Accumulating wealth and saving for retirement is a familiar concept for many people, even if the specific strategies aren’t. But what about when you transition into retirement and need to make the switch from saving to spending? Is your portfolio set up for success in your golden years?

Having a financial plan to support you once you’re actually in retirement doesn’t always get the same attention as advice for setting aside savings in your working years. Consider these key components of a successful financial plan in retirement:

1. Realign Your Financial Plan to Your Personal Values

This is sometimes overlooked, but it’s critical that the objectives of your financial plan are based on your core values. When you were working, maybe you cared about sustainable investing or funding a child’s education. Now that your earning years are largely behind you, it’s time to reassess. Ask yourself: What’s most important to me? What are my goals in retirement? Reflecting on your values can help ensure your financial plan is set up to support the things that are truly important to you.

Along those lines, check with your partner to confirm what their core values are and ensure the two of you are aligned. For example, let’s say one of your values is family and you want to leave behind something to protect your children’s financial future. If your partner values adventure and wants to travel around the globe, that could limit the assets available to put into your estate plan. It may serve you best to create two (2) accounts for investing; one for each goal. Make sure you and your partner communicate regularly to avoid any misunderstandings.

2. Regularly Review Your Retirement Income Sources

Once you retire and no longer have a regular paycheck, your monthly income can become harder to predict, especially when you consider market volatility, inflation, public policy changes, and fluctuating expenses. How do you estimate how much monthly retirement income (your “retirement paycheck”) you’ll have?

When it comes to investments, traditionally, you could rely on a 70/30 or 60/40 portfolio to provide adequate diversification during the accumulation phase, and then flip the script to 30/70 or 40/60 once you reached retirement. Not to mention, you used to be able to rely on bond coupons for steady sources of income to fund retirement. But given today’s yields and stretched valuations, you might need to take a more “total-return” approach, utilizing various sources of income across asset classes and not overreaching into below-investment grade bonds for yield.

Regularly reviewing your investment accounts, Social Security statements, pension income you may receive, and any other sources of income is a good pulse-check on your retirement. Each source of income comes with its own unique planning considerations, especially when factored into your individual situation, so it’s important to have a plan. As life events, market volatility, and public policies change, it’s a good idea to regularly revisit your plan to make sure you are still on track for your goals.

3. Plan Ahead for Tax Liabilities

You may not be working anymore once you retire, but it’s highly likely you’ll still pay taxes. These taxes may be income taxes on distributions from a tax-deferred retirement account, or they may be capital gains taxes from assets in a brokerage account.

The bigger surprise for many people is the fact that your Social Security benefits can also be taxed at your regular income tax rate. These thresholds are fairly low, and it’s likely you won’t be able to completely avoid paying taxes on your Social Security. The important thing is to be aware of and plan for the likelihood of this tax, as well as any other tax liabilities you (or your beneficiaries) may face. Add up your income sources at retirement so you can have a rough idea of your future income tax bracket. Planning and taking action now can help reduce your liability later.

4. Incorporate Estate Planning

No financial plan is truly complete without an estate plan. Some people think they don’t need one or that estate planning is only for the very wealthy. However, anyone who has specific plans for their assets after they leave this world needs an estate plan. Everything you own—your house, your car, your possessions, and your money—is part of your estate, and you need to plan for what happens to your estate when you pass away.

A carefully prepared estate plan can help you ensure the financial security of your loved ones, minimize taxes and fees on your estate, and make the process of distributing your assets to your heirs much simpler.

5. Prepare for Sequence of Returns Risk

Also known as sequence risk, this is the risk that comes from the order in which your investment returns occur. To put it another way, sequence of return risk is the risk that market declines in the early years of retirement, paired with ongoing withdrawals, could significantly reduce the longevity of a portfolio.

You want to make sure your plan helps guard against the risk of experiencing significant negative returns early in retirement. This is particularly important for retirees who depend on investment income to fund their lifestyle. As with most risks, effective portfolio diversification is one of the key ways to mitigate this risk.

6. Implement Risk-Mitigation Strategies

In your earning years, you likely had a long enough time horizon to recover from market downturns. But in retirement, you might not have the time to wait for the volatility to pass. It’s important to plan ahead and implement risk-mitigation strategies to help guard against a market downturn derailing your retirement.

As of this writing, both equities and bonds are trading at historically high valuations, and with yields expected to be exposed to risk in the coming months, bonds may not provide the same protection they used to. Now, more than ever, it is important to consider several different risk-mitigation strategies, such as alternative investments, options-based hedging and inflation protection strategies.

Get Your Financial Plan in Order

Are you ready to transition into retirement? Whether you don’t currently have a plan for retirement or it’s been a while since your plan was updated, it may be a wise decision to take the time to talk to a financial advisor.

And remember: It isn’t enough to simply incorporate these elements into your financial plan—you’ll also need to review them on a regular basis to ensure your needs are met as your life changes. A financial plan isn’t set-it-and-forget-it; it’s an evolving strategy that is meant to adapt to your changing circumstances and retirement goals.


This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

John O'Brien

John O'Brien

Senior Vice President, Financial Advisor

CFP®† John has more than 30 years of experience in the financial services industry, bringing a strong background in investment management, portfolio construction and retirement income strategies to his role as a financial advisor. John enjoys helping his clients understand that a successful financial plan requires much more than making stock selections and supports them in employing strategies that help them achieve their life goals. As a CERTIFIED FINANCIAL PLANNER™...Read More