When it comes to retirement, people are often advised to start saving as early as possible. The thing is that advice, while crucial, isn’t enough. Why? Savings alone cannot guarantee a secure, comfortable, or long-lasting retirement. It’s much more important to have a strategy for how much you’ll need, how long you’ll need it, and how you’ll make your money last.
So, how can you build a retirement that won’t run out before you do? In short, you need to think like a strategist and go beyond the savings account.
Why Saving Isn’t a Strategy
Saving is simple. As you save consistently, your money grows. However, there’s more to retirement than just accumulation. Rather, it’s about how to generate reliable income with your life savings. Aside from that, you also have to factor in market shifts, tax liabilities, inflation, and health costs.
To put it another way, saving gets you to retirement. Strategy, though, gets you through retirement.
Step 1: Know Your Retirement Number (and Make It Personal)
Retirement plans typically begin with a generic target, such as $1 million, $2 million, or 80% of your current income. In reality, your number should depend on your lifestyle, not just a formula.
So, to get a better ballpark figure for your retirement number, ask yourself the following;
- In retirement, what kind of lifestyle do I want?
- Do I plan to travel often or stay local?
- Will I downsize, move, or stay in my current home?
- How much should I budget for health expenses or insurance premiums?
It’s unlikely your retirement expenses will be identical to your current ones. But they won’t magically disappear either. So, don’t get caught up in numbers; instead, start with a detailed vision.
Strategy tip: To model different retirement scenarios, use tools like Fidelity’s Retirement Score or NewRetirement Planner.
Step 2: Shift From Income Growth to Income Reliability
As a working person, your primary concern is growing your income and investments. With retirement, however, you’re more concerned with preserving your wealth and ensuring it lasts for at least 20-30 years.
As a result, you should think in terms of income buckets:
- Bucket 1: Short-Term Needs. A reserve of cash or a low-risk investment to cover the next one to three years.
- Bucket 2: Mid-Term Stability. Invest in income-producing bonds, annuities, or stocks for a period of three to ten years.
- Bucket 3: Long-Term Growth. Investments in stocks or real estate that will grow over the next 10 years or more.
By using this bucket strategy, you can avoid selling stocks during downturns while still earning long-term gains.
Strategy tip: If you’re seeking a reliable income and long-term growth, consider bond ladders or annuities.
Step 3: Don’t Let Taxes Sneak Up On You
Retirees often assume they will be in a lower tax bracket after retirement, but that isn’t always the case. In addition to Social Security and other income, required minimum distributions from traditional IRAs and 401(k)s can raise your tax bracket.
With that said, tax management is an essential component of a strategic retirement plan:
- Roth conversions. While you’re in a lower tax bracket, gradually convert portions of your traditional IRA to a Roth IRA.
- Tax-loss harvesting. By selling underperforming investments, you can offset gains.
- Withdrawal sequencing. To minimize your tax burden, be aware of when to withdraw funds from which accounts.
Strategy tip: Consider multi-year planning with the assistance of a tax professional. You can save thousands of dollars throughout your retirement with the help of a professional CPA.
Step 4: Plan for Inflation (Because It’s Not Going Anywhere)
Over time, inflation may seem mild, but it’s relentless. Compared to today’s prices, what costs $50,000 today could cost $80,000 in 20 years. As you develop your strategy, consider the erosion of purchasing power, particularly in essential items such as food, housing, and healthcare.
To ensure your retirement is inflation-proof, follow these steps:
- Include growth assets (like stocks) in your portfolio, even in retirement.
- Use Social Security wisely. Benefits are adjusted for inflation when delayed until age 70, which can significantly increase your monthly income.
- Invest in TIPS (Treasury Inflation-Protected Securities) as a hedge.
Strategy tip: It’s not a good idea to be overly conservative too early. Over time, some of your money still needs to grow.
Step 5: Prepare for Healthcare and Long-Term Care Costs
In retirement, healthcare is one of the biggest wildcards. It is estimated that a couple retiring at 65 will spend about $315,000 to $413,000 on healthcare throughout their retirement. And that’s not including long-term care. It can, however, vary depending on factors like health, location, and life expectancy.
Despite its many benefits, Medicare does not cover everything. However, you’ll still have to pay for premiums, copays, and uncovered services, such as dental and vision care. What about long-term care (such as assisted living or home health aides)? If you don’t have insurance or qualify for Medicaid, you’ll have to pay out of pocket.
Strategy tip: If you are still working, consider setting up a Health Savings Account (HSA). It may also be a good idea to consider long-term care insurance or policies that combine both life insurance and long-term care insurance.
Step 6: Be Strategic with Social Security
Suppose you turn 62 in 2025. If you wait until your full retirement age (FRA) of 67 to claim Social Security, you’ll receive $2,000 per month. As a result of receiving benefits for a more extended period of time, your monthly payment will decrease by 30% if you begin collecting at age 62, bringing it down to $1,400. In most cases, this reduction is permanent.
Delaying retirement until age 70 increases your monthly benefit to $2,480, thanks to delayed retirement credits. Compared to what you’d receive at 62, that’s a 77% increase — $1,080 more per month.
However, your strategy will be determined by several factors, such as;
- Health and longevity
- Need for income
- Marital status
- Other available assets
Strategy tip: Use the Social Security Administration’s online estimator or a planner to determine your optimal claiming age. When couples coordinate their benefits, their lifetime payouts can be maximized.
Step 7: Keep Flexibility in Your Plan
It doesn’t matter how well you plan, life throws curveballs. To achieve the best retirement outcomes, retirement strategies must be flexible and reviewed regularly.
Consider the following when building in room for adjustment;
- Annually reviewing your budget
- Whenever necessary, rebalance your portfolio
- To avoid panic selling during downturns, keep a cash buffer
- Having a plan for life’s significant events (health changes, inheritances, spouse losses)
Strategy tip: Rather than treating retirement planning as a one-and-done exercise, make it a living document.
Step 8: Think About Legacy and Estate Planning
After retirement, what happens is equally important. When you create an estate plan, you’ll ensure your assets go to where you want, and you’ll avoid legal messes and family disputes.
Here’s what to include;
- A current will
- Power of attorney and healthcare proxy
- To manage complex assets or reduce taxes, a trust may be necessary
- Added beneficiaries to retirement accounts and insurance policies
Strategy tip: You can tie this all together with your retirement plan by working with an estate attorney. After all, there’s more at stake than money here — it’s about your mental well-being as well.
Final Thoughts: Strategy Is the New Superpower
In reality, most people outlive their money not because they didn’t save — but because they didn’t plan.
In retirement, you need to plan as carefully as you did during your career years. With a comprehensive, flexible, and tax-smart retirement strategy, you can give yourself the best chance at a long-term retirement with lots of options, freedom, and peace of mind.
TL;DR: How to Strategize a Retirement That Lasts
- Know your number according to your lifestyle, not by guessing
- Build income buckets for short, mid, and long-term needs
- Plan for taxes so you don’t get caught off guard
- Don’t ignore inflation — let your money grow
- Budget for healthcare and long-term care
- Time your Social Security benefits to maximize them
- Stay flexible when it comes to annual check-ins and course corrections
- Leave a legacy through estate planning and clear documentation
Saving is the first step. Strategy, however? That’s how you make retirement work for you.
FAQs
How much should I withdraw from my retirement savings each year?
According to the 4% rule, you should withdraw 4% of your retirement savings in the first year, then adjust for inflation each subsequent year. There are, however, exceptions to this rule. Your withdrawals should be based on your actual expenses, market conditions, and life expectancy.
Is it too late to build a retirement strategy if I’m over 50?
No. If you’re in your 50s or 60s, now may be the perfect time to catch up on your savings and optimize your savings strategy. Consider downsizing, making catch-up contributions to IRAs and 401(k) plans, and utilizing tax strategies such as Roth conversions.
Should I pay off my mortgage before I retire?
It depends. Investing excess cash may make more sense if your mortgage payment is manageable and your interest rate is low. In contrast, retiring debt-free can provide peace of mind and lower fixed costs. You should consider the mortgage’s role in your overall financial plan.
What’s the biggest mistake people make with retirement planning?
Not having a withdrawal plan in place. In retirement, many people do not consider how to spend money strategically. Without a solid distribution strategy, taxes, market volatility, and healthcare costs can quickly erode savings.
Do I still need to invest in stocks in retirement?
Most of the time, yes. Your retirement could last more than 30 years, meaning your money needs to grow to keep pace with inflation. When it comes to asset allocation, it is usually better to have both growth and income assets than to go 100% conservative.
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