The Top 5 Financial Planning Challenges in the First 10 Years of Retirement

The Top 5 Financial Planning Challenges in the First 10 Years of Retirement

By The Galecki Financial Management Team

When retirement time arrives, you might consider walking away from financial planning along with your job. But shifting from your working life to the first decade of your retirement presents several financial planning challenges.

How well you deal with these challenges can determine your entire retirement experience. Financial planning with Galecki Financial Management, a wealth management firm, could go a long way toward helping you enjoy the retirement you’ve earned.

Here are the top five financial planning challenges you might face in the first 10 years of your retirement.

1. Lifestyle Adjustment

Transitioning from a career to retirement can leave you with extra time in your day. You may relax at home, travel, pick a new hobby, or even start a new business.

Your retirement lifestyle can increase or reduce your expenses, raise new tax implications, and impact how long your money lasts. Consider these strategies for adjusting to retirement:

  • Envision your ideal retirement lifestyle.
  • Try to budget for expense changes.
  • Understand the tax implications.
  • Factor in unplanned events and risks.
  • Plan early and review often.

Keeping track of your spending is a key to enjoying the retirement lifestyle you want.

2. Healthcare Costs

Healthcare might be your biggest expense in retirement. Couples may need as much as $189,000 for a 90% chance of covering medical expenses. Along with physician and hospital visits, you must plan for over-the-counter medications, dental care, and long-term care.

If you retire prior to Medicare eligibility at age 65, you’ll need to obtain private medical insurance. We assume a cost of $12,000 per person for private medical insurance post-retirement, pre-Medicare age. 

Medicare Part A can cover hospital stays and procedures with a deductible of $1,632 in 2024. Part B can cover doctor visits and outpatient treatment and has a standard monthly premium of $174.70 in 2024. Your income determines if your Part B premium will be higher as well as how much you will pay for Part D. Part D, (prescriptions) has an estimated average cost of $55.50 in 2024.

However, Medicare may not cover all your healthcare needs, and long-term care can range from $5,511 monthly for assisted living to $10,025 for care in a private room in a nursing home. 

3. Market Volatility and Investment Management

Market swings and unforeseen events can eat into your nest egg, but don’t let short-term market volatility rattle you. Diversifying your investments can help reduce risk and exposure to volatility in your early retirement years.

This tactic can provide the income you need while allowing you to take advantage of lower long-term capital gains rates. A wealth manager can assist with strategies to shield your principal, generate income, and seize growth opportunities.

4. Inflation and Purchasing Power

Inflation can wreak havoc on a retiree’s money. Healthcare costs continue to rise, chewing up savings, requiring more income, and reducing purchasing power. With a steady inflation rate of just 2%, a retiree with $1,000 today could only buy $550 in goods and services in 30 years.

Consider these strategies to potentially hedge against higher inflation:

  • Seek higher cash yields.
  • Keep stocks in your portfolio.
  • Maintain a realistic withdrawal strategy.

The news isn’t all bad with inflation; for example, the Social Security Administration adjusts payments yearly based on the Consumer Price Index. You can expect a cost-of-living adjustment every October.

5. Longevity Risk and Retirement Income Sustainability

People are living longer. Your retirement could last for decades, and you don’t want to outlive your retirement savings. Along with inflation concerns, a longer retirement increases the need to deploy a sustainable withdrawal strategy.

Social Security benefits may play a role in your retirement income, but they cannot be your sole source. Here are several options to give you the income you need:

  • Pensions and pension maximization strategies
  • 401(k)s and IRAs
  • Stocks, bonds, and mutual funds
  • Certificates of deposit and money market accounts
  • Expense management

A wealth manager can guide you to find the mix appropriate to your lifestyle, risk tolerance level, and personal goals.

For some individuals, transitioning into retirement can be a massive identity shift. Working with a trusted financial planner can help to provide peace of mind as you navigate the next chapter of your life.  

Fee-Only Financial Planning for Your Retirement

Do you need financial planning help for your retirement, or is it time to review your plan? We at Galecki Financial Management would be happy to assist you with your retirement planning. As a Fee-Only financial planning firm, we implement an objective process which we believe is ideal for helping individuals like you reach their financial goals. As always, and most importantly, these services are tailored to meet your specific needs. 

To schedule a meeting, call (260) 436-8525 or email [email protected].

About Galecki Financial Management

At Galecki Financial Management, we help individuals and families confidently pursue their financial goals. We’re anything but a business-as-usual wealth management firm. We’re different. Friendly. Casual. And really good listeners. Indeed, that’s a big part of what makes us different. Everything we do is based on what we hear from you, because our experienced team of professionals specializes in comprehensive financial planning, cash flow analysis, IRA rollovers, financial services, money management, estate planning, retirement planning, and advising. We help you identify your short- and long-term goals, and then we work together to pursue them. Lastly, and most importantly, we’re fee-only, meaning we’re only compensated for our time. Our only incentive is to help you succeed.

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