Can I Retire with Confidence? 7 Financial Decisions Before You Retire
Retirement is one of the biggest financial transitions you’ll ever make. After years of earning a paycheck, contributing to retirement accounts, and building your savings, you’re approaching a point where the question changes from “How much have I accumulated?” to “How do I turn what I’ve built into the retirement I want?”
That transition involves more than choosing an investment portfolio or deciding when to claim Social Security. Your retirement income, taxes, healthcare costs, investment strategy, and spending all need to work together. And unlike saving for retirement, there is no single formula that tells you exactly when you’re ready. The good news is that you don’t have to figure it all out at once.
Here are seven financial decisions worth addressing before you retire.
1. Determine Whether Your Retirement Income Can Support the Life You Want
The first question isn’t simply, “Do I have enough money?”
It’s: “Will my resources reliably support the retirement I want?”
Start by estimating what you’ll actually spend in retirement. Your expenses may change significantly once you stop working.
Some expenses may decrease. You may no longer have commuting costs or contributions to a retirement plan. Others may increase, particularly travel, hobbies, healthcare, or spending during the early years of retirement.
It can also help to think about retirement spending in terms of priorities rather than one fixed annual number.
For example:
Essential expenses: housing, food, utilities, insurance, and healthcare
Lifestyle expenses: travel, dining, hobbies, and entertainment
Discretionary expenses: larger purchases, gifts, or experiences
Then compare those expenses with your expected sources of income.
These might include:
Social Security
Pension income
Retirement accounts
Taxable investment accounts
Business or real estate income
Other guaranteed or recurring income
The goal isn’t to predict every dollar you’ll spend for the next 30 years. It’s to build a reasonable framework for understanding whether your income sources and investment assets can support your expected spending.
A retirement plan should also account for the possibility that your spending and circumstances will change over time.
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2. Create a Retirement Income Strategy
Accumulating retirement assets and creating retirement income are two different challenges.
While you’re working, your primary focus may have been contributing to your 401(k), IRA, or other investments and growing your assets.
Once you retire, you’ll need to decide where your income will come from and when to take it.
That raises important questions:
Which accounts should you withdraw from first?
How much should you withdraw each year?
When should you begin taking Social Security?
How should investment withdrawals change during market downturns?
Should you maintain separate short-, mid-, and long-term reserves?
How much cash should you keep available?
How will required minimum distributions affect your plan later in retirement?
There isn’t one withdrawal strategy that works for everyone.
For some retirees, maintaining a larger cash or short-term reserve can provide flexibility during periods of market volatility. For others, a different combination of taxable, tax-deferred, and Roth assets may make more sense.
The important thing is to have a strategy before you need the money, rather than making withdrawal decisions reactively.
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3. Decide When and How to Claim Social Security
Social Security is an important part of many retirement income plans, but deciding when to claim benefits isn’t simply a matter of choosing the earliest or latest possible age.
Your decision can affect your lifetime income and may interact with other parts of your financial plan.
Consider:
Your age and health
Your spouse’s age and benefits
Your other sources of retirement income
Your expected spending
Your tax situation
Whether you plan to continue working
How long you expect to rely on Social Security
For married couples in particular, coordinating two Social Security benefit elections can be an important part of the overall retirement-income strategy.
There is also a difference between deciding when you can claim Social Security and deciding when it makes sense for your plan to claim it.
The right answer depends on your circumstances.
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4. Plan for Taxes Before You Retire
Retirement can change the way you think about taxes.
While you’re working, your income and tax situation are often relatively straightforward: you earn income, contribute to retirement accounts, and file your tax return.
Retirement can create more opportunities—and more decisions.
Your income may come from a combination of:
Traditional 401(k)s and IRAs
Roth accounts
Taxable investment accounts
Social Security
Pension income
Real estate or business income
The timing of withdrawals from these different sources can affect your taxable income.
This is why tax planning shouldn’t necessarily begin after you retire.
Depending on your circumstances, the years surrounding retirement may provide opportunities to:
Manage taxable income
Coordinate withdrawals between account types
Evaluate Roth conversions
Plan around required minimum distributions
Manage capital gains
Coordinate charitable giving
Avoid unnecessarily pushing income into higher tax brackets
Tax laws change, and individual circumstances vary, so significant tax decisions should be coordinated with your tax professional. But your investment and retirement-income strategy should be designed with taxes in mind—not treated as an afterthought.
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5. Understand What Healthcare and Medicare Will Cost
Healthcare is one of the largest and least predictable expenses many retirees face.
If you’re retiring before Medicare eligibility, you’ll need to determine how you’ll obtain health insurance until you become eligible.
Once you reach Medicare eligibility, you’ll still need to understand:
Medicare premiums
Supplemental or Medicare Advantage coverage
Prescription drug coverage
Out-of-pocket costs
Potential income-related premium adjustments
Long-term care considerations
Healthcare costs can also change throughout retirement.
For that reason, it’s helpful to build healthcare costs into your retirement plan rather than treating them as an expense that will somehow work itself out later.
If you’re retiring before age 65, healthcare planning becomes particularly important because losing employer-sponsored coverage can create a significant change in your monthly expenses.
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6. Make Sure Your Investment Strategy Matches Your Retirement
Your investment strategy shouldn’t automatically become “conservative” simply because you’re retiring.
At the same time, your portfolio should recognize that you’re transitioning from accumulating assets to relying on them.
The key question is:
What role does each part of your portfolio play in your retirement plan?
Your investments need to balance several competing priorities:
Growth to keep pace with inflation
Income to fund your lifestyle
Liquidity for near-term expenses
Protection against major market downturns
Long-term sustainability
One of the biggest risks in early retirement is having to sell investments after a significant market decline to fund living expenses.
That doesn’t mean you should try to avoid every market downturn. It means your overall retirement strategy should account for market volatility and give you flexibility when markets don’t cooperate.
Your portfolio should support your retirement plan, not the other way around.
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7. Build a Plan That Can Adapt
Even the best retirement plan won’t predict the future perfectly.
Your spending may change.
Markets will change.
Tax laws may change.
Your health may change.
You may decide you want to travel more,or less. You might move, help your children, start a business, or simply discover that retirement looks different than you expected.
That’s why retirement planning shouldn’t end when you retire.
A good retirement plan is designed to be reviewed and adjusted as circumstances change.
That might mean revisiting:
Your withdrawal rate
Investment allocations
Social Security strategy
Tax planning opportunities
Healthcare costs
Estate planning
Insurance coverage
Major purchases or lifestyle changes
The objective isn’t to create a plan that never changes.
It’s to create a plan that can change with you.
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Final Thought: Retirement Is a Transition, Not a Finish Line
Retirement isn’t simply the day you stop receiving a paycheck. It’s a financial transition that changes how you earn, spend, invest, withdraw, and think about your money.
The most important decisions often happen in the years immediately before and after retirement.
You don’t need to predict everything perfectly. You need a framework that connects your income, investments, taxes, Social Security, healthcare, and goals—and a process for adjusting that framework as your circumstances change.
If you’re approaching retirement and wondering whether your financial plan can support the life you want, that’s a conversation worth having before you make the transition.
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Oakway Financial helps individuals and families navigate major financial transitions—including retirement, job changes, and company buyouts—with ongoing investment management and financial guidance.
Disclosures: All investments and strategies have the potential for profit or loss. Different types of investments involve higher and lower levels of risk. There is no guarantee that a specific investment or strategy will be suitable or profitable for an investor's portfolio. There are no assurances that a portfolio will match or exceed any particular benchmark. Advisory services are offered through Aegis Wealth Management, Inc.. The firm is registered as an investment advisor with the SEC and only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the advisor has achieved a specific level of skill or ability. The content of this article has been created with the assistance of artificial intelligence. Content should not be regarded as a complete analysis of the subjects discussed and should not be viewed as an offer to buy or sell the securities discussed. It should not be viewed as personalized investment advice. You should consult with a professional advisor before implementing any strategies discussed. Tax information provided is general in nature and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation. Tax rules are subject to change at any time.