Retirement is a major goal many workers keep their eye on throughout their career.
However, once people actually reach retirement age, they are often in store for some financial surprises — despite decades of preparation.
For today’s retirees, that is compounded by new uncertainties brought by on by historically high inflation and recent turbulence in the stock market.
Ideally, those who enter retirement already have a plan they have developed with a reputable financial advisor.
“That transition from having a paycheck to not having a paycheck is full of anxiety,” said Jude Boudreaux, a certified financial planner and senior financial planner at The Planning Center in New Orleans.
“We just need to learn and establish what the new normal is,” he said.
Start with your ‘why’
Saving and investing to accumulate money toward retirement are great habits to have while you’re working. But once you retire, you have to find a new set of habits and skills, she said.
Much of the financial anxiety new retirees face in figuring out exactly how to replace their paychecks can be managed, according to Cathy Curtis, a CFP and founder of Curtis Financial Planning in Oakland, California.
Curtis said she sets up either monthly payments or the lump sum equivalent of a year’s worth of expenses. Most clients choose monthly payments, she said.
Remember retirement is not the end date
It helps to remember that retirement is not the end date, she said. Because it is uncertain how long the portfolio will need to last, it is important to plan for a long life.
Market selloffs during corrections or bear markets are to be expected. Ideally, a retiree’s portfolio projections will already have planned for these types of declines.
“You want to just look at how you can be smart and selective about some of the choices you want to make,” he said.
One key move for most retirees may be to rebalance, Boudreaux said, as retirement portfolios tend to lean either too conservative or too aggressive.
Do a reality check on inflation
As inflation has soared to historic highs, it would be wise for retirees to do a reality check on just how much higher prices have affected their spending, Boudreaux said.
By evaluating the last month or two, retirees can see whether their spending is in line with their expectations, or if it has been more or less.
When it comes to big-ticket items, it may be best to wait.
“Be cautious with purchase decisions right now, especially around cars or homes,” Boudreaux said.
By delaying Social Security for as long as possible — up to age 70 — retirees may increase the size of their monthly checks. From full retirement age — 66 or 67, depending on year of birth — to age 70, benefits grow 8% per year, Curtis noted.
As those checks are adjusted annually for inflation, having a bigger benefit base will also mean bigger increases. In 2023, estimates show the cost-of-living adjustment could be 8.7%, well above the 5.9% boost beneficiaries saw in 2022.
By carefully planning for Medicare eligibility at age 65, retirees can try to mitigate their exposure to income-related monthly adjustment amounts, or IRMAAs, that prompt additional charges for Medicare Parts B and D based on modified adjusted gross income.