Most Overlooked Items in Retirement Planning
Because people are living longer, retirement is no longer a "one-decade" event. On average, people are spending 18-22 years in retirement, which makes planning for retirement a bit more complicated. The true financial "wildcards" often lie in the granular details that don't make it into most retirement planning. Here are the most overlooked items that can quietly erode your retirement nest egg.
Planning for Longevity
Many people underestimate how much they will want to spend in their "go-go" years (early retirement) versus their "slow-go" and "no-go" years. Most people plan based on average life expectancy (e.g., age 84 for men, 87 for women). However, the average is just a midpoint; roughly 50% of people will live longer than that.
- If you are going to live 30+ years in retirement, you need a portion of your portfolio invested for growth to outpace inflation. Being too conservative, too early, is a quiet way to have an underfunded retirement.
The "Hidden" Healthcare Gap
While many plan for routine medical expenses, they often overlook the compounding cost of medical expense year over year and late-life care.
- Medicare Excluded Services: Medicare has significant “holes” that generally do not cover routine dental, vision, or hearing expenses, which can add several thousand dollars to expenses on an annual basis. Year over year those expenses add up.
- Underestimating Inflation: Healthcare costs and long-term care costs, inflate at a much faster pace than standard consumer goods. Your plan should reflect the higher inflation.
- Long-Term Care Costs: The average American, age 65, will spend roughly $135,000 on long-term care over their lifetime. Purchasing a long-term care policy can help reduce the financial impact.
- The IRMAA Surcharge: High earners are often blindsided by the Income-Related Monthly Adjustment Amount (IRMAA), which can cause Medicare Part B and Part D premiums to double or triple.
The Tax "Drag"
Your retirement income isn't all yours; a portion belongs to the IRS.
- Qualified Retirement Account Distributions: Required Minimum Distributions (RMDs) from traditional IRAs and 401(k)s are taxable at ordinary income rates; additional withdrawals from retirement accounts can push you into a higher tax bracket. Having a diverse group of investment accounts such as a Non-Qualified brokerage account, and a Roth IRA, will allow tax efficient withdrawal strategies.
- Social Security: Many retirees are surprised to find that up to 85% of social security benefits are taxable. It does not take a high level of income to exceed the taxation thresholds. $34,000 for individuals and $44,000 for joint filers.
Expenses Beyond the Mortgage
Retirees often fall into the trap of "planning for today" rather than "aging for tomorrow" and tend to overlook significant expenses.
- The 1% Rule: Even a "paid-off" home is still a liability as many retirees do not include the annual cost of maintenance. As part of your overall budget, a minimum of 1% of your home’s value should be used annually, and can vary, depending on the age and size of your overall home. A home valued at $500,000, that’s $5,000 a year expense often not planned for.
- The "Outsourcing" Premium: Tasks you used to do yourself - mowing the lawn, cleaning gutters, or painting - often have to be hired out as you age, turning "sweat equity" into a fixed monthly expense.
- Bank of Mom and Dad: Supporting adult children is one of the fastest-growing drains on retirement savings. Many retirees provide "stealth" support, such as paying for a child’s cell phone plan, insurance, or helping with a grandchild’s education. Diverting $1,000 a month to a child for five years doesn't just cost $60,000; it costs the growth that money would have earned, which could be the difference between a 25-year and 30-year portfolio lifespan.
- Insurance Surges: In 2025 and 2026, homeowners and auto insurance premiums have seen double-digit increases. For retirees living on fixed income, costs like insurance rise faster than the COLA. A retiree’s “real" purchasing power for food, utilities, and medicine shrink, while the baseline costs remain at historic highs. This can create a disproportionate burden on those no longer in the workforce.
Financial freedom in retirement is about what you keep, not just what you’ve saved. Longevity, taxes and overlooked expenses can derail a successful retirement plan. It is our job to ensure our clients have these blind spots identified and build them into their planning. Whether you’re looking for a full retirement plan, a review of your current plan or just have a few questions, we’re here to support you. Let’s connect soon to ensure your retirement plan is ready for whatever comes next.
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