation rate, creating substantial hurdles for those planning for retirement. Some of the post-COVID supply chain increases have remained sticky as well. If you’re within 5–10 years of retirement or have recently retired, this is especially critical. Higher living expenses, unexpected health costs, and longer life expectancy can all chip away at the savings you’ve worked hard to build.

The good news? If you’ve paid off your mortgage or built substantial home equity, it can help ease some of these rising costs. However, even with this advantage, today’s retirees are facing a landscape that is significantly different from what previous generations experienced.  Having a retirement planner and guide like a CFP pro can help you to better map out your goals and plug in your resources.  Call today (561) 210-7887 to get started or fill out the following form and we’ll be promptly in touch. 

👉 Schedule Your Consultation

In the following The New Realities of Retirement, we outline ten key strategies to help you navigate these challenges, safeguard your wealth and legacy while helping to ensure a secure and fulfilling retirement.

1 Rethink the “80% of Pre-Retirement Income” Rule

The myth that you’ll only need 80% of your last year’s gross income in retirement is one of the biggest misconceptions I see. Sure, in theory, you may no longer have work-related expenses, but the reality is often much different—especially if you retire before you qualify for Medicare.

What to Expect:

• Health insurance before Medicare (age 65) can cost nearly $13,000 per year. (U.S. Department of Health and Human Services) This is just the cost of health coverage—not counting any out-of-pocket medical expenses.
• Social Security may not be in play if you haven’t enrolled or choose to delay it, meaning less income to cover your new expenses.
• You might unexpectedly find yourself supporting adult children or caring for aging parents, which can further strain your finances.

Action Plan: Track both fixed and discretionary expenses in your first year. Look for subscriptions or memberships you no longer need and cancel them. These seemingly small changes can save you thousands overtime.

2 The 4% Rule: Still Standing, But With a Modern Twist

The 4% rule has long been a cornerstone of retirement planning. Introduced by financial planner Bill Bengen in 1994, it suggested retirees could withdraw 4% of their savings annually, adjusted for inflation, and expect their funds to last 30 years.

Recent Insights:

• Bill Bengen’s Updated Perspective: In recent years, Bengen has revised his recommendation, suggesting retirees might safely withdraw 4.7% annually, and in some scenarios, even up to 5.25% to 5.5%.
• Morningstar’s Caution: Morningstar’s 2024 analysis recommends a more conservative 3.7% withdrawal rate, reflecting anticipated lower returns from stocks and bonds.

Key Takeaways:

• Flexibility is Crucial: Adjust your withdrawal rate based on market conditions, personal expenses, and other income sources.
• Diversification Matters: A diversified portfolio can support a higher withdrawal rate, but reassess your asset allocation regularly.
• Longevity Considerations: With life expectancy rising, plan for a retirement that could last 30 years or more.

Pro Tip: Understanding how much of your annual retirement income may come from your portfolio versus Social Security or other resources helps you create a sustainable withdrawal strategy and ensures you won’t outlive your resources.

3 Budget Relentlessly in Your First Year

The first 12 months of retirement are all about adjusting to a new lifestyle and managing your spending. This is your financial foundation—a time to track every dollar, both fixed (mortgage, utilities) and discretionary (travel, entertainment, subscriptions).

Action Plan: Track every expense meticulously with a zero-based budget where every dollar has a purpose. Stick to the 4% rule when withdrawing from retirement savings to ensure you’re not at risk of running out of money later.

4 Health Insurance: A Major Retirement Expense

Health insurance premiums are one of the largest expenses for retirees under 65.  Marketplace plans for a 60-year-old can range between $12,000 and $18,000 annually, depending on your, health, plan and location. (U.S. Department of Health and Human Services) For a couple, this could exceed $24,000 before Medicare kicks in at 65.

Pro Tip: Incorporate healthcare costs into your retirement budget early. Explore your options through the ACA marketplace and check if you qualify for subsidies.

5 Taxes May Not Be as Low as You Think

Many retirees believe they’ll automatically drop into a lower tax bracket once they stop working. But if your retirement savings are in pre-tax accounts (like IRAs), that money is taxed as ordinary income when withdrawn. You might still end up in the same or even a higher tax bracket.

What to Do: Diversify your accounts! A mix of Roth IRAs, taxable brokerage accounts, and pre-tax retirement accounts provides more flexibility when making withdrawals and helps better manage your tax situation.

6 Reevaluate Your Portfolio for Risk and Income Goals

If you’ve spent years riding the wave of a bull market, your portfolio might be more equity-heavy than it should be as you transition into retirement. A balanced portfolio may still be overweight in stocks, which may no longer align with your new risk tolerance or income needs.

Pro Tip: Take a hard look at your asset allocation. The “100 minus your age” rule might not be appropriate for today’s market. Dial down risk and focus more on income generation—especially from tax-free sources in non-retirement accounts.

7 Don’t Overlook Long-Term Care Insurance

Long-term care can be one of the most underappreciated retirement expenses. Whether it’s in-home care or nursing homes, these services can be costly.

Key Takeaways:

• High Probability of Need: Approximately 70% of individuals turning 65 today will require some form of long-term care during their lifetime. (US Department of Health and Human Services)
• Extended Lifespan: With average life expectancy now at 78.4 years (CDC), many are living well into their 80s and beyond, increasing the likelihood of needing extended care.
• Protection: LTC insurance helps safeguard your savings and estate from the potentially high costs of care, which can average nearly $45K/year for home care and $117K annually for nursing home residents. (Genworth)
• Coverage Gaps: Private health insurance (e.g., BCBS) and Medicare (65+) typically do not cover long-term care costs, which means without LTC insurance, you may be left to cover these expenses out of pocket. Plus, having the backing of a professional agency to assist with your care rather than burdening family members ensures both quality of care and peace of mind.

