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

| August 25, 2022

You have spent the last 30 or more years working, saving, and strategizing to finally be able to sit back and enjoy the fruits of your labor. Whether it’s sitting by the beach all day or finally having time to paint, you have earned the right to a fulfilling and relaxing retirement. You have prepped for a long time, but a successful retirement requires continued rational financial decisions and discipline.

Within the first 10 years of your golden years, you will likely encounter 5 obstacles that will have a great impact on your financial situation. Today let’s go over these challenges so you’re prepared and confident to face them head-on.

1. Not Creating a Withdrawal Strategy

How do you turn your hard-earned savings into an income stream to replace the income you will lose from not having a steady paycheck? While there’s no easy answer, how you take your money out is just as important as how you put it in. The right decision for you will include tax planning, reviewing your tax return, and, most importantly, distribution optimization. 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 Roth IRAs and Roth 401(k)s are taxed beforehand, so the money is withdrawn tax-free.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 from 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 assist you in withdrawing funds at a sustainable rate and help ensure that you’re doing it in a tax-efficient way.

2. Tossing the Budget

Many people spend their retirement years doing everything 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 4.54%, (1) and the current average inflation rate is a whopping 9.1%. (2) This means retirees are more likely to feel the effects of inflation due to necessary expenses, such as healthcare costs. 

A 2022 Retirement Risk Readiness Study from Allianz insurance company found that 43% of participants were worried about the rising costs of healthcare, 41% were worried about rising costs of living, and 47% were worried that market downturns would affect their savings. (3)

With a retirement that could easily last 20 to 30 years, inflation is 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 and be proactive about inflation risk. 

4. Neglecting Your 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 3 to 6 months of expenses in an easily accessible savings account, (4) but with the havoc these past two years have wreaked on many peoples’ finances, 12 to 18 months might be a better goal. This may sound like a lot, but an emergency fund serves two purposes: it covers unexpected expenses and 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 required minimum distributions (RMDs). 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

Have you been DIY-ing your personal finances up until now? Even if that’s worked for you in the past, retirement is definitely not the time to wing it. If you turn to a doctor for health concerns and a mechanic for car trouble, why wouldn’t you enlist the help of an experienced financial professional to help you pursue your vision of retirement? 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 T.A. Holland & Co. would love to be the qualified professionals you turn to for help tackling these mistakes (and others) on the road to a confident and fulfilling retirement. Through a long-term relationship and a sound process, we can help you retire with confidence. Contact us at or 617-523-5656 to schedule a complimentary appointment to learn if we are the right fit for your financial goals.

About T.A. Holland & Co.

T.A. Holland & Co. was founded in Boston, Massachusetts, in 1920, and serves individuals and businesses throughout the country. We provide cutting-edge financial services with a broad array of solutions to help our clients grow and preserve their wealth. We have seen good and bad economic times. Through it all, T.A. Holland & Co. has thrived by always making the customer our #1 priority. We get to know you and understand your needs so we can provide you with the proper guidance and strategies. Our senior vice president, John Hellmuth, has been at the helm of T.A. Holland’s financial services since 1990, but he doesn’t do this job alone. He is joined by his two children, Lindsay Hellmuth and Thomas Hellmuth. As CERTIFIED FINANCIAL PLANNER™ practitioners, our financial services team has the knowledge and experience to help you solve your most pressing financial challenges. To learn more about how we can help you, visit our website and reach out to us at (617) 523-5656 to schedule a complimentary get-acquainted meeting.