Break The Fear That Won't Let You Enjoy What You Built
There's a point in retirement planning when the question changes.
For most of your working life, the question is straightforward: Am I saving enough?
You work. You save. You invest. You avoid unnecessary risks. And, over time, those habits help you build something substantial.
Then retirement arrives, and the question becomes very different: Can I actually use this money without worrying that I'll regret it later?
For some retirees, that question is surprisingly difficult to answer.
The financial plan may say they're fine. Their investments may be substantial. Social Security and pension income may cover a meaningful portion of their expenses.
Even after accounting for healthcare, inflation, taxes, market downturns, and a long retirement, the numbers may still show plenty of financial flexibility.
Yet the fear remains.
What if we live longer than expected?
What if the market falls?
What if healthcare becomes more expensive?
What if our kids eventually need help?
What if something happens that we haven't thought about yet?
Those aren't unreasonable questions. In fact, asking them is part of responsible retirement planning.
Research from the Society of Actuaries continues to show that running out of assets, inflation, healthcare costs, and unexpected financial shocks remain meaningful concerns for retirees.
However, there comes a point when prudence can quietly turn into paralysis.
And when that happens, the biggest risk to your retirement may no longer be running out of money.
It may be reaching the end of retirement with plenty of money left, but too many things you never gave yourself permission to do.
The Habit That Built Your Wealth Doesn't Automatically Retire With You
There's a reason this transition can be so difficult.
The behaviors that helped many successful families accumulate wealth are almost the exact opposite of the behaviors retirement eventually requires.
For decades, the formula was simple.
Earn more than you spend. Save the difference. Invest it. Leave it alone. Repeat.
Every dollar you didn't spend strengthened your financial position.
Then one day, retirement asks you to reverse a habit that may have been reinforced for 30 or 40 years.
Now you're supposed to withdraw money from accounts you spent decades filling.
You're supposed to book the trip rather than save for someday.
You're supposed to help your children or grandchildren while you're alive rather than simply leave everything behind.
And you're supposed to trust that spending money today won't somehow jeopardize tomorrow.
That's a big psychological shift.
One useful way to understand that tension comes from research on what psychologists and financial therapists call money scripts.
Money scripts are underlying beliefs about money that can influence the financial decisions we make.
Researchers Bradley Klontz, Sonya Britt, Jennifer Mentzer, and Ted Klontz originally identified four broad patterns: money avoidance, money worship, money status, and money vigilance.
More recent research examining the revised Money Script Inventory continues to find support for those four categories.
For the kind of retiree we're talking about here, money vigilance is particularly interesting.
Being vigilant about money isn't inherently bad.
Quite the opposite.
Being careful, prepared, private about finances, and concerned about maintaining adequate savings can support many of the behaviors that help someone build wealth in the first place.
That's why I wouldn't look at this as something that suddenly needs to be "fixed" when you retire.
The problem is that a belief can continue doing its old job long after your circumstances have changed.
The voice that once said, We need to save because we don't have enough yet, may still be saying the same thing after you've accumulated enough to fund the retirement you planned.
The circumstances changed.
The script didn't.
The Numbers Can Say Yes While Your Instincts Still Say No
I see variations of this tension regularly in financial planning conversations.
Someone will tell me that one of their primary goals is making sure they never run out of money.
That makes sense.
So, we build the plan around that concern. We model retirement income.
We evaluate investment risk.
We account for healthcare.
We build cash reserves. We examine taxes and withdrawal strategies. Then we stress-test the plan against different assumptions.
And once we've established what needs to be protected, we can begin asking a different set of questions.
Could you travel more?
Could you comfortably spend a little more each month?
Could you take the bigger family vacation?
Could you help your children or grandchildren today?
Could you replace the car, renovate the house, or make another large purchase without undermining the rest of the plan?
Sometimes we'll model those scenarios too.
And occasionally, something interesting happens.
The plan still works.
Yet the client remains hesitant.
At that point, we're no longer dealing primarily with a math problem.
We're dealing with the emotional residue of a lifetime spent protecting against the possibility of not having enough.
That's where the money-script concept becomes useful.
A projection can show us whether a particular level of spending appears financially sustainable. However, it can't automatically erase a belief about money that's been reinforced for most of someone's adult life.
That's an important distinction because another spreadsheet may not solve a problem the spreadsheet has already answered.
When "Enough" Never Feels Like Enough
One of the most difficult questions in wealth management is deceptively simple: How much is enough?
There's almost always another level of financial security available.
If $2 million feels safe, perhaps $3 million would feel safer.
If $3 million feels comfortable, perhaps $4 million would remove the uncertainty.
Then $4 million becomes $5 million.
The finish line can keep moving because the real objective was never a particular portfolio value. It was the feeling of certainty that the portfolio was supposed to provide.
Unfortunately, money can reduce uncertainty, but it can't eliminate it.
You can't know exactly how long you'll live.
You can't know what markets will do every year.
You can't know exactly what healthcare will cost.
And you certainly can't anticipate every financial need your family may have over the next several decades.
A good financial plan accounts for uncertainty. It doesn't pretend uncertainty can be eliminated.
That distinction matters.
Otherwise, you can continue accumulating more financial security while never actually feeling more secure.
Why Spending From the Portfolio Can Feel So Different
There's another wrinkle here.
Not all money feels the same when it's time to spend it.
Research by David Blanchett and Michael Finke using Health and Retirement Study data found that retirees consumed a much larger percentage of available lifetime income, such as Social Security and pension income, than they did from accumulated savings.
Their findings suggest that retirees' willingness to spend can depend partly on how the money reaches them.
That makes intuitive sense.
A Social Security check arrives and feels like income.
A pension payment arrives and feels like income.
But taking $10,000 out of an IRA can feel very different.
You've watched that account grow for decades. You've been taught not to touch it. You've probably celebrated when the balance went up and worried when it went down.
Now your retirement plan is telling you that the account exists, at least in part, to be spent.
Financially, that may be completely rational.
Emotionally, it can feel like moving backward.
And that's why the transition from accumulation to retirement can't be treated as purely a portfolio-management exercise.
Consider the Couple Who Keeps Saying "Maybe Next Year"
Imagine a retired couple who has done almost everything right.
They saved consistently.
They invested prudently.
They avoided excessive debt.
Their retirement income is coordinated. They maintain appropriate reserves. And their portfolio gives them considerably more flexibility than their basic lifestyle requires.
For years, they've talked about traveling more in retirement.
They've also talked about helping their grandchildren while they're young enough to see what that help makes possible.
Yet every year, the conversation sounds roughly the same.
Maybe we'll take the trip next year.
Maybe we should wait before giving the kids anything.
Maybe the market will be better.
Maybe we should keep a little more in reserve.
So, the money stays invested.
Another year passes.
Then another.
Nothing is necessarily wrong with that decision. Some people genuinely prefer spending less. Others intentionally want to leave a larger estate. Those are perfectly legitimate choices.
The question is why the decision is being made.
Is keeping the money part of the plan?
Or does spending it simply feel dangerous?
Those are two very different things.
This is a composite example based on recurring themes I've encountered in financial planning conversations. It doesn't represent the circumstances of any one client.
Your Financial Plan Should Help Separate Fear From Fact
This is where I think financial planning can play a role that goes beyond calculating a withdrawal rate.
The purpose isn't to convince someone to spend more money.
It's to help separate three things that can easily get mixed together: what needs to be protected, what the financial plan can reasonably support, and what fear is preventing you from doing.
First, we have to protect what matters.
That means understanding your recurring lifestyle needs, maintaining appropriate reserves, considering healthcare and long-term care risks, evaluating taxes, testing the portfolio against difficult markets, and accounting for the legacy you actually want to leave.
Those aren't fears to dismiss.
They're planning problems to address.
Then, once we've established those guardrails, we can test what's possible.
What happens if travel spending increases?
What happens if you help the family today instead of leaving all of the money later?
What happens if you spend more during the early years of retirement?
What happens if markets disappoint us?
What happens if inflation remains higher than expected?
The objective isn't to figure out the maximum amount you could possibly spend.
It's to understand the range of choices available to you without putting the priorities we've already protected at unnecessary risk.
Then comes the harder part.
If the plan says you can afford something and you still can't bring yourself to do it, it's worth asking:
What am I actually afraid will happen?
That's a different question than, "Can I afford it?"
And sometimes, it's the more important one.
The Goal Wasn't Just to Accumulate
This matters because retirement isn't simply the final stage of an accumulation plan.
It's the stage when some of the money finally gets to do the job you spent decades preparing it to do.
Perhaps that job is providing financial independence.
Perhaps it's creating experiences with your spouse while you're both healthy.
Perhaps it's helping children or grandchildren at a time when the money could materially change their lives.
Perhaps it's giving more to organizations you care about.
Or perhaps it's simply creating the ability to make ordinary financial decisions without worrying that one purchase will somehow undo 40 years of disciplined saving.
Research on retirement spending gives us some reason to pay attention to this issue.
Blanchett's more recent work finds that inflation-adjusted household spending generally declines as retirement progresses, including among relatively well-funded households.
That doesn't mean every retiree will spend less or that early retirement spending should automatically be increased.
However, it does challenge the assumption that every dollar preserved for later will necessarily have the same value to your life when later finally arrives.
At the same time, caution still matters. Research from EBRI shows that retirees face legitimate longevity and late-life financial risks, and asset-decumulation patterns vary considerably from household to household.
That's why this isn't an argument for reckless spending.
It's an argument for intentional spending.
Give Yourself Permission to Trust the Plan
For some people, the hard part of retirement planning isn't building the portfolio.
They've already done that.
The hard part is believing they no longer have to approach every dollar as though they're still preparing for an uncertain future.
And that's where I think good planning earns its keep.
The goal isn't simply to produce a probability-of-success number and hand you a report.
It's to help you understand what you can control, prepare for what you can't, and make informed decisions about the life you want to live with the resources you've built.
Sometimes the plan will tell us to be careful.
Sometimes it will tell us to wait.
Sometimes we'll need to change the investment strategy, reduce spending, increase reserves, or rethink a goal.
But sometimes the analysis has already done its job.
The risks have been considered.
The contingencies have been modeled.
The money is there.
And the thing standing between you and the life you planned isn't the portfolio anymore.
It's the fear that the portfolio was supposed to solve.
The goal was never to hold on tightest.
It was the freedom to use what you built.
So, name the fear. Understand where it may be coming from. Hold it up against the facts. Then give your financial plan permission to do something more than protect the money.