Action Plan: Consider long-term care insurance to protect your assets if you need assistance later. It’s not just about healthcare—it’s about preserving your wealth for you and your family.

8 Get Your Estate Plan in Order

Estate planning is often overlooked by retirees, especially those who are single. But a well-crafted estate plan is essential to protecting both yourself and your assets.

Key Takeaways:

• Review Regularly: Estate planning is not a one-and-done task. Make sure to review and update your plan regularly, especially after major life events like marriage, the birth of children or grandchildren, or changes in financial status.
• Designate a Trusted Executor: Choose someone reliable and organized to serve as your executor. They’ll be responsible for carrying out your wishes, and having the right person in this role can prevent complications after you’re gone.
• Consider Trusts: While wills are important, trusts can help avoid probate, reduce taxes, and offer more control over how your assets are distributed. A trust can also protect your estate from lengthy legal battles.
• Include Healthcare Directives: Don’t just focus on assets. Make sure you have a healthcare power of attorney and living will, which will specify your wishes in the event you are unable to make decisions for yourself due to illness or incapacity.
• Plan for Digital Assets: In today’s world, digital assets such as social media accounts, email, and cryptocurrencies need to be addressed. Ensure your estate plan accounts for your online presence and passwords, so your loved ones can easily manage them after your passing.

Pro Tip: Review your estate plan regularly to reflect current circumstances. An updated estate plan can protect your wealth for generations and ensure a smoother transition for your family.

Remember: Taking the time to refine your retirement and estate plans today can make all the difference for tomorrow. Your proactive decisions now can provide security for you and your loved ones for years to come.

9 Reinventing Retirement: Work, Purpose, and Staying Active

Retirement today is about more than leisure; it’s about reinvention. Many retirees are choosing part-time work, volunteering, or exploring new passions for purpose, social connection, and financial flexibility.

Why Work in Retirement?

• Financial Necessity: 20% of retirees are working part-time or full-time due to higher living costs.
• Social and Emotional Benefits: Work can provide structure, social interaction, and a sense of accomplishment.
• Personal Fulfillment: Many retirees are starting businesses or pursuing hobbies that bring joy.

Embracing Change: Reinventing yourself in retirement is common. Whether it’s a new hobby, a part-time job, or a new skill, embracing change can lead to a fulfilling retirement.

10 Retirement Income Strategies 

As you transition into retirement, it’s crucial to have a clear strategy for generating sustainable income. Depending solely on savings or Social Security may not be enough to support your desired lifestyle, especially considering the rising costs of healthcare, housing, and other essentials.

Key Strategies for Retirement Income:

• Diversify Your Sources: Relying on one source of income (e.g., Social Security) can expose you to risks. Consider a mix of Social Security, pensions, annuities, dividends, and withdrawals from your investment portfolio.
• Withdrawal Strategy: Create a strategy that balances withdrawals from tax-deferred accounts (like IRAs) and taxable accounts to minimize tax liabilities.
• Create an Emergency Fund: Make sure you have enough cash set aside to cover at least 6-12 months of expenses in case of unexpected health issues or market downturns.
• Roth Conversions: Converting some of your traditional IRA to a Roth IRA before retirement can help minimize taxes in the long term, allowing for tax-free withdrawals in retirement.
• Guaranteed Income: Consider annuities or other income-producing products that can offer a reliable source of income throughout retirement, especially if you don’t have a pension.

Pro Tip: With the New Realities of Retirement protect your wealth by making sure your retirement income strategies are built to adapt to unexpected changes. Having a flexible approach allows you to adjust for inflation, market performance, and your own personal needs.

Get Started: 

With the new realities of retirement upon us, don’t wait until the day you retire to get organized. As the maxim goes- Failure to plan is planning to fail. Ensure that your retirement plan reflects your current circumstances and accounts for your needs in the decades to come. A comprehensive plan, designed with the help of an accredited financial advisor like a CFP® pro, can not only help you avoid costly mistakes but also reduce family stress and protect your health and wealth for generations to come

For more information on our firm or to request a complimentary investment and retirement check-up, call (561) 210-7887 or email jon.ulin@ulinwealth.com.

Author: Jon Ulin, CFP® is the founder and Managing Principal of Ulin & Co. Wealth Management, an SEC Registered Investment Advisor based in South Florida for over 20 years. As a fiduciary wealth advisor, Jon helps successful individuals, families, and business owners nationwide with multi-generational planning, investment management, and retirement strategies. Learn more about Jon and our team at About/CV. 

Diversification does not ensure a profit or guarantee against loss.  You cannot invest directly in an index.

Note: This content is for informational purposes only and should not be construed as financial, legal, or tax advice. Please consult your financial advisor, attorney, or tax professional regarding your specific situation.

You cannot invest directly in an index. Past performance is no guarantee of future returns. Diversification does not ensure a profit or guarantee against loss. All examples and charts shown are hypothetical used for illustrative purposes only and do not represent any actual investment. The information given herein is taken from sources that are believed to be reliable, but it is not guaranteed by us as to accuracy or completeness. This is for informational purposes only and in no event should be construed as an offer to sell or solicitation of an offer to buy any securities or products. Please consult your tax and/or legal advisor before implementing any tax and/or legal related strategies mentioned in this publication as NewEdge Advisors, LLC does not provide tax and/or legal advice. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors.