Retirement is just as much a leap of faith as any other significant life change. No matter how much you prepare, you will only really understand all the implications when you start your new life. That’s one reason we believe that the first requirement of a good retirement plan is that it needs to be flexible enough to efficiently encompass changes in your life as you adjust to your new situation.

How do we get to maximum flexibility? It starts with avoiding retirement risks. The more your plan is set up to accommodate predictable events or situations, the greater your ability to adjust to the unpredictable.

Making Sure You Don’t Outlive Your Money

The Social Security Administration reports that the average life expectancy for a man reaching age 65 in 2023 is just over 84 years, and for a woman, it is almost 87 years. A twenty-year retirement is a norm now, and for many people, it can be a decade or more longer than that.

Expenses in retirement are often high during the early, active years. In the middle years of retirement, expenses may drop. But longer life expectancy often means increased expenses in the last years of retirement to pay for health care. Returning to our 65-year-old couple above, Fidelity estimates that healthcare expenses may be approximately $315,000 throughout their retirement – over and above Medicare.

How do you mitigate this longevity risk? It comes down to three things:

  •       Keep a careful eye on expenses and update budgets regularly
  •       Maximize guaranteed income by delaying claiming social security
  •       Invest with a bucket strategy for short-term, mid-term, and long-term needs. This allows you to keep capital growing for long-term needs and to ensure you have what you need in the short term without liquidating investments at a loss. 


Keeping an Eye on Inflation – But Not Too Close

The high levels of inflation we’ve seen in the last couple of years are hitting everyone’s wallet. But taking a longer view, over the previous 50 years to 2021, inflation has averaged about 3.8% annually. The stated goal of the Federal Reserve is for inflation to remain around 2% annually.

Building an income strategy around today’s high inflation could result in taking too much income out of your plan in the early years. It’s also a good idea to go beyond the statistics and consider how inflation affects you. High inflation rates aren’t as much of a threat for many retirees. Social security is indexed to inflation, so some income will keep pace. Retirees also may have a smaller outlay on things impacted by inflation than people still in their working years.

Include a modest assumption for inflation in your income planning, and for temporary spikes, some remedial budget-cutting is probably enough to keep you on track.

 Paying Attention to Your Taxes

You’ll be in a lower tax bracket in retirement, right? Well, maybe. You don’t have the same deductions as when you were working, and once you hit 73, required minimum distributions (RMDs) turn your tax-advantaged savings in 401(k)s and IRAs into big chunks of taxable income. And if your income gets too high, you may end up paying a tax on Medicare through the IRMAA, which kicks in at higher income levels.

You don’t have to give up control of your income if you plan ahead. You can deploy several tax strategies, particularly in the early years of retirement. One of the most advantageous is a Roth conversion, which allows you to take money from your tax-efficient accounts over the course of several years when your income is low, pay the taxes, and then reinvest in a Roth account. Roth accounts grow tax-free, and no taxes are due when you withdraw the funds.

The key is to take a multi-year planning approach. The goal is to even out income streams to keep taxes as low as possible. The recently passed SECURE 2.0 Act provides significant changes to the rules around retirement accounts and will certainly impact planning trends going forward. 

The Bottom Line

Retirement changes your mindset from being a saver to essentially a spender as you begin to live on the nest egg you accumulated. You won’t have income from work, but you will have more freedom. For many retirees, the newfound freedom opens new doors. Ensuring you can make your retirement assets match your retirement lifestyle means mitigating the risks.

Have questions for our team of certified tax and personal financial advisors? We would love to hear your questions and offer our answers! Please send them to 


The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.

This content not reviewed by FINRA

Northbrook Financial is an Investment Adviser registered with the State of Maryland. All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy or the completeness of any description of securities, markets or developments mentioned. Please contact us at 410-941-9709 if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate or modify any restrictions on the management of the account. Our current disclosure brochure, Form ADV Part 2, is available upon request, and on our website