Let it help you use the money with purpose.
Because there comes a point when financial security isn't just having enough.
It's trusting that enough can finally be enough.
Sources
Klontz, Bradley T., Sonya L. Britt, Jennifer Mentzer, and Ted Klontz. "Money Beliefs and Financial Behaviors: Development of the Klontz Money Script Inventory." Journal of Financial Therapy, Vol. 2, Issue 1, 2011.
https://journals.newprairiepress.org/jft/article/id/5669/download/pdf/
Reiter, Miranda, Jesse B. Jurgenson, and Dee Warmath. "Evaluating the Klontz Money Script Inventory-Revised (KMSI-R): Factorial Validity, Internal Consistency, and Measurement Invariance with a Diverse Sample." Journal of Family and Economic Issues, 2025.
https://link.springer.com/article/10.1007/s10834-025-10055-7
Blanchett, David, and Michael Finke. "Retirees Spend Lifetime Income, Not Savings." Financial Planning Review, Vol. 8, Issue 3, 2025.
https://onlinelibrary.wiley.com/doi/full/10.1002/cfp2.70010
Blanchett, David. "How Spending Evolves in Retirement: A Smile, a Smirk, or Something Else?" Financial Planning Review, 2026.
https://onlinelibrary.wiley.com/doi/10.1002/cfp2.70032
Society of Actuaries Research Institute. "2024 Retirement Risk Survey: Report of Findings." Published 2026.
https://www.soa.org/globalassets/assets/files/resources/research-report/2024/2024-retirement-risk-survey-series-final-report.pd
Employee Benefit Research Institute. "Asset Decumulation Over Retirement and the Role of Guaranteed Income Streams." EBRI Issue Brief, 2026.
https://www.ebri.org/content/asset-decumulation-over-retirement-and-the-role-of-guaranteed-income-streams
The Market Does Not Need a Recession to Correct
When markets fall, investors often assume something must be wrong with the economy.
They start looking for evidence of a recession, weakening employment, falling consumer spending, or deteriorating corporate profits.
However, markets don't need an economic contraction to experience a meaningful decline.
Sometimes prices simply get ahead of fundamentals.
Indeed, according to Ned Davis Research, moderate corrections of 10% or more happen, on average, once per year. Market declines greater than 15-20% happen once every 2-3 years according to their research.
That’s because valuations can become stretched, interest-rate expectations can change, or investors can crowd into the same companies or sectors.
Additionally, sentiment can shift after a modest earnings disappointment.
And when markets are priced for an unusually favorable outcome, it doesn't take a crisis to force a reset.
That distinction matters because markets and the economy aren't the same thing.
The economy measures activity across businesses, consumers, employment, and production. Markets, on the other hand, reflect what investors are willing to pay today for the cash flows they expect to receive in the future.
As a result, the economy can remain relatively stable while stock prices decline. Corporate earnings may still be growing. Consumers may still be spending. Businesses may still be investing. Yet markets can fall if those outcomes are weaker than investors expected or if the price attached to those outcomes becomes harder to justify.
To be sure, we're seeing some of the forces that can create that vulnerability today.
For example, investors have become more selective about whether artificial-intelligence spending will translate into revenue, cash flow, and profits.
At the same time, higher oil prices and Treasury yields have brought inflation and interest-rate risk back into focus. None of this means a broad correction is underway.
However, it does illustrate how expectations can become more fragile even when the economy isn't falling apart.
In other words, a correction doesn't require a recession. It only requires the market's expectations to change.
Markets Trade on Expectations, Not Just Economic Conditions
One of the most important distinctions we make when evaluating markets is the difference between what's happening in the economy and what investors had already assumed would happen.
The economy tells us what's happening today. Markets are forward-looking, meaning they attempt to price what may happen next.
That means a company can continue growing revenue and profits while its stock declines. If investors expected faster growth, stronger margins, or a clearer return on investment, otherwise respectable results may still disappoint.
Suppose a company reports that earnings increased 10 percent from the prior year. On its own, that sounds like a good result, right?
Well, if the market had expected earnings to grow 15 percent, the stock may still decline. The company hasn't stopped growing, and the business may not be fundamentally impaired. Its results simply weren't strong enough to support the assumptions already reflected in its share price.
The same principle applies to the broader market.
Prices don't fall only when economic conditions become bad. They can also fall when conditions remain good but no longer appear good enough to support current valuations.
That's why a correction can occur before a recession becomes visible in the economic data. It's also why a correction can happen without a recession ever arriving.
Valuation Determines the Margin for Error
Now, a key factor we look at when it comes to market corrections valuations.
That’s because valuation affects how forgiving the market will be when expectations aren't met.
When investors are paying relatively modest prices for future earnings, some uncertainty may already be reflected in stock prices. A company may be able to report a mixed quarter or lower its outlook without producing an extreme reaction.
However, that dynamic changes when valuations become elevated.
A higher valuation often reflects confidence that revenue will keep growing, profit margins will remain strong, interest rates will cooperate, and management will execute with few setbacks. The more favorable assumptions already included in the price, the less room there is for disappointment.
The Federal Reserve describes elevated valuation pressure as a condition in which asset prices are high relative to economic fundamentals or historical norms, often alongside a greater willingness by investors to accept risk.
To be sure, elevated valuations don't tell us exactly when prices will decline, but they can increase the potential for larger losses when expectations change.
That's why a market priced for perfection doesn't need a recession to decline. It may only require the future to look slightly less perfect.
A company might still report higher revenue, but investors may become concerned that expenses are rising faster. A new product may continue attracting customers, but the path to profitability may take longer than anticipated.
An industry may still have a compelling long-term future, but investors may decide they've already paid too much for that potential.
None of those developments requires an economic collapse. They simply require investors to reconsider what they're willing to pay.
Interest Rates Can Reset Prices Without Breaking the Economy
Interest rates can create another source of market pressure.
The value of an investment partly depends on the cash flows investors expect to receive in the future. When the return available elsewhere in the market rises, investors may apply a higher required return to those future cash flows. That can reduce what they're willing to pay today.
At the same time, higher bond yields give investors a more competitive alternative to stocks. Investors may become less willing to accept equity risk when high-quality fixed-income investments offer more attractive yields.
Consequently, the market may demand a lower stock price, a higher expected return, or both.
This effect can be particularly significant for growth companies whose valuations depend heavily on profits expected many years from now. Even when the underlying business outlook remains positive, a change in rates can reduce what investors are willing to pay for those distant earnings.
Bonds can also decline as interest rates rise. Therefore, a period of higher yields can place pressure on both stocks and fixed income without signaling that a recession has begun.
The market may simply be adapting to a different cost of capital.
That's also why inflation matters to investors even when economic growth remains intact. If inflation causes interest rates to stay higher than investors expected, asset prices may need to adjust around that new reality.
Again, the economy doesn't have to contract for that adjustment to take place.
Positioning Can Magnify an Otherwise Ordinary Disappointment
Market corrections aren't driven by fundamentals alone. They're also influenced by how investors are positioned.
When enthusiasm builds around a company, sector, or investment theme, more investors begin owning the same assets for many of the same reasons. Rising prices attract additional capital, recent performance reinforces confidence, and the trade can become increasingly crowded. That process can continue longer than many investors expect.
However, crowded positioning can work in reverse.
A modest disappointment may lead some investors to reduce exposure. Those initial sales push prices lower, which can encourage additional selling from investors who were comfortable with the risk only while prices were rising. Before long, the decline can appear disproportionate to the news that caused it.
The headline may be the catalyst, but valuation, positioning, and sentiment often determine the size of the reaction.
That's another reason markets don't need a recession to correct. A crowded trade can unwind because the expectations supporting it have changed, even when the broader economy remains relatively stable.
Today's Environment Shows the Ingredients, Not the Outcome
The current market environment helps illustrate these forces, but it's important not to overstate what the recent data tells us.
The market hasn't experienced a broad correction simply because some growth and technology investments have come under pressure. Instead, investors have started applying greater scrutiny to companies making large artificial-intelligence investments. The question is shifting from how much those companies can spend to whether that spending can generate sufficient growth, cash flow, and profitability.
Meanwhile, renewed inflation concerns and higher interest rates have complicated the valuation backdrop. These developments don't prove that a correction is coming, and they certainly don't tell us when one might occur. They do, however, show how the assumptions supporting market prices can change.
A company can remain profitable while investors become less willing to pay a premium for its future growth. The economy can remain intact while interest rates force investors to reconsider valuations. A popular investment theme can continue having long-term potential while the stocks associated with it experience a short-term reset.
The current environment makes the subject timely. It doesn't serve as evidence that a broad correction has already occurred.
For evidence of the thesis itself, history provides a cleaner example.
The Fourth Quarter of 2018 Offers a Useful Example
During much of 2018, the Federal Reserve described asset valuations and investor appetite for risk as elevated. The economy, meanwhile, remained in an expansion.
Then, during the fourth quarter, market volatility rose sharply and equity prices declined. That drop reduced valuation pressure in stocks and corporate bonds, even though the underlying economic expansion continued.
The Federal Reserve later reported that economic growth remained solid during the second half of the year, with real gross domestic product growing a little less than 3 percent for 2018 as a whole.
The economy didn't enter a recession in 2018. According to the National Bureau of Economic Research, the expansion that began in June 2009 continued until economic activity peaked in February 2020.
That doesn't mean the 2018 decline was unimportant or that investors knew the economy would continue expanding. It means a meaningful market reset occurred without a concurrent recession.
Investors reassessed valuations, interest rates, global growth expectations, and their appetite for risk. Stock prices adjusted even though the economic expansion still had more than a year to run.
That's the distinction investors often miss.
A market decline may reflect concern about what could happen next. It may reflect a lower price investors are willing to pay for the same earnings. Or it may simply reverse some of the optimism that had already been built into prices. It doesn't automatically mean the economy has entered a recession.
How We Read a Market Decline
In our investment process, we don't treat every pullback as evidence that the long-term plan is broken. Over the years, we've learned to ask the same question first, before anything else. Is the market repricing expectations, or is the economy actually deteriorating?
That single question does most of the work. The market can reprice for all the reasons we've described, stretched valuations, higher rates, crowded positioning, a modest earnings disappointment, without the economy changing at all. So the first thing we look for isn't a headline. It's evidence of genuine financial stress.
Credit conditions tend to tell us the most. When investors grow truly concerned about borrowers' ability to repay, that worry shows up in credit markets before it appears almost anywhere else. When credit spreads stay calm while stocks fall, the decline usually looks more like repositioning than a fundamental break.
When spreads widen meaningfully, we pay closer attention. That's the same signal we've relied on through past pullbacks, and it rarely misleads us.
From there, the rest of the read fills in around that question. We look at whether weakness is broad or concentrated, because a decline led by a handful of highly valued companies tells us something different from weakness spreading across most sectors and company sizes.
We look at whether corporate fundamentals are deteriorating across the market or whether a smaller group of companies is simply failing to meet elevated expectations, because there's a real difference between profits falling throughout the economy and a profitable company disappointing investors who wanted more.
And we consider whether interest rates are changing the return investors demand, because a higher discount rate can lower prices even when the expected cash flows haven't weakened at all.
None of those readings, though, answers the only question that ultimately matters to you. Does this decline change your plan?
That's where we finish, every time. We return to the purpose of the money.
Has your time horizon changed?
Have your near-term spending needs increased?
Is there enough liquidity in place?
Has your willingness or ability to accept risk changed?
We also look at whether prior performance has quietly left the portfolio more concentrated than intended, because an investment that did well can grow into a larger position and leave you more dependent on one company, one sector, or one outcome than you meant to be.
A correction that doesn't change your goals, time horizon, or cash-flow needs may not require any change to the long-term strategy.
However, a portfolio that was too concentrated, too aggressive, or too dependent on near-term withdrawals may reveal a weakness that deserves attention.
This approach doesn't let us predict the market's exact bottom.
Nothing does.
But it does help us tell the difference between normal repricing, broader financial stress, and a portfolio problem that actually requires action. That distinction is the one that protects the plan.
Diversification Matters When Leadership Changes
The purpose of portfolio construction isn't to eliminate every decline. That isn't realistic.
Instead, the goal is to build a portfolio that doesn't require every part of the market to perform well at the same time.
Market leadership changes. Growth can outperform value for an extended period before the relationship reverses. Domestic stocks can lead international markets until valuation differences begin to matter. Longer-term bonds can provide diversification in one environment and struggle when inflation and interest rates rise. No allocation works best under every condition.
That's why diversification isn't simply about owning more investments. It's about reducing the portfolio's dependence on one company, one investment style, or one economic outcome.
The SEC describes asset allocation as dividing investments among categories such as stocks, bonds, and cash. It also emphasizes that investors should look beneath fund labels and examine underlying holdings, because owning several funds doesn't necessarily create meaningful diversification.
Diversification can't prevent losses or guarantee better returns. However, it can reduce the risk that weakness in one narrow part of the market disrupts the entire plan.
Rebalancing provides another layer of discipline. When one area has risen far beyond its intended allocation, rebalancing can reduce unintended concentration.
When another area has fallen below its target, the process can create a systematic way to restore exposure without relying entirely on emotion or short-term predictions.
The SEC identifies asset allocation, diversification, and rebalancing as related tools for managing portfolio risk over time.
Adequate liquidity matters as well. Investors who have their near-term spending needs covered are generally in a better position to tolerate volatility. They're less likely to become forced sellers during a decline and less dependent on correctly predicting when the correction will end.
In our experience, these decisions are best made before markets become unsettled. It's far easier to build discipline into a portfolio when nothing is going wrong than to manufacture it in the middle of a selloff.
Build for the Reset Before It Arrives
Corrections are uncomfortable because they create uncertainty without providing a clear endpoint.
Nevertheless, they're a normal part of investing.
A durable investment plan shouldn't depend on the economy avoiding every slowdown, interest rates moving exactly as expected, or investors remaining permanently enthusiastic about the same companies.
It should assume that valuations will occasionally reset, market leadership will change, and prices will sometimes decline even when the economic backdrop remains relatively stable.
Therefore, the important question isn't whether the market will experience another correction. It will.
The more important question is whether your portfolio was built to withstand one.
A pullback isn't automatically evidence that the plan has failed. Sometimes it's simply the market adjusting expectations, demanding greater discipline, and returning prices to a level that better reflects the risks ahead.
The market doesn't need a recession to correct. Likewise, a disciplined investor doesn't need to predict every correction to be prepared for one.
So the real question isn't whether you can see the next correction coming. It's whether your plan is ready when it does.
Sources
Federal Reserve Board, Financial Stability Report: Asset Valuation Pressures, November 2018; https://www.federalreserve.gov/publications/2018-november-financial-stability-report-asset-valuation-pressures.htm
Federal Reserve Board, 2018 Annual Report: Monetary Policy and Economic Developments; https://www.federalreserve.gov/publications/2018-ar-monetary-policy.htm
National Bureau of Economic Research, Determination of the February 2020 Peak in US Economic Activity, June 8, 2020; https://www.nber.org/news/business-cycle-dating-committee-announcement-june-8-2020
U.S. Securities and Exchange Commission, Investor.gov, Asset Allocation and Diversification; https://www.investor.gov/introduction-investing/getting-started/asset-allocation
Stock Market Corrections Are Normal — Ned Davis Research (PDF); https://www.ndr.com/hubfs/NDR/Business%20Developer/pdfs/EDU_8_WM_public.pdf?hsLang=en
Weekly Market Update: The Bigger Picture Behind July's Turn
July delivered the third major shift in financial markets this year, following the turns in March and April. The AI and semiconductor trade that had led all year reversed sharply, sliding into a bear market as investors moved from rewarding capital spending to scrutinizing it.
At the same time, the re-escalation of the U.S.-Iran conflict reopened the channel that runs from oil to inflation to Fed policy. Major indices pulled back from record highs, the VIX drifted toward 20, and the Fed turned more hawkish. The damage, though, has been relatively concentrated.
AI stocks have entered correction territory, but credit spreads remain near cycle lows and breadth has improved, making this something close to a mirror image of early in the second quarter.
Our base case is for volatility to stay elevated, with wide dispersion and continual rotations as the market works through two open questions: whether the AI pullback is the first crack or a healthy mid-cycle reset, and whether the oil-inflation-Fed risk builds or fades.
The setup carries wide tails in both directions, and we are positioned to stay flexible.
Looking further out is harder given the pace at which markets are moving. Yet for all the swings in sentiment this year, major indices remain near record highs, and the consensus still calls for a soft landing, a reflection of the economy's resilience even through a global oil supply disruption.
The bull case is now driven more by corporate earnings than by expectations for lower rates, with AI-related investment the dominant structural force behind earnings growth. Much of that is already viewed as priced in, and expensive valuations paired with unresolved tensions in the Middle East introduce real downside risk.
The next twelve months likely turn on whether earnings can grow into elevated valuations and whether inflation and energy prices stay contained.
Current Market Themes
Federal Reserve Policy: The Fed remains on hold but continues to shift hawkish, with markets now pricing in two rate hikes (September 2026 and early 2027).
Corporate Earnings: A strong second quarter, with the S&P 500 posting its seventh straight quarter of double-digit year-over-year growth and record margins.
Artificial Intelligence: AI capex is powering both economic and EPS growth, though expectations are very high and the industry looks set to stay volatile.
Economic Factors
U.S. GDP Growth: Q2 growth slowed from the first quarter, though core growth (real final sales to private purchasers) held up solidly despite the oil disruption.
Inflation: The oil supply disruption pushed inflation higher, and with oil prices still volatile, there is a risk it stays above target.
Employment: Labor conditions are improving after weakening in late 2025, with the market still relatively tight and "low-fire, low-hire."
U.S. Consumer: Supported by strong equity and labor markets, but facing headwinds from slowing income growth and inflation pressure.
Interest Rates: Rate volatility has come down from recent years, though rates should stay volatile given oil prices and economic uncertainty.
Long Duration Bonds: Neutral to modestly overweight, driven mainly by inflation risk and economic uncertainty; favor Treasuries over corporates.
Why the First Five Years of Retirement Decide the Next Twenty-Five
Most people think the biggest retirement risk shows up late, the fear of running out of money in your eighties or nineties.
However, the conditions that create that risk usually show up much earlier.
The first five years of retirement are a genuine hinge point. Your paycheck stops, withdrawals begin, and decisions about Social Security, taxes, healthcare, investments, and spending all start colliding with one another in ways they never did while you were working.
Those five years don't literally dictate everything that follows. Still, they have an outsized effect on how much flexibility your plan keeps for the twenty that come after.
That's why retirement shouldn't start with a portfolio balance and a withdrawal percentage. Instead, it should start with a plan for the stretch when your financial life is most exposed to change.
Retirement Changes the Math
While you're working, a market decline is uncomfortable, but it's survivable. You're still earning, still contributing, and you have time to let markets recover.
Retirement rewrites that equation.
Once withdrawals begin, your portfolio has to absorb two things at once, the market's swings and the money you're pulling out to live on. As a result, a decline in the first year or two can do far more damage than the same decline fifteen or twenty years later.
That's sequence-of-returns risk.
Two retirees can earn the exact same average return over their retirement and still end up in completely different places, depending on when their best and worst years land. In fact, the decumulation research keeps showing the same thing, that losses early in retirement, paired with ongoing withdrawals, can meaningfully shorten how long a portfolio lasts.
In other words, the average return in your projection doesn't tell the whole story. The order of those returns does.
Why an Early Loss Is So Hard to Recover From
Say you retire with $3 million and plan to draw $150,000 in your first year.
If the portfolio drops 20 percent before you take anything out, it falls to about $2.4 million. After that first $150,000 withdrawal, you're at roughly $2.25 million.
Now the portfolio has to recover from the loss and keep funding every withdrawal that follows.
By contrast, put that same 20 percent decline in year twenty, and the picture changes. By then you may have banked years of positive returns, shortened the horizon the money has to cover, or adjusted your spending. The drop still stings, but the plan is built to take it.
That's why, in our planning work, we don't just ask whether a portfolio can support a given withdrawal over thirty years. We also ask what happens if the bad years show up first.
What if the market falls in year one?
What if inflation stays hot?
What if the roof, the car, and a round of dental work all land in the same twelve months?
What if a large Roth conversion quietly triggers a Medicare premium increase?
A good plan answers those questions before you're forced to answer them in real time, under pressure.
The First Five Years Are About More Than Markets
Sequence risk matters, but markets are only half the story.
The early years of retirement are also when the big, hard-to-reverse decisions get made.
