How Would You Rate Your Retirement Readiness? A Financial Planner Explains Why Successful Savers Might Score Lower Than They Expect
Many people think responsibly saving a nest egg is all you need to do for a successful retirement. But you won't be fully prepared if you haven't considered how you'll protect it from these risks.
When we have introductory meetings with prospective clients, we ask them to rate themselves from one to 10 on our "Retirement Readiness Scale."
People typically think they're ready for retirement because they've been carefully saving throughout their careers and have healthy nest eggs by the time they start a conversation with us.
When we ask them to rate themselves, we explain that an eight or higher means, at minimum, you've put together a Social Security optimization strategy and built what we call a "money map" of all your financial accounts in order of planned withdrawal in retirement.
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After hearing that, many rate themselves lower and ask us for help to get to the top of the scale.
These are three factors that could derail your retirement even if you've gotten ahead of the curve by having robust retirement savings. By understanding them, you can enhance your position on the Retirement Readiness Scale.
1. Buying power is likely to decrease during retirement
This year in particular, we've heard a lot about inflation. It's been so persistent that on September 16, the Federal Reserve raised target interest rates for the first time in three years.
Most people understand inflation as increasing prices, but a better way to think about it is that your buying power decreases because the value of your money goes down.
Inflation rising by 3.5% year-over-year means your buying power drops by nearly that much, meaning stashing your cash in a savings account is generally not a good idea. If your money loses value faster than you earn interest on it, you're losing purchasing power.
Inflation isn't the only factor that attacks buying power in retirement. Medical costs are skyrocketing. Based on Fidelity Investments' July 2026 Retiree Health Care Cost Estimate, the average 65-year-old could need hundreds of thousands of dollars for medical expenses in retirement. Having to spend that much to stay healthy reduces your ability to buy things you want.
Social Security is another potential buying power landmine. For years in which the economy experiences inflation, Social Security issues a Cost of Living Adjustment (COLA). But COLA usually doesn't make up for the actual increase in your cost of living. It's often eaten up by increases in Medicare premiums, which makes affording those higher medical bills even harder as the years go by.
This loss of buying power is why we often ask clients, "Do you have a portfolio, or do you have a plan?" Sound financial planning involves more than simply accumulating assets; it evaluates how factors such as inflation, healthcare expenses, investment returns and withdrawals can affect a retiree's ability to meet future spending needs. It's much easier to enjoy retirement if you aren't constantly worried about money.
2. Bad tax planning can deplete a retirement nest egg
Picture two retiree clients. Both are the same age, saved the same amount and live in the same city. You'd think they'd both have equally successful retirements.
Not necessarily. If one client strategized their retirement account taxation while the other did not, their results could be significantly different. One could enjoy a long and happy retirement while the other could end up having to exit retirement and re-enter the workforce.
Many people don't realize that different retirement accounts are taxed differently. For example, withdrawals from a traditional IRA are generally taxed as ordinary income.
A Roth IRA could contain the same assets, but qualified withdrawals from it are generally tax-free. Deposits to a traditional IRA are pretax; you don't pay taxes now on the understanding that you will pay them years later. Contributions to a Roth are taxed up front, so you typically don't owe them when you withdraw.
IRAs also carry required minimum distributions (RMDs). The IRS requires you to withdraw a certain percentage of the IRA every year starting at age 73 (75 for those born in 1960 or later), whether you need the money or not. These withdrawals are not only taxed — they're counted as income.
When combined with income streams you can't turn off, such as Social Security or pensions, those RMDs can put you into a higher tax bracket and, if not reinvested, drain your retirement savings faster than you'd like.
Properly planning for retirement taxation is key to paying only the taxes you should owe and not unnecessarily paying more.
3. Sequence-of-returns risk can threaten your retirement
Most of today's retirees remember the subprime mortgage collapse of 2008. This was a perfect, awful example of sequence-of-returns risk. The crisis caused the stock market to plummet, and many people who were in or near retirement with most of their assets in stocks suddenly found themselves much less wealthy than they had been.
Because they still had to pay the bills, they were often forced to withdraw assets whose value had collapsed in a process we call locking in losses. If they hadn't had to sell their assets, they might have been able to wait until the stock market recovered in 2013.
This is known as sequence-of-returns risk. Having to withdraw from diminished assets early in retirement meant they had much less of a nest egg to grow in the market going forward. For some, this meant having to exit retirement and go back to work.
By spreading your retirement assets into classes with higher and lower risk, you give yourself the option to withdraw from the lower-risk assets when the higher-risk ones are down, potentially giving higher-risk assets additional time to recover. Planning for sequence-of-returns risk is critical to safeguard your nest egg.
This article isn't meant to scare you, but to encourage you to work with a financial adviser who understands that retirement planning only begins with saving money; it's how you strategize what to do with it in retirement that can make or break your golden years.
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