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The Top 5 Financial Planning Challenges In The First 10 Years Of Retirement

Cypress Wealth Services

January 2021

It’s finally time to pack up your office for good and transition into the phase of life you’ve been working so hard to reach…that’s right, the golden years of retirement! This new chapter comes with many changes, but one thing that should remain is financial planning. If you thought your years of saving, investing, calculating, and planning are over now that you’ve reached the retirement milestone, think again. You still have decisions to make, actions to take, and plans to strategize so that you can enjoy a fulfilling retirement.

We’ve found that most retirees face the same 5 financial planning challenges during the first 10 years of retirement. Let’s discuss these challenges so you’re not caught off guard.

1. Not Creating A Withdrawal Strategy

You’ve saved for years, and now you need that money to live on. How you take it out is just as important as how you put it in. That’s why you should capitalize on your wealth by determining a tax-efficient way to withdraw funds in your golden years.

Different financial accounts are taxed at different rates. Traditional IRAs and 401(k)s get taxed at the ordinary income tax rate when you withdraw. Roth IRAs and Roth 401(k)s are taxed beforehand, so the money is withdrawn tax-free. Funds in a taxable investment account are taxed at the capital gains tax rate, which is different than your ordinary income tax rate.

Calculating when might be the best time to pull from each account is enough to give anyone a headache. But the last thing you want is to get hit with a hefty tax bill when you’re trying to stretch your money for decades.

Create a withdrawal strategy with the help of a trusted professional who can help ensure you’re withdrawing funds at a sustainable rate and that you’re doing it in a tax-efficient way.

2. Throwing The Budget Away

Many people spend their retirement years doing all the things they never got to do when they were working—starting a passion project, remodeling the house, traveling the world, and more.

It’s easy to underestimate the amount of money you’ll spend during those first few years when you don’t account for all these “extras.” Overspending, even for a short period, can shave years off the longevity of your assets. The solution? Create a spending plan. Calculate your monthly income given your withdrawal strategy and then create a budget, tracking your money along the way so you stick to your goals.

3. Ignoring Inflation

Another major challenge we see new retirees face is the desire to play it safe in the stock market. This can do more harm than good as it can lead to inflation risk.

The long-term average inflation rate for healthcare expenditures is 5.28 (*1) compared to the current average inflation rate of 2.3%. (*2)   What does this mean? Retirees are more likely to feel the effects of inflation due to necessary expenses, such as healthcare costs.

As tempting as it may be, resisting the urge to worry about short-term stock market volatility may be a good option. With a retirement that could easily last 20 to 30 years, inflation is still a significant threat to your nest egg. Sit down with a trusted professional who can help you strike a balance between principal protection and growth.

4. Neglecting To Create An Emergency Fund

Could you comfortably pay for an unexpected, major expense in retirement without jeopardizing your financial future? For most of us, the answer is no. Just as you were taught to have an emergency fund in your formative years, it’s even more critical to have one in your retirement years.

Most professionals recommend that retirees have at least 12 to 18 months of expenses in an easily accessible savings account.(*3)  This may sound like a lot, but an emergency fund serves two purposes: it covers unexpected expenses and it can provide stability during economic downturns. This means you can optimize your portfolio to help beat inflation, as suggested above, while having a safety net to fall back on.

There are other factors that should be considered in determining how much of an emergency fund to maintain including; pensions, other guaranteed income streams, and your minimum required distributions. Working with a professional can help you determine how much of an emergency fund to maintain given your specific situation.

5. Planning On Your Own

During your career, you likely relied on a team of professionals in your day-to-day work life to get the job done; so you already know that the best outcomes result when each team member tackles the task for which they’re most qualified. And although you might have handled your personal finances on your own up until saying goodbye to your career, now’s not the time to wing it. Having a trusted financial advisor by your side can be the difference between having a retirement fund that dries up or one you can’t outlive.

Our team at Cypress Wealth Services would love to be the qualified professionals you rely on throughout your journey to a comfortable retirement. Call our office today at 866.888.6563 or contact one of our offices today to get started!


About Cypress Wealth Services

Cypress Wealth Services is an independent RIA firm providing financial planning and investment management to high net worth individuals, families, business owners, and institutions. Cypress Wealth Services comprises professionals with diverse backgrounds and extensive experience and qualifications. Cypress Wealth Services is uniquely qualified to serve a broad range of client needs, and their experience and expertise act as a foundation for their client service process. The firm uses The Second Growth, which focuses on efficiently protecting, growing, and transferring to their loved ones the wealth and legacy a person has already built. With financial advisors in Palm Desert, CA, Tustin, CA, and Anchorage, AK, the firm serves clients across the country in Wealth Management Services, Fiduciary Services, 401(k) Design and Management, Investment Reporting Services, Financial and Retirement Planning, and more. For more information, visit or call 760.834.7250.