For example, take Social Security. Benefits generally grow for each year you delay claiming past full retirement age, up to age 70. That doesn't make delaying right for everyone, health, marital status, survivor needs, other income, and your withdrawal strategy all weigh in. However, once you claim, your options narrow.
Similarly, consider the window between retiring and the start of required minimum distributions. Your earned income may be lower in those years, which can open room for Roth conversions, capital-gain harvesting, charitable planning, or deliberate withdrawals from tax-deferred accounts. Under current rules, most retirees begin RMDs at age 73, though the exact age depends on your birth year.
Here's where it all ties together, and where a lot of plans go wrong. A Roth conversion can't be judged only by comparing today's tax rate to a future one. Higher income in a single year can raise your Medicare Part B and Part D premiums through IRMAA, pull more of your capital gains into tax, and reshape the tax bill your surviving spouse will one day face. These moves live in the same retirement tax window I've written about before, so I won't rebuild that case here.
The problem isn't that retirees make these decisions. Instead, it's that they too often make them one at a time, when the entire point is to coordinate them.
Two Couples, One Market, Two Outcomes
Picture two couples. Each retires at 65 with $3 million and needs about $150,000 a year to live the life they've planned for. In their first three years, both run into the same rough market.
The first couple keeps taking the full, inflation-adjusted withdrawal straight from the portfolio. They claim Social Security right away, because watching their investments fall makes them nervous. And they go ahead with a big travel year and a major renovation.
No single one of those choices is unreasonable. However, stacked together, in a down market, they pile pressure on a portfolio that's already shrinking.
The second couple runs a different play. They lean on a near-term cash reserve, so they're not selling growth investments into the decline. They separate essential spending from discretionary, and push part of the travel budget out a year. They rebalance back to their policy instead of reacting to the headlines. Finally, they revisit Social Security and Roth conversions in light of the new market and tax picture.
Same returns. Different retirement. The difference wasn't the market, it was the decisions they made around it.
The point isn't that every retiree needs that exact reserve or withdrawal order. Instead, it's that retirement resilience comes from having more than one way to respond.
Flexibility Might Be Your Most Valuable Retirement Asset
In planning conversations, I keep coming back to one distinction, the line between essential spending and flexible spending.
Essential is housing, food, insurance, healthcare, taxes, basic transportation. You can't cut those quickly.
Flexible is travel, gifts, renovations, the vehicle upgrade, the discretionary purchases. Those matter too, retirement is meant to be enjoyed, not endured. However, having some room to shift their timing can keep a temporary market drop from hardening into a permanent setback.
The withdrawal research backs this up. Dynamic strategies that adjust spending when the portfolio moves outside preset guardrails tend to hold up better than mechanically raising withdrawals every year, no matter what markets are doing.
That doesn't mean slashing spending every time the market has a bad month. Instead, it means deciding in advance what would actually trigger a change. For example, ordinary spending might continue through normal volatility, while the big discretionary items get a second look if the portfolio falls past a line you set ahead of time.
The value is in making that call while everyone's calm, not after fear has taken the wheel.
A Five-Year Retirement Stress Test
Before you retire, you want to know the plan can handle more than the expected case. Five tests get you most of the way there.
Test an early market decline
Instead of assuming smooth average returns, model a real drop in year one or two. Then map out exactly how you'd fund spending without abandoning your long-term strategy, whether that's cash, short-term fixed income, trimmed discretionary spending, or another income source. "We'll figure it out when it happens" isn't a strategy.
Separate recurring and irregular spending
A monthly budget is necessary but not sufficient. Roofs, cars, family support, big trips, and uncovered healthcare arrive in lumps, and they belong in the model separately from ordinary lifestyle spending. Otherwise, a plan can look sustainable while quietly ignoring the retirement spending blind spot most likely to derail it.
Build a multiyear tax map
Retirement tax planning shouldn't be done one April at a time. Instead, project your income out through the start of RMDs and beyond, find the years when taxable income dips, and test whether Roth conversions or other moves improve your lifetime tax position, not just this year's return. Then check how each move ripples into IRMAA, capital gains, charitable goals, and your surviving spouse.
Name the permanent decisions
Social Security claiming, pension elections, selling the house, large gifts, certain insurance choices. Some of these can't be undone. Before you act, get clear on what's reversible and what isn't. When uncertainty is high, keeping your options open is often worth more than locking in a permanent answer early.
Set your guardrails
Finally, decide ahead of time how the plan responds when things move. What happens if spending runs 10 percent over plan? If the portfolio drops? If one spouse dies earlier than expected? If a child needs help? If you want a second home? A plan is far more useful when it holds decision rules, not just projections.
The Goal Isn't to Predict the First Five Years
Nobody knows what markets, inflation, tax law, healthcare, or your family will do in your first five years of retirement.
Fortunately, a strong retirement plan never required a crystal ball. It requires preparation.
Those first five years matter because that's when withdrawals begin, the big elections get made, and the portfolio has the least room for an avoidable mistake. However, they don't have to dictate the rest of your retirement. A coordinated plan gives you room to respond, through appropriate reserves, flexibility in your discretionary spending, coordinated tax decisions, a disciplined portfolio, and a plan you actually revisit as life changes.
So before you circle a retirement date, don't ask only whether you've saved enough. Ask whether the plan can survive an unfavorable start.
Because the strength of a retirement plan isn't how well it works when everything goes right. It's how much flexibility you've still got when something goes wrong. That's where clarity, confidence, and peace of mind actually come from.
If you'd like to pressure-test your own first five years, especially how your withdrawals, Social Security timing, and Roth conversions interact before the difficult years get a vote, that's the conversation we have every day. We'd be glad to have it with you.
Sources
Social Security Administration. "Delayed Retirement Credits."
https://www.ssa.gov/benefits/retirement/planner/delayret.html
Internal Revenue Service. "Retirement Plan and IRA Required Minimum Distributions FAQs."
https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs
Social Security Administration. "Medicare Premiums: Rules for Higher-Income Beneficiaries" (income-related monthly adjustment amounts for Part B and Part D).
https://www.ssa.gov/benefits/medicare/medicare-premiums.html
Jonathan Guyton and William Klinger. "Decision Rules and Maximum Initial Withdrawal Rates." Journal of Financial Planning, March 2006.
https://www.financialplanningassociation.org/article/journal/MAR06-decision-rules-and-maximum-initial-withdrawal-rates
Morningstar. "The State of Retirement Income."
https://www.morningstar.com/retirement/morningstars-retirement-income-research-finding-your-safe-withdrawal-rate
The Tax Bill You're Leaving Your Kids
One of the most common things I hear in a Roth conversion conversation is, "I don't want to pay the tax until I have to."
That sounds conservative. Why create a tax bill today when you could leave the money invested?
But for families with more retirement money than they're likely to spend, delaying the tax doesn't avoid it. It moves it. Off the parents' return, onto the children's.
Your kids may inherit that account in their forties or fifties, in the highest-earning years of their careers. So the dollars you declined to convert at a 22 percent marginal rate could come out later while they're paying 32 percent or more.
The family pays the tax either way.
The only real question is whether you decide whose return the income lands on, or whether you let that get decided for you.
A Traditional IRA Is More Than an Investment Account
A traditional IRA isn't just an investment account. It's an investment account with a deferred tax liability attached.
The balance on the statement isn't the amount your family gets to spend.
If the account holds mostly deductible contributions and tax-deferred growth, distributions are generally taxable income. During your lifetime, required minimum distributions eventually force some of that income onto your return. If you die with money still in the account, your beneficiaries inherit the assets and the tax obligation that rides along with them.[1]
There are exceptions worth knowing. Part of an IRA may represent after-tax basis. A qualifying charity can generally receive the account without paying the income tax an individual beneficiary would owe. A surviving spouse has options an adult child doesn't.[1]
But when a parent leaves a largely pretax IRA to adult children, the tax liability doesn't disappear.
It changes taxpayers.
The SECURE Act Compressed the Window
Before the SECURE Act, many non-spouse beneficiaries could stretch inherited IRA distributions over their life expectancy. Depending on the beneficiary's age, that could spread the taxable income across decades.
For most adult children today, that's gone.
Most adult children are designated beneficiaries, but not "eligible designated beneficiaries." They generally have to empty the inherited IRA by December 31 of the year containing the tenth anniversary of the owner's death.[1][3]
The main exceptions are a surviving spouse, the owner's minor child, a disabled or chronically ill beneficiary, and someone who isn't more than ten years younger than the account owner.[1]
What happens inside those ten years depends on when the owner died.
If the owner died before the required beginning date for minimum distributions, the beneficiary generally doesn't have to take annual distributions in years one through nine. The account still has to be empty by the end of year ten.[1][3]
If the owner died on or after the required beginning date, the beneficiary generally has to keep taking annual required distributions during the ten-year period, and still empty the account by the end of year ten.[1][3]
Either way, the window is a lot shorter than most families expect.
Your Children May Inherit the IRA at the Worst Possible Time
The problem with the ten-year rule isn't that ten years is short.
It's which ten years they turn out to be.
Your children might inherit this account while they're earning peak salaries, taking bonuses, exercising options, selling company stock, running a business, or writing tuition checks for your grandchildren.
Then, on top of all of that, they have to empty an inherited IRA.
Those distributions can push part of the account into a higher federal bracket. They can also reach state income taxes, deductions, credits, and capital-gain rates.
That's why I don't evaluate a conversion by asking only, "How much tax would you pay this year?"
I ask a different question. Which family member is most likely to report these dollars as income, in which years, and at what incremental rate?
That turns a one-year tax calculation into a multigenerational planning decision.
Consider a 74-Year-Old Widow With a $1.4 Million IRA
Say a 74-year-old widow has $1.4 million in a traditional IRA.
She's already taking required minimum distributions. After her other income and deductions, additional taxable income still falls in the 22 percent federal bracket.
She passes on Roth conversions. Her tax bill already feels high enough, and paying more on purpose doesn't seem necessary.
Now say she dies several years later and leaves the remaining IRA equally to her two adult children.
Both are in their late forties. Both are already earning well. Once the inherited distributions stack on top of their existing income, assume those incremental dollars land in the 32 percent bracket.
For illustration, each child inherits $700,000 and takes $70,000 a year over ten years. Before any growth, the family recognizes $1.4 million of inherited IRA income during that period.
At an assumed 32 percent marginal rate, that's roughly $448,000 of federal income tax.
Apply an assumed 22 percent rate to the same $1.4 million and you get roughly $308,000.
A simplified difference of $140,000.
