6 Overlooked Areas That Can Make or Break Your Retirement, From a Retirement Adviser

Many people spend decades saving and investing, only to discover that their well-funded portfolio doesn't necessarily equal a well-planned retirement.

To build lasting security, it's important to create a plan that can help you realize your goals while also protecting your income and independence. In the run-up to retirement, or when newly retired, you should therefore focus on these six key areas:

1. Taxes: Avoid the stealthy erosion of wealth

People are often surprised to learn they could end up in a higher tax bracket in retirement than while working. Income-based taxes on Social Security and Medicare and required minimum distributions (RMDs) that start in your 70s can push tax bills higher than you might expect.

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The good news is that you may have more control over the taxes you pay in retirement than at any other time in your life.

If you've stashed a chunk of your money in tax-deferred accounts (a 401(k), 403(b) or traditional IRA, for example), you may want to look at the benefits of doing a Roth conversion now to minimize your tax burden later. You might also consider:

• Placing your investments in account types based on how they're taxed (called asset location)
• Using qualified charitable distributions to optimize the tax benefits of gifting and reduce your RMDs
• Applying income-timing techniques that can help smooth out taxable income over time

You may not be able to avoid taxes altogether, but with the right strategies, you can make them more predictable and ensure that more of your money continues to work for you.

2. Health care: Preparing for retirement's most underestimated expense

According to Fidelity Investments' most recent Retiree Health Care Cost Estimate, a 65-year-old retiring in 2025 can expect to spend an average of $172,500 on health care and medical expenses throughout their retirement — and those costs can rise sharply if long-term care is required.

Building health care into your financial plan, rather than treating it as an afterthought, can make a dramatic difference in how much you'll spend.

That means reviewing your Medicare options annually to make sure you still have the best plan for your needs. (If you're still working, you may want to consider investing in a health savings account.)

The sooner you explore the options for long-term care coverage, the more confident you can be that you'll be protected from what could be one of the largest expenses you'll encounter in retirement.

3. Risk in the market: Safeguarding what you've built

The stock market doesn't care that you've just retired and that you're depending on your nest egg to last for decades.

Experiencing a downturn early in retirement, while you're taking money out of your accounts but no longer putting money in, can drain your portfolio much faster than you expected.

One way to guard against this phenomenon, known as sequence of returns risk, is to separate your assets into three separate "buckets":

• Safe reserves for near-term income
• Balanced holdings for the next phase
• Growth assets for later years

The goal of a bucket strategy isn't to completely eliminate risk but to position it so that it serves you, and not the other way around.

4. Income: Turning savings and benefits into a reliable paycheck

After years of diligently accumulating money, many retirees struggle to come up with a withdrawal strategy that works for their needs. Withdraw too much, and you risk running short in the future. Take too little, and you may not enjoy the lifestyle you worked so hard to earn.

A plan that thoughtfully blends multiple income sources — Social Security, pensions, dividend and annuity payments, and systematic withdrawals — can create a steady paycheck that remains reliable even when markets fluctuate.

5. Vitality: Extending your health span, not just your lifespan

Money is a means to sustain your active and fulfilling retirement, not a scoreboard to measure it against.

Studies consistently show that physical activity, purpose and social connection can improve quality of life and extend longevity.

Your financial plan should support the habits and hobbies that keep you energized, including travel, time with family and friends, continued learning and/or volunteering and giving back to your community.

6. Estate and legacy: Living fully and making your wishes known

A legacy plan is about more than the distribution of your assets when you're gone. It's about ensuring your loved ones know and understand your wishes, have access to up-to-date and professionally prepared legal documents, and can navigate decisions without confusion or conflict.

Don't delay. It's important to keep your beneficiary designations current, establish powers of attorney and communicate your wishes to your financial adviser and those you care about.

Coordination is key

It's often the blind spots that cause the most problems — and the most regret — for retirees.

In truth, many hard-working retirees don't have a money problem; they have a coordination problem. They've accumulated various assets over the years, but they have no idea how, or if, those investments will work together.

It's like trying to assemble a 1,000-piece jigsaw puzzle without looking at the picture on the front of the box.

That's how retirement feels for many people — scattered, uncertain and more complex than it needs to be.

When you have a plan in place to cover the six foundational areas — taxes, health care, risk, income, vitality, and estate and legacy (or THRIVE) — your wealth can transform from a collection of accounts into a framework for living well.

And with the help of a financial adviser, preferably someone who is a retirement specialist, you can feel more confident that you're prepared for the exciting time ahead.

Kim Franke-Folstad contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

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