Linda Yeager, CFP®, AAMS®, FPQP™,
Senior Wealth Manager, Chief Compliance Officer
If you’re nearing your planned retirement age, it’s important to ensure you’re financially prepared to maintain your ideal lifestyle. According to a 2024 survey, 60% of respondents worry that they may outlive their retirement savings—and the majority say it’s impacting their mental health.1
Here’s what you can do to help ease stress, assess your preparedness, and facilitate a smooth transition into retirement when the time comes.
Test Your Retirement Plan
Each year, review your savings and investment portfolio to ensure they are on track with your needs and goals. Specifically, examine your target retirement date, estimated expenses, projected income streams, risk tolerance, asset allocation, and diversification of your investments.
Although you can use a retirement calculator, you’ll get a more comprehensive assessment by reviewing your plan with your financial advisor and adjusting it according to their projections and guidance.
Take Advantage of Catch-Up Contributions
Many people max out contributions to retirement accounts during peak earning years, particularly if their employer offers matching contributions. Once you turn 50, you can make annual catch-up contributions to 401(k), 403(b), and IRAs—to boost your savings. For 2024, the standard contribution limit for 401(k) accounts is $23,000, and the catch-up contribution is $7,500.2
If you and your spouse are eligible to contribute to a Health Savings Account (HSA), the contribution limits for 2025 are $4,300 for self-coverage and $8,500 for family coverage. There is a catch-up contribution of $1,000 for those 55 and older.3
Decide When to Take Social Security
A key decision regarding your retirement is when you want to begin receiving Social Security benefits. Although you can start taking benefits as early as age 62, you are only entitled to full benefits at your full retirement age. This is determined by how long after 1954 you were born. For example, the retirement age for people born in 1960 and later is 67.4. If you’re a wealthy individual in good health, you may choose to delay your benefits until the age of 70, which will maximize the annual amount you receive.
Planning for Higher Health Care Expenses
According to research by Fidelity, healthcare accounts for approximately 15% of retirement expenses.5 Although you will qualify for Medicare when you turn 65, out-of-pocket costs like copays, premiums, and deductibles can add up quickly. If you have HSAs, you can no longer contribute once you sign up for Medicare, but you can make tax-free withdrawals to pay for qualified expenses.
Long-term care insurance can help cover personal or custodial care expenses should you become chronically ill, disabled, or unable to live independently as you age. It’s important to work with an insurance specialist to obtain the best coverage for your needs.
Developing a Withdrawal Strategy
To get the most out of your retirement savings, it’s important to have a withdrawal strategy for 401(k)s, IRAs, and other investment accounts that consider your life expectancy, taxes, and additional income sources. Common strategies include:
- The 4% rule: This rule-of-thumb involves withdrawing 4% of your savings in the first year of retirement and adjusting that amount for inflation each year thereafter. It’s based on the assumption of a 30-year retirement period, so it’s important to consider if you plan on an early retirement.
- Proportional withdrawals: The goal of this strategy is to spread out and mitigate the tax impact by withdrawing proportionally from taxable and tax-deferred accounts first, followed by Roth accounts. We recommend discussing this plan with your tax and financial planning specialists to inform you about your withdrawals.
- Bucket strategy: With this method, you divide your funds into short-term “buckets” that hold easily accessible cash (municipal bonds, treasury notes) and long-term buckets that hold growth-oriented investments, typically in your retirement accounts. This strategy can provide peace of mind of knowing that you will have cash on hand for short-term spending, balanced by growth to support future needs.
- Dynamic withdrawals: This method allows you to adjust your withdrawals based on market conditions and income needs. While it offers flexibility, it may not provide a steady income stream, especially if the market
Get Objective Advice
As an Independent Registered Investment Advisor (RIA), Tiller Private Wealth is ethically bound as a fiduciary to act solely in the best interests of our clients. We can help you navigate the complexities of preparing for retirement, pinpoint unique investment opportunities that align with your goals, and provide a comprehensive roadmap for maintaining the lifestyle you wish to lead when you retire.
Schedule a consultation today to learn more.
Sources
1https://www.blackrock.com/us/individual/insights/retirement/retirement-survey
2https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-catch-up-contributions
3https://www.fidelity.com/learning-center/smart-money/hsa-contribution-limits
4https://www.ssa.gov/benefits/retirement/planner/agereduction.html
5https://www.fidelity.com/viewpoints/retirement/spending-in-retirement
The views expressed represent the opinions of Tiller Private Wealth as of the date noted and are subject to change. These views are not intended as a forecast, a guarantee of future results, investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial or legal advice or service to any person. The information contained has been compiled from sources deemed reliable, yet accuracy is not guaranteed.
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