The family pays the tax either way. It just paid ten points more, and nobody chose it.
One qualification matters here. This doesn't mean the widow could have converted the whole $1.4 million at 22 percent. A conversion that size would cross several brackets. Federal brackets also apply in layers, so not every dollar a beneficiary withdraws is taxed at their top rate. The illustration compares two incremental rates on the same dollars. It isn't a forecast.
The real opportunity would have been a series of partial conversions over several years. Some might happen after retirement but before required distributions begin. Others could happen after RMDs start, as long as the required distribution comes out first, because an RMD itself can't be converted to a Roth IRA.[4]
So the credible question was never whether she could convert everything at 22 percent.
It's how much of the account she could move over time at a lower family tax rate than her children may eventually pay.
What I'd Actually Model
A useful conversion analysis has to do more than compare today's bracket against a child's assumed future bracket.
In our planning process, I want to see at least five scenarios.
- The parent's tax bill with no conversions.
We need a baseline first. That means projecting IRA growth, required distributions, Social Security, pensions, deductions, filing status, and other taxable income.
Without it, we don't know whether the IRA is likely to shrink, hold steady, or keep growing even while distributions come out. In a lot of cases it keeps growing, and that surprises people.
- A series of partial conversions.
Then we model several amounts instead of an all-or-nothing decision. We might compare converting enough to stay inside a target bracket against pushing into the next rate on purpose.
The goal isn't to minimize this year's tax bill. It's to find out whether paying more now lowers the family's projected lifetime tax cost.
This is also where we settle how the conversion tax gets paid. Outside assets or withholding from the IRA. Paying from the IRA leaves fewer dollars inside the Roth and can shrink the benefit you're converting to capture.
- The surviving spouse.
For married couples, the children usually aren't the first tax problem. The first problem shows up when one spouse dies.
The survivor may keep most of the same income and file as a single taxpayer, which means reaching higher brackets on less income.
Conversions can protect the spouse who lives longer, not just the next generation.
- The beneficiaries' likely tax range.
Nobody knows what your children will earn twenty years from now. No projection fixes that.
We can still make reasonable estimates. Are they early in high-income careers? Do they own businesses? Might they retire before they inherit? Does one live in a high-tax state while the other lives somewhere with no income tax?
We aren't trying to predict their returns. We're trying to see whether there's a meaningful chance they pay a higher incremental rate than you could pay today.
- Where the IRA is actually headed.
Finally, who's getting this account?
If it's going to charity, a conversion is usually less attractive, since a qualifying charity can generally receive traditional IRA assets without the income tax an individual beneficiary would owe. Someone already making qualified charitable distributions may be shrinking the IRA and meeting charitable goals at the same time.
If it's headed to high-earning children, the beneficiary tax cost deserves more weight.
A Roth IRA Changes the Character of the Inheritance
Converting doesn't get your children out of the ten-year rule. They'll still generally need to empty an inherited Roth by the end of the tenth year.[1]
Two things change, though.
Qualified Roth distributions can generally come out free of federal income tax.[5] A child can take a large withdrawal without adding the same amount to taxable income, so it doesn't push wages, bonuses, business income, or capital gains into higher brackets.
And because a Roth owner is never treated as dying after a required beginning date, an inherited Roth generally doesn't carry the annual distribution requirement that an inherited traditional IRA can.[1] That's the mechanism behind the flexibility. Your child can leave the account invested and take it near the end of the ten years, on their own timing.
The five-year rule still matters. Death is itself a qualifying event, so for a beneficiary the holding period is the remaining hurdle. If the applicable five-tax-year period has been satisfied, distributions after the owner's death are generally qualified. If it hasn't, earnings distributed from the inherited Roth can still be taxable until that period is complete.[1][5]
Which is one more reason this planning works better when it starts years before the account is expected to change hands.
When a Conversion Isn't the Answer
A credible analysis has to say when the answer is no.
Conversions get less compelling when your children are likely to be in lower brackets than you are, or when most of the IRA is headed to charity. They get less compelling when the tax would trigger a Medicare premium increase you aren't willing to absorb, when you're planning to move from a high-tax state to a low-tax one, or when paying the bill would cut into liquidity you actually need. If you'd have to use a large slice of the IRA itself to cover the tax, that's a warning sign too. Substantial after-tax basis inside the account changes the math. So does having other deductions or charitable strategies that could reduce future IRA income more efficiently.
Tax rates change. So do account values, spending needs, beneficiaries, and estate plans.
So a conversion projection isn't a one-time answer. It's a document you update as the family changes.
The Decision Is Bigger Than This Year's Bracket
The traditional IRA you decide not to convert doesn't escape taxation.
For most families leaving pretax retirement assets to individual heirs, the decision just determines who pays it later.
That could be you, through required distributions.
It could be a surviving spouse, filing single.
Or it could be your children, emptying the account during the highest-earning years of their lives.
So the question isn't whether you're comfortable paying 22 percent today.
The question is whether 22 percent is the lowest rate your family will ever see.
The IRA gets taxed eventually. What's still up to you is whose return it lands on, what rate applies, and whether anybody chose it on purpose.
Build the projection while you still have the choice.
Then decide on purpose. That's what clarity, confidence, and peace of mind look like on a tax return.
Sources
- Internal Revenue Service, Publication 590-B, "Distributions from Individual Retirement Arrangements (IRAs)," including beneficiary categories, the ten-year rule, and inherited Roth IRA distribution rules. https://www.irs.gov/publications/p590b
- Internal Revenue Service, "Retirement Topics: Beneficiary." https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary
- U.S. Department of the Treasury and Internal Revenue Service, "Required Minimum Distributions," final regulations, July 19, 2024. https://www.govinfo.gov/content/pkg/FR-2024-07-19/pdf/2024-14542.pdf
- Internal Revenue Service, Publication 590-A, "Contributions to Individual Retirement Arrangements (IRAs)," including the taxation of conversions and the rule that a required minimum distribution can't be converted. https://www.irs.gov/publications/p590a
- Internal Revenue Service, "Roth IRAs," including qualified distributions and the five-year holding period. https://www.irs.gov/retirement-plans/roth-iras
Retirement: 8 Tests Before You Leave Your Paycheck Behind
Retirement shouldn’t begin with a guess.
Still, that’s effectively what happens when someone chooses a retirement date based primarily on the balance of an investment account.
The number may look substantial. The financial projection may show a high probability of success. And after decades of working and saving, it may finally feel like the right time to leave.
However, retirement readiness isn’t determined by one number.
Instead, it depends on whether the major pieces of your financial life can continue working together after your paycheck stops.
In our planning work, we don’t begin the retirement conversation by asking whether someone has reached a particular portfolio balance. We begin by looking at what the paycheck currently supports, what will replace it, and which financial decisions could put the most pressure on the plan after retirement.
That process usually requires more than an investment projection.
It requires a retirement readiness test.
Why Your Retirement Number Isn’t Enough
Most people begin with a straightforward question:
Do I have enough money to retire?
That’s an important question. However, it’s also incomplete.
Two couples could each have $4 million saved and have very different levels of retirement readiness.
One couple may have no debt, predictable spending, substantial taxable savings, two pensions, and both spouses already enrolled in Medicare.
Meanwhile, the other couple may have a large mortgage, most of its wealth in tax-deferred retirement accounts, several years to go before Medicare, and ongoing financial responsibilities for parents or adult children.
The account balances may be identical.
Nevertheless, the retirement decisions aren’t.
That’s because a portfolio can tell you how much you’ve accumulated, but it can’t tell you whether your spending is realistic, whether your tax strategy is coordinated, or whether your family is prepared for an unexpected health or caregiving event.
So, before choosing a retirement date, we believe the plan should pass eight readiness tests.
Test 1: Do You Know What Retirement Will Actually Cost?
First, you need a dependable estimate of what you’ll spend.
That sounds simple. Yet, in practice, it’s often one of the least developed parts of a retirement plan.
Many households know approximately what comes out of their checking account each month. However, that number may not include irregular expenses such as travel, home repairs, vehicle replacements, financial support for family members, or large insurance premiums.
Additionally, retirement spending rarely remains constant.
During the early years, you may spend more on travel, hobbies, dining, or home projects. Later, those expenses may decline while healthcare, home assistance, or caregiving costs increase.
As a result, one static spending assumption may not adequately describe a retirement that could last 25 or 30 years.
When we review retirement spending, we separate expenses into three broad categories:
- Core expenses are the costs required to maintain your household, including housing, utilities, food, insurance, and basic healthcare.
- Lifestyle expenses include travel, entertainment, gifts, hobbies, and other discretionary spending.
- Contingent expenses are costs that may not occur every year but still need to be planned for, such as major home repairs, helping an aging parent, or replacing a vehicle.
This distinction matters because each category has a different level of flexibility.
If markets decline, you may be comfortable postponing a large trip. However, you probably won’t be able to postpone property taxes, health insurance premiums, or a new roof.
Therefore, the first readiness test isn’t whether your portfolio can support one spending number.
It’s whether you understand which expenses are essential, which are flexible, and which could surprise you.
Test 2: Do You Know What Will Replace Your Paycheck?
Once spending is clear, the next step is mapping out your retirement income.
That may include Social Security, pensions, investment income, retirement account withdrawals, rental income, deferred compensation, or part-time work.
However, income planning isn’t simply a matter of adding those sources together.
Timing matters.
For example, you may retire several years before claiming Social Security. A pension may not begin immediately. Deferred compensation may arrive in large installments rather than predictable monthly payments.
Consequently, the first several years of retirement may place more pressure on your portfolio than the later years.
The plan should also consider what happens after the first spouse dies.
A married couple receiving two Social Security payments may eventually become a surviving household receiving one benefit. A surviving spouse may qualify for the higher applicable benefit, but the two payments generally aren’t added together.
Meanwhile, many household expenses may remain largely unchanged.
The surviving spouse may still have the same house, property taxes, insurance premiums, and maintenance costs. However, the household may now have less income and narrower federal tax brackets.
Therefore, a retirement income plan shouldn’t work only while both spouses are alive.
It should also be tested for the survivor.
Test 3: Do You Have Enough Liquidity?
Next, you need to determine how much money should remain readily available.
Retirement changes the role of cash.
While you’re working, a paycheck can replenish your checking account after a large expense. Once you retire, that expense may need to be funded by selling investments or withdrawing money from a retirement account.
That can become a problem during a market decline.
