Today’s retirees may be the richest the world has ever seen with Baby Boomers holding more than half of U.S. household wealth as of the end of 2020.[1] While you may be looking forward to traveling, working on your golf game, or retiring early to enjoy more free time, you first have to overcome some major retirement challenges. Here are some questions to ask yourself when creating a plan to overcome them.

Facing Market Volatility

If you don’t want to put off retirement or downgrade your retirement lifestyle, you may want to reassess your risk tolerance. Risk tolerance can change with age. If you haven’t changed your investment approach in a decade, it can help to talk with an advisor who can help you quantitatively and qualitatively assess your risk tolerance. You might consider how you will cover your basic living expenses and your desired retirement lifestyle as you transition from saving to spending. From there, an advisor can help you decide on an appropriate investment strategy designed for your unique financial situation.

Choosing the Right Social Security Claiming Strategy

Although you will most likely not be able to maintain your current lifestyle on a Social Security benefit alone, it can make up a significant portion of your income and is guaranteed for as long as you live. Despite its importance, only 4% of retirees claim Social Security benefits at the optimal time, losing out on an average of $111,000 per household, according to a recent study.[2] The earliest you can claim Social Security benefits is age 62. However, claiming benefits before your full retirement age will result in a permanently smaller benefit. Consider at what age you will claim benefits and know your full retirement age.

Minimizing Taxes

There could be several ways a financial advisor can help you with tax strategies. Every part of a financial plan is connected, including an investment strategy and a tax minimization strategy. If you’ve sold off losing investments this year, you might be able to deduct those losses from your taxes if you itemize. Or, you might consider a Roth conversion. In this case, you would pay tax on the amount converted now and then enjoy tax-free withdrawals later in retirement.

Covering Healthcare Costs

An average 65-year-old couple retiring today will need an estimated $295,000 to cover their healthcare costs, and that doesn’t even include long-term care costs.[3] An estimated 70% of today’s 65-year-olds will need long-term care at some point[4]. Consider that the median annual cost for an assisted living facility is $51,600, and the median annual cost for a private room in a nursing home is over $105,850.[5] There are several strategies for covering high healthcare and long-term care costs in retirement we can discuss with you beyond traditional long-term care insurance.

One of the advantages of going to one professional for all of your financial planning needs is that everything from investment strategies to tax minimization works together in one overall plan. If you need to update or create a plan, Click HERE to schedule a complimentary financial review at Zinnia Wealth Management.