Retirement Ready: Mastering Budgets, Healthcare, & Income Planning

Imagine your retirement is full of relaxation, engaging in hobbies you love, and enjoying financial freedom for the rest of your life. It’s an inviting picture, but apprehension is also common. After all, retirement, which could last 30 or more years, brings various uncertainties that you’ll have to address. Think market swings, inflation, recessions, political turmoil, economic downturns, interest rate hikes, and global disruptions, to name just a few.

What if you had a financial roadmap, a retirement plan, that could help guide you through every phase of your financial journey regardless of the potholes? 

As CERTIFIED FINANCIAL PLANNER™ professionals at SGL Financial, we’ve developed “The Four Pillar Retirement Plan.” We focus on four key areas for a robust retirement strategy: generating income, managing investments, minimizing taxes, and planning your legacy. 

Today’s blog will look at the importance of having a retirement budget that accounts for healthcare expenses and your need for retirement income. Let’s get started. 


Read our latest quick guide: Ready to Retire Today? Preparing for Your Life’s Next Chapter

Retirement Concerns

Everyone has different concerns and financial goals when it comes to retirement. That’s why having a customized retirement plan made just for you is so important. When discussing the hard-earned savings you’ve accumulated for years, cookie-cutter solutions just don’t work. 

The following are some of the most frequent questions we encounter when we assist individuals and couples with their retirement planning:

  • Am I setting aside enough for the lifestyle I want in retirement?
  • What’s a realistic timeline for retiring?
  • How can I manage the impact of market fluctuations on my investments?
  • What’s the impact of inflation on my investments and retirement income?
  • Will my finances sustain me throughout my later years?

Retirement planning goes beyond just saving; it’s about creating a foundational framework that supports your lifestyle and future financial security when the bi-monthly paychecks stop. 

Assessing Retirement Expenses

Understanding your retirement expenses is the first step in retirement planning. It’s not just about covering your day-to-day living costs but also accounting for leisure activities and unexpected expenses that might arise. An accurate estimate ensures you’re prepared for the future, helping to avoid financial stress during your retirement years.

Creating a Retirement Budget

To set up a realistic retirement budget, consider inflation, your primary expenses, and how your spending patterns might change over time. Start by reviewing your current expenses and then adjust for anticipated changes in retirement. Remember, some costs may decrease, like commuting expenses, while others, such as leisure and healthcare, may increase.

Cost-Cutting Strategies

Another way to sustain your retirement savings, albeit not the most popular, is to reduce your expenses once you retire. Consider downsizing your home or moving to an area with a lower overall cost of living. Evaluating all of your recurring services can uncover opportunities to reduce spending. 

Also, try to reduce and/or eliminate all forms of debt before you retire so that it is not a financial burden on your month-to-month cost of living. 

Anticipating Healthcare Costs

Healthcare costs often rise as we age, making it critical to plan for these expenses. Private and long-term care insurance can provide coverage, but it’s essential to be aware of the potential out-of-pocket expenses that might not be covered.

Medicare and Supplements

Medicare offers a foundation for healthcare in retirement, but understanding the various parts (A, B, C, D) is crucial. Supplemental insurance policies, or Medigap, can help cover additional costs not included in traditional Medicare, providing a more comprehensive safety net.

Health Savings Accounts (HSAs)

Contributing to an HSA offers a tax-efficient way to save for rising healthcare expenses during retirement. These accounts can be a valuable part of your healthcare planning strategy, offering flexibility and tax advantages for future medical expenses.

Retirement Income Planning

Relying on multiple income streams can provide stability in retirement. Social Security, pension funds, retirement accounts (IRAs), and even part-time work or passive income sources can contribute to your financial well-being in retirement.

Maximizing Social Security benefits requires careful planning. Deciding when to start taking benefits can significantly impact your retirement income because while delayed withdrawals provide larger monthly payments, it may not be the best choice for everyone.

Withdrawal Strategies

If you will be relying heavily on distributions from your retirement accounts for sources of income during retirement, developing a smart withdrawal strategy can help your savings last longer. 

Consider the commonly recommended withdrawal rates and the order in which you withdraw from different accounts to optimize your distribution and tax benefits. Here are two of the more common strategies that are used by millions of retirees:

  • The 4% Rule is very popular with retirees. The concept is you withdraw 4% of your retirement in the first year, then adjust that amount for inflation each year after. It’s based on the thought that this should help your savings last about 30 years. If you’ve got $1 million saved up, you’d start by taking out $40,000 in year one. Part of this strategy can include a rate of return expectation that exceeds 4% (net of inflation).
  • The Bucket strategy is another way to handle withdrawals from your retirement accounts. Think of your retirement savings that are invested in different “buckets.” One bucket is for cash (the emergency fund) needed for emergencies, another might be for investments that can appreciate over the medium term, and a third bucket is for longer-term growth (appreciation plus income). This way, you can use your cash bucket for immediate expenses without selling off investments during more volatile markets.

Each strategy has pros and cons; what works for you might not be the best fit for someone else. It’s all about determining what makes sense for your situation and gives you the confidence that your assets will produce sufficient income to support you for the rest of your life. 

Get to Know SGL Financial

Retirement planning isn’t just about the numbers; it’s about creating a sustainable, enjoyable, secure lifestyle throughout retirement that could last 30 plus years. With prudent planning and the right investment strategies, you can build a retirement as rewarding as your working years.

Leveraging our Four-Pillar approach to retirement planning could significantly transform your outlook on your retirement years.

As Buffalo Grove fiduciary financial advisors and CFP® professionals, we can provide personalized guidance tailored to your retirement goals. A strategic approach, whether tax planning for retirement or creating a comprehensive retirement plan, is key. 

We are here to assist with all your retirement planning needs, ensuring a smoother transition into this new chapter. Connect with our team to learn more about our unique retirement planning process.

SGL Are You Ready to Retire