If you’re forced to sell investments after they’ve fallen, you’re not only realizing the loss. You’re also removing assets that would otherwise have the opportunity to participate in a recovery.
That’s why we don’t view a retirement cash reserve as idle money.
Instead, it’s a source of financial flexibility.
The appropriate amount will vary by household. However, it should generally reflect near-term spending needs, known major purchases, the reliability of outside income, and the level of risk in the investment portfolio.
At the same time, holding too much cash can create another problem. Over long periods, inflation can reduce its purchasing power.
So, the goal isn’t to move everything out of the market before retirement.
Rather, the goal is to maintain enough liquidity that you won’t need to make a rushed investment decision simply because a bill is due.
Test 4: Have You Built a Retirement Tax Strategy?
Taxes don’t disappear when your paycheck stops.
In many cases, they become more complicated.
During your working years, income may come primarily from wages. In retirement, however, cash flow may come from several sources with different tax characteristics.
Traditional retirement account withdrawals are generally taxable. Qualified Roth withdrawals may be tax-free. Brokerage account sales may create capital gains. Social Security may become taxable depending on the household’s other income.
Meanwhile, higher income can also increase Medicare Part B and Part D premiums through income-related monthly adjustment amounts.
Therefore, the question isn’t simply which account has money available.
The better question is which account should fund spending this year without creating unnecessary problems in future years.
For instance, the period after retirement but before required minimum distributions begin may create an opportunity to recognize income intentionally through Roth conversions.
However, that doesn’t mean converting as much as possible.
A Roth conversion can affect federal and state taxes, Medicare premiums, capital-gain taxation, healthcare subsidies before Medicare, and the amount of cash available for spending.
Additionally, required minimum distributions generally apply to traditional IRAs and many employer retirement plans under current tax rules.
As a result, the tax strategy should look beyond this year’s tax return.
It should consider the full retirement timeline.
The objective isn’t necessarily to pay the least amount of tax in one particular year. Instead, it’s to manage lifetime taxes while preserving the flexibility to fund the life you want.
Test 5: Have You Planned for Healthcare?
Healthcare is one of the biggest variables in the retirement decision.
If you retire before age 65, you’ll need to determine how you’ll maintain coverage until Medicare begins.
Depending on your circumstances, that may involve coverage through a spouse, COBRA, an Affordable Care Act marketplace plan, or private insurance.
However, the premium is only part of the cost.
You’ll also need to consider deductibles, copays, prescription expenses, dental care, vision care, and out-of-pocket limits.
Then, once Medicare begins, the planning doesn’t stop.
Original Medicare doesn’t cover every healthcare expense. For example, it generally doesn’t cover most routine dental care, hearing aids, or long-term custodial care.
That distinction is important.
Medicare may cover qualifying short-term skilled nursing care under certain conditions. However, it generally doesn’t cover ongoing custodial care when help with activities such as bathing, dressing, or eating is the only care required.
Therefore, a complete healthcare review should address two different risks:
The first is how you’ll pay for medical coverage and routine healthcare expenses.
The second is how you’d fund an extended-care need that Medicare may not cover.
Without both pieces, an otherwise strong retirement plan may still contain a significant blind spot.
Test 6: Do Your Debt and Housing Decisions Support the Plan?
Next, consider the role of debt.
A mortgage payment that felt manageable during your working years may feel different when it’s funded through portfolio withdrawals.
At the same time, paying off the mortgage immediately before retirement isn’t automatically the right answer.
For example, withdrawing a large amount from a traditional IRA could create a sizable tax bill. Using taxable savings to eliminate the mortgage could reduce the liquidity available for healthcare, home repairs, or a market downturn.
Therefore, the question isn’t simply whether you can pay off the house.
It’s whether paying it off improves the overall plan.
Housing also needs to be evaluated beyond the mortgage.
Consider whether the home will remain:
- Affordable to maintain
- Physically accessible
- Close to family and healthcare
- Appropriate for the lifestyle you want
- Practical if one spouse is living there alone
A retirement projection may assume that you’ll stay in the same home indefinitely. However, that assumption should be tested rather than accepted automatically.
Ultimately, the home should support your retirement.
Your retirement shouldn’t exist primarily to support the home.
Test 7: Are Your Protection and Estate Plans Current?
As retirement approaches, insurance needs often change.
Disability insurance may become less important once earned income stops. Meanwhile, long-term care, property, liability, and umbrella coverage may become more important.
Life insurance also deserves a fresh review.
Some policies may no longer be necessary because the original income-replacement need has declined. However, other policies may still play a role in supporting a surviving spouse, providing liquidity, funding a legacy goal, or covering an estate-planning need.
The objective isn’t to cancel every policy once you retire.
Instead, it’s to determine whether each policy still has a specific job.
The same principle applies to your estate plan.
Wills, trusts, financial powers of attorney, healthcare directives, and beneficiary designations should reflect your current wishes and family circumstances.
However, estate planning isn’t only about transferring assets after death.
It’s also about preparing for incapacity.
Your family should know who can make financial and medical decisions, where important documents are located, and how essential accounts and bills will be managed during an emergency.
Otherwise, a financially sound retirement plan may become difficult to implement precisely when your family needs it most.
Test 8: Are You Personally Ready to Retire?
Finally, retirement readiness isn’t purely financial.
Work provides more than income.
It may also provide structure, identity, relationships, intellectual stimulation, and a sense of purpose.
Once work ends, those things don’t automatically replace themselves.
That’s why we ask clients to think beyond the retirement date.
What will an ordinary Tuesday look like?
How will you spend your time after the initial travel and home projects are complete?
How will you maintain friendships and social connections?
What will give you a sense of progress or contribution?
And if you’re married, have you and your spouse discussed what each of you expects retirement to look like?
A person can be financially prepared to retire and still struggle with the transition.
Conversely, someone may feel emotionally ready to leave but discover that the financial pieces haven’t yet been coordinated.
A durable retirement plan needs both.
What a $4 Million Portfolio Doesn’t Tell You
Consider a hypothetical married couple with $4 million in total savings and investments.
At first glance, they appear ready to retire.
However, the account balance doesn’t reveal the full picture.
Of the $4 million, assume $2.8 million is held in traditional tax-deferred retirement accounts. Another $700,000 is held in a taxable brokerage account, $300,000 is in Roth accounts, and $200,000 is in cash.
The couple estimates that they spend approximately $160,000 per year. However, that estimate doesn’t fully include irregular home repairs, vehicle replacements, or travel.
They also have a mortgage costing approximately $4,000 per month.
Additionally, one spouse is several years away from Medicare eligibility. The couple expects to provide roughly $18,000 per year of support to an aging parent, and their estate documents haven’t been updated in more than 10 years.
Neither spouse has started Social Security.
So, are they ready?
Possibly.
However, the $4 million balance alone can’t answer the question.
Before choosing a retirement date, the couple would need to determine:
- Whether $160,000 accurately reflects their full spending
- How much additional money is needed for health insurance
- Whether the mortgage should be maintained, refinanced, or paid off
- How family support affects sustainable withdrawals
- Which accounts should fund the first several years
- Whether partial Roth conversions improve the long-term tax picture
- How the plan changes when Social Security begins
- Whether the surviving spouse can maintain the household
- How much cash should remain outside the investment portfolio
- Whether estate and incapacity documents need to be updated
The couple may discover that they can retire as planned.
Alternatively, they may decide to work one more year, reduce a planned expense, restructure the mortgage, or create a more deliberate withdrawal strategy.
The purpose of the analysis isn’t to push retirement further away.
Instead, it’s to replace uncertainty with informed tradeoffs.
Test the Full Plan Before Choosing the Date
Before submitting your retirement notice, step back and review the entire financial system that will need to replace your paycheck.
Do you understand what retirement will cost?
Do you know where your income will come from?
Do you have enough liquidity to avoid selling investments at the wrong time?
Have you coordinated taxes, healthcare, housing, insurance, and estate planning?
Have you tested what happens if markets fall, inflation remains elevated, a spouse dies, or a family member needs help?
And just as importantly, do you know what you’re retiring to?
The goal isn’t to eliminate every uncertainty.
That’s impossible.
Instead, the goal is to identify the decisions that matter most, understand the tradeoffs, and make sure the major pieces of your financial life can continue working together.
Because retirement readiness isn’t determined by whether you’ve reached one particular number.
It’s determined by whether the full plan is ready to support the life that comes next.
Sources
- Internal Revenue Service, required minimum distribution guidance. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
- Social Security Administration, retirement and survivor-benefit guidance. https://www.ssa.gov/survivor/amount
- Centers for Medicare & Medicaid Services, Medicare premiums and income-related adjustments. https://www.cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles
- Medicare.gov, services not covered by Original Medicare and long-term-care guidance. https://www.medicare.gov/coverage/long-term-care
Why Diversification Feels Broken Right Before It Works
Diversification can feel like a mistake when one part of the market is doing all the work.
That's the part investors don’t always appreciate.
Diversification is easy to believe in when everything's working. It's much harder to believe in when a narrow group of stocks is carrying the market higher and the rest of your portfolio feels like dead weight.
That's when the questions start.
Why own bonds?
Why own value stocks?
Why own international stocks?
Why own anything other than the part of the market that's clearly winning?
Those are fair questions. They're also the exact questions that tend to show up right before diversification matters most.
In our portfolio work, we don’t treat diversification as a prediction tool. It's a risk-management discipline. It's not there because we know exactly which part of the market will lead next. It's there because we don’t.
Diversification Isn’t Supposed to Feel Good All the Time
The purpose of diversification isn’t to beat the hottest asset class every year.
It's not designed to make every part of your portfolio look smart at the same time. It's not designed to keep up perfectly with whatever corner of the market is leading today. And it's not designed to eliminate frustration.
In fact, a diversified portfolio almost always owns something that feels disappointing.
That's not a flaw. That's the tradeoff.
If every part of your portfolio is working at the same time, there's a good chance your portfolio isn’t as diversified as you think. You may simply own different versions of the same risk.
True diversification means owning investments that behave differently under different conditions.
Some may lead when growth stocks are in favor.
Some may help when interest rates fall.
Some may provide stability when stocks are under pressure.
Some may become useful when market leadership broadens beyond the same small group of winners.
But because those investments behave differently, they won’t all work at once.
That's what makes diversification frustrating.
It's also what makes it valuable.
Diversification doesn’t guarantee a profit or protect against loss. No portfolio strategy can do that. But it can reduce the risk that one market segment, one economic outcome, or one investment theme determines the entire result of your plan.
