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MARCH 2, 2023

1 be your own advocate
When you choose an advisor, take a close look at their regulatory record for customer complaints and disciplinary action by visiting BrokerCheck. Keep in mind that some financial firms act as both broker and investment advisor, a dual role that allows them to charge commissions and fees that can go unnoticed by investors. So, you need to be proactive in asking questions about total costs and what potential conflicts of interest your advisor may have. Consider engaging an independent third party to provide a free accounting of your investments. Performing this due diligence up front will give you peace of mind—and that is priceless.

On average, today’s 65-year-old man lives to be 83, and a 65-year-old woman lives to be 85.1 By projecting a longer-than-average life expectancy in your retirement plan, you can have greater confidence that you won’t outlive your assets. Therefore, it’s wise to plan for your savings to last 30-40 years after retirement. Doing so will help ensure you have sufficient funds to maintain your lifestyle and cover additional expenses that may arise in your later years depending on your health situation. Deferring on Social Security as long as possible is another great way to help reduce longevity risk and also combat inflation. 

Inflation has recently been an increasingly hot topic for many investors, as they question how elevated inflation will affect their portfolio. At a three percent rate of inflation, an individual will lose half of his or her purchasing power every 24 years—meaning, at that rate, having $1 million in savings today would only worth $500,000 in today’s dollars 24 years from now. While it is impossible to accurately predict where inflation may be headed, sufficient asset class diversification, along with periodic rebalancing and tax loss harvesting, should help your portfolio withstand bouts of elevated inflation. Maintaining and updating your personal financial plan, along with various projections, is another important way to help mitigate the risks of inflation, which are different for each person depending on the timing and type of your goals. Adjusting inflation rates in your financial plan for healthcare, education, housing, etc. will help prepare you arrive at your personal inflation rate and prepare for potential inflation risks in the future.

When building a financial plan, start with conservative return assumptions based on your portfolio’s risk profile. You want to also include scenarios with significant market declines in the first few years of your retirement to see if you have bad timing risk—if so, you may need to have more assets in lower-volatility investments to help you cover a few years of expenses. Retirement generally requires drawing from your savings to meet living expenses, and having to withdraw assets in declining markets only compounds the negative impact of those declines—your asset values have already taken a hit, and any assets you withdraw won’t have the opportunity to recover with the market. Besides safeguarding some assets for near-term expenses, you may also need to claim Social Security sooner than expected to reduce the amount you’re withdrawing from your portfolios. If you contemplate and account for downside scenarios in your plan, it will help you weather significant market downturns when they happen.

As you transition into retirement, you have several decisions to make. If you have a pension, will you take it in the form of a lump sum or a monthly annuity? Will you roll over your 401(k) to an IRA or leave it with your employer? Will you execute a Roth conversion or maybe set up a charitable giving fund? What type of dynamic withdrawal strategy will maximize your retirement savings and minimize your tax bill? Making hasty or uninformed decisions could result in significant tax penalties or unnecessary tax consequences. Instead, consult with retirement and tax professionals first to help you make decisions that will optimize your taxes over the long run.


1 Social Security Administration, Period Life Table, 2019,  

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The Mather Group



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