The Five Phases of Retirement Planning You Have to Get Right

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published 6 September 2025

Three of the biggest risks you face in retirement are 1) a market crash, 2) inflation and 3) higher future taxes.

It is difficult to address one risk without leaving yourself vulnerable to another. If you take too much money out of stocks to avoid a market crash, you run the risk of losing your purchasing power to inflation.

Conversely, if you leave all your money in stocks to keep up with inflation, you run the risk of a market crash, especially at the front end of retirement.

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So how do you create a plan that balances all three elements?

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I consider the following recommendations as the five most important steps to focus on when developing a solid retirement plan, with the proviso: These steps work much better for you if you set them up sooner rather than later.

Devise an income plan

By the time you reach retirement, you will have been saving for a long time. But then what? How do you strategize your Social Security, pensions and retirement accounts to create the retirement you deserve?

First things first: You need an income plan.

To create an income plan, start by identifying what guaranteed income you will have during retirement, e.g., Social Security, pensions, etc.

How much of a gap is there between your guaranteed income and how much you spend in a month right now? Should you delay Social Security or your pension to increase cash flow and decrease that gap?

Once you've identified the gap, the next step in creating an income plan is to set up the foundation of your fiscal house. This is where you will draw the remaining income from to cover your gap.

The most important element of the foundation is principal protection. You can accomplish this through a number of different tools, such as CDs, treasuries, money market funds or fixed index annuities.

Most people don't want to have to worry about how much income they can take next month based on what the stock market did this month.

That's why it's prudent to build a principal-protected foundation to cover the gap between your guaranteed income and your monthly spend.

Draw up an investment plan

Once you've solved the income plan, you're somewhat protected from the risk of a market crash.

But what about inflation? What about growth?

The next step is to set up the roof and the walls of your fiscal house. The roof is where you invest in equities, focusing on growth and taking more risk to achieve more growth.

The walls are a great place for the in-between: investments that offer some growth but with less risk. Bonds are a great wall asset.

How much risk should you take? That depends on the individual. Ask yourself: What is your risk tolerance? How will that change once you enter retirement and no longer receive regularly recurring checks?

There are two main philosophies when it comes to investing in equities: strategic vs. tactical:

The strategic strategy boils down to buy and hold, passive strategies. It says most fund managers won't consistently beat the market over the long term, so why bother? Just buy low-cost index funds and hold them for the long term.
A tactical strategy takes a more deliberate, active approach. In retirement, there are funds and portfolio managers who actively manage risk to attempt to limit the downside for investors.

Typically, a blend of strategic and tactical investments works nicely for retirees.

Outline a tax mitigation plan

I hear this story a lot: A retiree will have a question about tax strategy, so naturally they ask their financial adviser.

Many times, financial advisers either can't or don't want to talk about taxes, so they tell the client to go talk to their CPA.

The client will often ask the question when they're meeting with their CPA around tax time. But the CPA is so busy getting 500-plus tax returns done during tax time that they don't have time to help plan how to lower the client's taxes over the long run.

Instead, the CPA is focused on how they can lower taxes right now on that individual tax return.

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Here's the problem: There's an enormous difference between tax-return preparation and tax planning.

The tax game changes when you enter retirement and start introducing a whole slew of new rules. Uncle Sam would love for you to pay more in taxes than necessary in retirement. Do you have a plan to make sure that doesn't happen?

If you have a financial adviser, it is crucial that they look at your tax return every year and understand it. There is so much that goes into this:

How to strategically manage your withdrawals from our various retirement accounts that are all taxed differently.
How to manage your required minimum distributions (RMDs) once you are of age.
How to tax-efficiently allocate your assets based on their tax status.

Roth conversions have become a popular way to mitigate taxes in retirement and can be an incredible strategy for the right individual. They've also become a bit of a marketing tool used by financial advisers who don't quite understand how the tax system works and recommend Roth conversions to anyone with a pulse.

Make sure you are getting the right advice or doing your own research.

Nail down your health care plan

What will you do for health insurance both before and after age 65? Do you have a plan in place to make sure you're not overpaying for premiums? And what is your plan for potential long-term care costs in the future?

This is no surprise: Health care expenses (premiums, out-of-pocket costs, deductibles, copays and prescriptions) make up a huge portion of retirement spending.

The amount you pay for Medicare is determined by your income two years prior, so at age 65 (when most retirees start Medicare), your premium is determined by your income at age 63. It's a two-year lookback that resets each year.

When planning your income and your tax mitigation, it's important to take this into account — show too much income on your tax return, and two years later your Medicare premiums will go up due to income-related monthly adjustment amount (IRMAA).

According to the U.S. Department of Health and Human Services (HHS), about 70% of individuals turning 65 today will need some form of long-term care. There are several ways to approach it.

Some will choose to self-fund, some will opt for a long-term care policy, and others will opt for a hybrid life insurance policy that pays out in the event of a long-term care need.

What makes sense for one may not make sense for another, but it's important to educate yourself on the various options.

Usually, the most cost-effective time to purchase long-term care insurance is in your 50s and early 60s.

Complete your legacy and estate plan

Do you have a will or a trust? Do you have a medical power of attorney? Are your beneficiaries clearly defined and aligned with your desires?

One of the biggest challenges with a will or a trust is making sure the documents are securely stored, well-maintained and updated with changes that inevitably arise.

The first step with legacy planning is making sure you have designated beneficiaries for every account you hold. It's wonderful when you're retired to know that when you pass, your wealth will be distributed according to your wishes –– and not left up to the courts.

Technology has opened up the ability to generate a trust or will at a much lower cost. If you have a complicated estate or beneficiary situation, it is likely best to make an appointment with an attorney and get it done. Your beneficiaries will thank you.

I've seen lack of planning in this area rip apart families. Make sure that doesn't happen to you.

Creating a comprehensive retirement plan can seem overwhelming in the early stages, but this five-step process can help you clarify, simplify, reduce stress and make sure your money works well for you both in retirement and beyond.

After all, you've earned it!

Dan Dunkin contributed to this article.

The appearances in Kiplinger were obtained through a public relations 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.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Matt Johnson is the founder of Roots First Financial. A CPA and a National Social Security Advisor who specializes in retirement planning, he puts an emphasis on tax planning and Social Security in retirement. He is also the founder of the Social Security Education Center, a registered 501(c)3. Johnson is a graduate of Brigham Young University, where he earned bachelor’s and master’s degrees in accounting. He began his career in Big 4 public accounting with Ernst & Young. He also holds insurance and securities licenses.