That distinction matters.
The Problem Starts With Comparison
The hardest part of diversification isn’t the math.
It's the comparison.
When large-cap growth stocks lead for a long stretch of time, a balanced portfolio can feel too cautious. When a handful of companies are responsible for most of the market’s gains, anything outside of those companies can feel unnecessary. When the index keeps moving higher and your portfolio is moving more slowly, discipline starts to feel like a drag.
That's usually when investors begin to second-guess the plan.
At first, it's just an observation.
Then it becomes a question.
Then it becomes frustration.
And eventually, it can become action.
That's where investors get into trouble.
Because the decision to abandon diversification rarely feels reckless in the moment. It often feels rational. It feels like responding to the evidence. It feels like finally admitting what's been obvious for a while.
Why own the laggards when the winners are right there?
But that line of thinking can quietly turn a long-term investment plan into a performance chase.
And performance chasing has a way of showing up late.
Market Leadership Doesn’t Last Forever
The problem with chasing what's working now is that market leadership changes.
It doesn’t always change quickly. It doesn’t always change when valuations suggest it should. And it doesn’t always change in a way that feels obvious ahead of time.
But it changes.
That's why diversification exists in the first place.
It's not an admission that returns don’t matter. It's an acknowledgment that the future is uncertain.
Think about a period when large-cap growth stocks have led the market for several years. In that environment, a portfolio that also owns value stocks, small caps, international equities, or high-quality bonds may lag the most visible market benchmark.
The investor may look at the portfolio and feel like too many pieces aren’t pulling their weight.
Then conditions shift.
Interest rates move.
Earnings leadership broadens.
Valuations begin to matter again.
The economy slows, reaccelerates, or changes in a way investors didn’t expect.
Suddenly, the parts of the portfolio that looked unnecessary may become the source of stability, income, or return.
That doesn’t mean every diversifying asset will work perfectly. It doesn’t mean a diversified portfolio will avoid losses. And it doesn’t mean diversification will protect against every bad outcome.
But it does mean the portfolio isn’t dependent on one narrow market outcome continuing forever.
That's the point.
A concentrated portfolio feels best when the concentrated bet is working.
A diversified portfolio can feel less exciting during narrow leadership.
But when leadership changes, the difference matters.
Concentration Risk Often Feels Best Right Before It Matters
One of the reasons diversification is so difficult is that concentration risk can feel rewarding for a long time.
That's what makes it dangerous.
When one asset class, sector, or stock keeps leading, concentration doesn’t feel like risk. It feels like confirmation. The investor feels rewarded for having more exposure to the winners and less exposure to everything else.
This can be especially challenging for investors with concentrated company stock, equity compensation, or large positions that have appreciated over many years. The position may have created meaningful wealth. It may still be a high-quality company. It may still have a strong long-term story.
I worked with a client recently who was heading into retirement with a large share of their net worth sitting in company stock. They'd watched that stock grow across their entire career. Selling any of it felt like betting against their own success story.
I told them about a group of people I met years ago when I worked in Saint Louis. Most were former employees of Wachovia, and many were approaching retirement in 2008. Like my client, a large portion of their retirement savings sat in company stock. When the financial crisis hit and Wachovia collapsed, their savings went with it. Years of disciplined saving disappeared in a matter of months, not because they'd done anything wrong, but because their financial future depended entirely on one company continuing to succeed.
That story isn’t meant to scare anyone away from company stock. It's meant to separate two different questions. The first is, “Has this position performed well?” The second is, “What happens to my retirement plan if it stops?” My client’s stock may still have a bright future. But their retirement plan shouldn’t require it to.
For a deeper look at how to evaluate whether you’re sitting on a concentrated position and what to do about it, see Don’t Keep All Your Eggs in One Basket.
But none of that eliminates concentration risk.
A great company can still become an oversized position.
A strong sector can still become overowned.
A successful investment can still become too important to the family’s financial future.
That's why diversification isn’t just an investment concept. It's a planning concept.
The question isn’t simply, “What has performed best?”
The better question is, “How much of my financial life depends on this one thing continuing to work?”
That's a different question.
And for high-net-worth families, retirees, and investors with concentrated wealth, it's often the more important one.
The Risk Isn’t Just Losing Money
The risk isn’t simply that the market pulls back.
The bigger risk is that investors make a permanent decision based on a temporary environment.
That matters because most families aren’t investing for entertainment, ego, or quarterly bragging rights.
They're investing to support a retirement income plan.
To fund education.
To manage concentrated stock exposure.
To preserve liquidity.
To reduce the risk of being forced to sell at the wrong time.
To keep their broader financial life moving in the right direction.
For those investors, the portfolio has a job.
Its job isn’t to win every short-term comparison.
Its job is to support the plan.
That means some parts of the portfolio may look unnecessary for a while. Some may lag. Some may feel boring. Some may be hard to appreciate when the market’s favorite trade is working.
But every allocation should have a purpose.
Growth assets are there for long-term appreciation.
Defensive assets are there for stability and liquidity.
Income-producing assets are there to support cash flow.
Diversifying assets are there because the future doesn’t always look like the recent past.
The question isn’t whether every piece is outperforming today.
The question is whether the total portfolio is built to survive different market environments.
Diversification Has to Be Judged Against the Plan
A diversified portfolio shouldn’t be judged only against the market’s current favorite.
It should be judged against the plan it was built to support.
That includes the investor’s time horizon, spending needs, withdrawal strategy, tax situation, liquidity needs, risk tolerance, and ability to stay invested when markets become uncomfortable.
For an accumulator, diversification may be about avoiding overdependence on one source of return.
For a retiree, it may be about managing sequence-of-return risk and maintaining enough stability to support withdrawals during difficult markets.
For an executive with equity compensation, it may be about reducing the risk that career income, company stock, and long-term wealth are all tied to the same business outcome.
For a family stewarding generational wealth, it may be about preserving flexibility across market cycles rather than maximizing exposure to the latest winner.
The right portfolio isn’t the one that looks best in hindsight.
It's the one the investor can actually live with, fund goals from, and stick with when the environment changes.
That's where diversification earns its place.
Not because it always feels good.
Because it helps keep the plan from depending on one version of the future.
Don’t Confuse Frustration With Failure
There will always be moments when diversification feels broken.
There will always be a stock, sector, asset class, or theme that makes the disciplined portfolio look dull by comparison.
And there will always be investors who are tempted to simplify the portfolio around whatever's worked best recently.
But temporary frustration isn’t the same thing as strategic failure.
Sometimes diversification feels broken because one part of the market has dominated for a long period of time.
Sometimes it feels broken because the benefit hasn’t been needed yet.
Sometimes it feels broken because the thing it's designed to protect against hasn’t happened.
That doesn’t make it useless.
It makes it easy to underappreciate.
The real test of diversification doesn’t come when the market’s current favorite is still leading. It comes when leadership changes, when expectations shift, when volatility returns, or when investors are reminded that no single trade works forever.
By then, it may be too late to rebuild the portfolio without paying a price.
So don’t judge diversification by whether it keeps up with the market’s current favorite.
Judge it by whether your portfolio can survive a change in leadership.
Because by the time diversification feels obvious again, the opportunity to stay disciplined may have already passed.
Weekly Market Update: Hot Inflation Sidelines Rate Cuts
Markets traded lower this week, though there was relative strength beneath the major equity indexes. The S&P 500 and Nasdaq both ended the week lower as the largest technology stocks sold off, while the Russell 2000 small-cap index, along with the value and equal-weight factors, posted modest gains.
Technology, Communication Services, and Consumer Discretionary were the worst-performing sectors as mega-cap names like Apple and Microsoft declined.
The eight remaining sectors finished higher, led by defensive areas of the market. Bonds gained as Treasury yields fell despite a hot inflation report, with investors expecting inflation to ease following the recent drop in oil prices.
Oil fell nearly 5% as shipping traffic through the Strait of Hormuz increased, while the VIX, a measure of expected market volatility, drifted higher as stocks declined.
Key Takeaways
Semiconductors Remain Volatile as a Crowded Trade Unwinds
The group sold off sharply Monday and Tuesday as investors unwound leverage that had built in the industry. Semiconductors have significantly outperformed the broader market this year, but the popularity cuts both ways: when sentiment turns, the moves are large in both directions. The mood shifted again Wednesday evening, when Micron, a leading memory-chip maker, reported record quarterly revenue and its shares jumped more than 15% overnight into Thursday morning.
Why it matters: AI infrastructure spending is the engine behind semiconductor companies' profits and share-price gains, and the industry has benefited from hundreds of billions of dollars in capital spending. The trade has become popular and heavily leveraged, which is why it has become so volatile.
Inflation Ran Hot in May
The Federal Reserve's preferred inflation measure rose 4.1% from a year earlier, its highest level in nearly three years. Higher energy prices tied to the conflict in the Middle East were the main driver, though many economists believe May may mark the peak before inflation eases over the summer. Even so, the Fed has shifted its stance with inflation still above its 2% target. After signaling earlier this year that rate cuts were likely, officials have taken cuts off the table for 2026, and markets now see a possible rate increase later this year.
Why it matters: The Fed's rate-cutting cycle looks likely to stay on pause. With the Fed now placing more weight on inflation than on growth or the job market, interest rates could stay elevated, and may even move higher, before any cuts arrive.
Energy Prices Return to Pre-Conflict Levels
Oil has now given back the entire increase tied to the Middle East conflict. U.S. crude fell to around $70 a barrel this week, its lowest level since the conflict began in late February, as tankers resume moving through the Strait of Hormuz and shipping normalizes.
Why it matters: Lower energy prices ease pressure on household budgets. They are also the main reason inflation is expected to cool in the months ahead, since the same energy spike that drove inflation to a three-year high is now reversing.
First-Quarter GDP Revised Higher
The government's final estimate of growth for the first quarter came in at 2.1%, up from an earlier reading of 1.6%. The figure covers January through March, so it predates most of the energy shock from the conflict and reflects where the economy stood earlier in the year.
Why it matters: The economy entered 2026 on firmer footing than many economists previously thought, an encouraging data point even though it measures activity before the oil supply disruption.
Business Investment Held Up in May
Orders for long-lasting manufactured goods fell 4.5% for the month, but nearly all the decline came from a drop in volatile aircraft orders following an unusually strong April. A broader measure of business investment, which strips out aircraft and defense, rose more than expected.
Why it matters: The headline looks worse than the reality. Underneath the noise, businesses continued to invest, a quietly encouraging sign for the economy and for corporate profits.
The Retirement Costs You Don't See Coming
Most retirement plans begin with one big question.
How much can I safely spend?
It’s the right question. But it’s often answered too simply.
Most retirees build their spending assumptions around the lifestyle they can see clearly. Travel. Dining out. Family support. Hobbies. Charitable giving. Home projects. Everyday living.
Those expenses matter. But the expenses that matter most aren’t always the ones you can see.
Healthcare costs can rise faster than expected. In fact, a 65-year-old couple retiring today is projected to spend roughly $345,000 on healthcare over the course of retirement, and that figure doesn’t even include long-term care.[1] Home maintenance can grow more expensive as the house ages. Insurance premiums can climb. Inflation can quietly raise the cost of the same lifestyle, one year at a time. And long-term care, even if it never arrives, can become one of the largest unknowns in the entire plan.
That’s the retirement spending blind spot.
The risk isn’t simply that you spend too much. The bigger risk is that your plan assumes spending will behave more predictably than real life usually allows.
Retirement spending isn’t one number
It’s a collection of categories, and every category behaves differently over time.
Some expenses go down. Payroll taxes disappear. Retirement contributions stop. Work-related costs decline. A mortgage eventually gets paid off.
But other expenses go up. Healthcare often becomes a larger slice of the budget as you age, and it tends to climb faster than everything else. Over the years, medical costs have tended to rise faster than general inflation, often by a few percentage points a year. Home costs arrive in lumps you can’t schedule. And inflation, while it doesn’t touch every household the same way, still raises the cost of groceries, utilities, insurance, services, travel, and the help you may eventually need.
That creates a planning problem.
A flat spending assumption feels clean. But clean isn’t the same as accurate. A single number can hide the very expenses most likely to create stress later.
That’s why retirement income planning has to go beyond a monthly spending figure.
The better question isn’t, “How much do you want to spend each year?”
The better question is, “Which parts of your spending are predictable, which parts are flexible, and which parts could surprise you?”
That distinction matters, because different expenses call for different tools.
Core living expenses need reliable income. Lifestyle spending needs flexibility. Healthcare and long-term care need contingency planning. Home repairs need reserves. Inflation-sensitive expenses need a portfolio built to protect purchasing power over time.
The goal isn’t to predict every future cost perfectly. The goal is to build a plan that can absorb the costs you can’t predict at all.
What this looks like in real life
I’ve spent a lot of time sitting with couples in the window right before and just after retirement. The plan almost always looks the same on paper. It’s the years that follow that tell the real story.
Here’s a version of a story I’ve watched play out more than once.
A couple retires in their mid-sixties. They’ve done thoughtful work. They know what they spend on travel, dining, gifts to family, utilities, groceries, entertainment, and giving. On paper, the plan works.
But the projection assumes their spending rises at a steady inflation rate and stays smooth from one year to the next.
Then real life shows up.
In a single year, their Medicare premiums increase. Prescription costs come in higher than expected. Property insurance rises. A major appliance fails. The roof needs work. And they want to help an adult child with a family expense.
None of these costs is unusual. But together, they create pressure.
And these are only the costs that arrive while both spouses are healthy. Roughly 70% of people turning 65 will need some form of long-term care at some point, and the price is real. The national median for a private room in a nursing home now runs north of $127,000 a year, and assisted living is close to $71,000.[2] A cost like that doesn’t show up in a smooth annual budget. It lands all at once.
The issue isn’t that the couple was careless. The issue is that the plan treated retirement spending as one predictable number instead of several different kinds of expenses.
A more integrated plan would separate the spending into categories.
A baseline budget for essentials. A lifestyle budget for the flexible things. A healthcare reserve for rising medical costs. A home maintenance reserve for the large and infrequent. An inflation assumption that reflects the truth that some expenses climb faster than others. And a withdrawal strategy designed to flex when spending runs high or markets run weak.
That last piece matters more than most people expect. Recent research pegs a safe starting withdrawal rate near 3.9% for someone who wants steady, inflation-adjusted spending.[3] But retirees willing to stay flexible, dialing spending up in strong years and easing off in weak ones, can support meaningfully higher withdrawals over time. The takeaway isn’t a magic number. It’s that flexibility is itself a planning tool.
The couple may still spend the same amount over time. But now the plan has structure. Now it’s clear which expenses are essential, which are flexible, and which need a cushion all their own.
That’s the difference between a retirement spending estimate and a retirement spending plan.
Plan for what you can’t see
Retirement planning isn’t just about reaching a number. It’s about understanding what that number has to support.
Healthcare, home costs, inflation, insurance, family needs, and the repairs you never schedule can all reshape your spending over time. So can the costs that arrive long after the plan is built. The higher tax bill a surviving spouse can face, for example, is one of the most overlooked expenses in retirement, and it rarely shows up in a simple monthly budget. Because costs like these rarely arrive neatly, they deserve a place in the plan of their own.
The goal isn’t to make retirement feel restrictive. The goal is to create clarity, confidence, and peace of mind.
When you know which expenses are fixed, which are flexible, and which could surprise you, you can make better decisions about withdrawals, investments, cash reserves, insurance, and the planning that protects you years from now.
So before you assume your retirement budget is complete, it’s worth asking one more question.
Have we planned for the expenses that don’t show up every month, but can still rewrite the plan?
That question matters, because retirement income should not only support the life you expect. It should be ready for the costs you don’t see coming.
This is exactly the kind of coordination we walk clients through in the Premier Wealth Blueprint. A retirement plan shouldn’t just tell you how much you can spend.
It should help you understand what your spending needs to withstand.
[1]Fidelity Investments, “2025 Retiree Health Care Cost Estimate,” 2025. newsroom.fidelity.com
[2]Genworth and CareScout, “Cost of Care Survey 2024,” 2025. carescout.com/cost-of-care
[3]Morningstar, “The State of Retirement Income: 2025,” 2025. morningstar.com
Asset Location: The Retirement Tax Mistake Hiding in Plain Sight
Most investors spend a lot of time thinking about what they own.
Stocks. Bonds. Mutual funds. ETFs. Cash. Real estate. Alternative investments.
That matters.
But for retirees and near-retirees, there is another question that can be just as important:
Where should each investment live?
Because the same investment can produce very different outcomes depending on whether it is held in a taxable account, a traditional IRA, a Roth IRA, or a trust.
That is the basic idea behind asset location.
It is not about chasing higher returns. It is about coordinating your investments with your tax situation, your retirement income needs, your estate plan, and your long-term wealth strategy.
In other words, your portfolio may be diversified. But if the right assets are sitting in the wrong accounts, your plan may not be as efficient as it could be.
What You Own vs. Where You Own It
Asset allocation answers the question, "What should I own?"
Asset location answers the question, "Where should I own it?"
That distinction matters because different account types are taxed differently.
A taxable brokerage account gives you flexibility, favorable long-term capital gains treatment, and potentially a step-up in basis at death. But it can also create annual tax drag from interest, dividends, and realized gains.
A traditional IRA or 401(k) offers tax deferral, but withdrawals are generally taxed as ordinary income. That means the account can become a future tax liability, especially once required minimum distributions begin.
A Roth IRA offers tax-free growth and tax-free qualified withdrawals, which can make it one of the most valuable accounts for long-term growth, legacy planning, and late-retirement flexibility.
So the planning question is not simply, "Which account is best?"
The better question is, "Which assets belong in which accounts, based on the role each account plays in the broader plan?"
That is where asset location stops being an investment issue and becomes a wealth management issue.
As a general rule, highly tax-inefficient investments may be better suited for tax-deferred accounts. Long-term growth assets may be attractive in Roth accounts. Tax-efficient equity investments may fit well in taxable accounts, especially when flexibility and estate planning are important.
But there is no universal answer.
The right decision depends on your income needs, your tax bracket, your withdrawal strategy, your charitable intent, your estate plan, your health, your longevity assumptions, and whether the money is intended for you, your spouse, or the next generation.
This is also where coordination between your investment strategy and your tax strategy does the quiet, compounding work that rarely shows up on a single year's statement.
What This Looks Like in Real Life
Consider a retired couple with three major account types.
A taxable brokerage account. A traditional IRA. A Roth IRA.
They own a mix of stock funds, bond funds, cash, and dividend-oriented investments.
At first glance, they look well diversified. They have growth assets, income assets, and liquidity. But when we look closer, the location of those assets may be creating unnecessary friction.
Suppose most of their bonds and income-producing investments are held in the taxable account. Each year, that income may show up on their tax return, whether they need the cash or not.
Meanwhile, their highest-growth investments may be sitting inside the traditional IRA. That growth is tax-deferred, which sounds attractive, but it may also increase future required minimum distributions and push more income into ordinary tax rates later.
At the same time, their Roth IRA may be sitting mostly in cash or conservative investments, even though they may not need that money for many years.
Nothing here is technically wrong.
But the accounts may not be working together as well as they could.
A more integrated approach might place some income-producing assets inside the IRA, where annual income is not taxed currently. The Roth IRA might hold more long-term growth-oriented assets, since qualified withdrawals can be tax-free and Roth accounts are often powerful legacy assets. The taxable account might hold more tax-efficient investments, while preserving flexibility for spending needs and potential estate planning benefits.
The portfolio did not necessarily become more aggressive.
The investments did not necessarily become more complicated.
But the structure became more intentional.
And that is the point.
Asset location is not about making the portfolio look clever. It is about making the portfolio fit the plan.
The Real Goal
Asset location is one of those planning topics that is easy to overlook, because it does not always feel urgent.
But over time, the location of your investments can influence your tax bill, your retirement income flexibility, your estate plan, and the amount of wealth ultimately available to you and your family.
The goal is not to find a perfect formula.
The goal is to make sure your investment strategy, your tax strategy, your withdrawal strategy, and your estate plan are all working in the same direction.
So if you have taxable accounts, traditional retirement accounts, and Roth accounts, it may be worth asking a simple question:
Are the right investments sitting in the right places?
That question may not sound dramatic.
But in retirement planning, small structural decisions can create meaningful long-term differences.
If you are not sure whether your portfolio is positioned as efficiently as it could be, this is exactly the kind of coordination we help clients evaluate through the Premier Wealth Blueprint, where your investment plan and your tax plan are built to work as one.
Because your investments should not just be diversified.
They should be integrated. That’s how you get clarity, confidence and peace of mind.