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Advice Only Retirement Financial Planning

The annual Retirement Confidence Survey consistently shows retirees’ expectations pre, and post-retirement may not always be realistic for specific areas of retirement planning. A realistic financial plan will consider all variables and any high-risk scenarios.

Being real with expenses

Expenses are one of the most disliked aspects of developing a financial plan. It’s impossible to determine the long-term sustainability of a financial plan without a clear idea of expenses. If you want creative solutions to tackle the planning expense exercise check out our article on How To Budget a Sustainable Retirement.


Pick realistic assumptions

Inflation can be a problematic assumption to settle on right now. Inflation is the change in certain goods and services over a long period. It is important to remember that in the plan report, even a tiny change can radically change the course of your planning decision-making. Let’s not move too quickly and dramatically with inflation. The truth is that inflation has averaged about 3% over the last 30 years; that remains a fair and realistic assumption despite the recent inflation increases due to the COVID pandemic and the Russian invasion of Ukraine.

Regarding financial planning assumptions, it is essential not to create planning panic based on a temporary peak in inflation when viewed in the grand scheme of things. Sabotaging a working financial plan based on a short-term assumption may ultimately be less than fruitful. Watch how things play out over the next year or so and decide if to change the long-term inflation assumption built into the plan. An example might be to move the inflation assumption from 3% to 3.5% over 30 years.

Being real with medical costs

The RCS reports that most retirees experience higher-than-expected medical costs once they formally retire. A big surprise for many retirees is the price fluctuations associated with Medicare Part B&D. Did you know there is a teir system for who pays what in Medicare premiums? 

Understanding IRMAA

The IRMAA (or Income Related Monthly Adjustment) is a surcharge to Medicare Part B&D premiums and is determined by your past two years’ tax returns.


Because IRMA is based on income, including potential capital gains, you may pay more for Medicare than expected. Medicare planning can be a pitfall or planning opportunity depending on how far in advance you wrap your head around how it works in your particular situation.

Give me an example

Let’s say a couple plans to sell a paid-off primary residence in the same year they retire. Let’s assume they’ll have capital gains beyond the primary home exclusion of $500,000 (for a married couple). Suppose those gains are substantial and earned income in their final year is still reasonably high. The combination of higher income and capital gains could expose them to paying more for Medicare. An alternative strategy might be to delay selling the property until income drops a year later. It is important to note that certain life-changing events allow individuals to petition an IRMAA surcharge. Visit the Social Security website to learn more.

The time to repair the roof is when the sun is shining.

-John F. Kennedy

Being real with custodial care

This is a big one. If a long-term care plan has not been determined before retirement, inertia may have already made the decision. However, while some may have bought some time by not addressing the issue, no one is off the hook for coming up with a plan for long-term care (should it happen). That’s because a custodial care need has a high likelihood of occurrence.

How big of a risk is it?

Retirees should keep in mind the statistics. says many retirees will need custodial care at some point. The average age for a claim age has historically been around 80 years old, but it may be prudent to plan closer to age 85 (if it occurs). Even with a sound long-term care plan in place, it’s common to be sideswiped, and it frequently affects individuals at inopportune times. It can lead to situations such as being forced to sell investment accounts in a down market or “fire sales” on an investment property. The ability to raise and maintain cash flow and expenses is an added stressor on top of an already troublesome period.

Can I afford to self-insure?

What is going to be the strategy for paying? How realistic is it to have funds come from cash reserves, retirement accounts, or a property sale? That’s where insurance can play a role, but in many cases, it makes sense to consider a reverse mortgage to reduce costs or tap into equity.

Using this resource, one can likely get a ballpark of the out-of-pocket cost to pay for long-term care.

These are often big numbers to most retirees, and they typically occur during a vulnerable period in people’s lives when individuals are on a fixed income.

No matter what, there ALWAYS needs to be a consideration and a well-rationed plan for long-term custodial care, even if insurance was not purchased or is unavailable. I’ve seen all kinds of creative ideas, and if you are interested in learning more, please read our article Qualifying Yourself for Long Term Care.

Can I rely on Medicaid to pay?

First, be sure not to confuse Medicaid and Medicare. Medicare is not “custodial care.” On the other hand, Medicaid is a joint federal and state program to fund long-term custodial care needs for specific impoverished individuals. Furthermore, some Medicaid programs have unique names. The Medicaid program in your state can be found here.

Medicaid programs by state


Relying on Medicaid to pay for custodial care is probably not ideal and should ultimately not be a “Plan A” for most retirees with functioning retirement plans. Being realistic about the viability of utilizing these programs is highly important. Medicaid is generally for those with little or no assets. It typically requires that individuals spend their assets down to a tiny amount to qualify for the program. Some protections exist for surviving spouses, but it’s not generally realistic or desirable to consider Medicaid a practical solution for long-term custodial care needs for those retirees with functioning retirement plans. Furthermore, for the individuals who do qualify, the expectation is that the individual needing care will likely be required to go to a facility and will not generally receive ongoing long-term care in their home.

Being real with risk

Risk tolerance and, in turn, your withdrawal strategy are vital areas of a financial plan that should require ongoing re-examination – but not necessarily a change. Sometimes I invite my clients to consider the “realness factor” of their plan assumptions. General awareness of your comfort levels with risk keeps the family unit on the same page. It foreshadows a potential contingency plan for a change when trouble arrives, not if or after it comes. It’s part of having a “tactical” financial plan; you want that.

It’s called planning for a reason.

What’s the right risk?

Your risk tolerance should stay relatively constant throughout retirement, with minor tweaks reducing risk over time. That’s the conventional wisdom, anyway. Sometimes, individuals have a “deer in the headlights” moment. I call this “the long game” and the “short game.” Essentially, this is generally the difference between planning math, current economic variables, and what your gut says. What you’re supposed to do isn’t always what your gut says is the right thing to do this second. So what’s the right choice?

Managing indecision

The goal is to rectify the two impulses, but sometimes, it’s much easier said than done. Think of it as “calling an audible” or making a “game time” decision versus the initial plan. It’s true; the general rule is to avoid changing things around constantly. I see plenty of people making bad decisions that way. Ultimately be bold in making an informed personal choice in subjective matters – especially regarding market risk. Helpless regret is a far worse feeling than making an erroneous but sound judgment call based on all the information.

Whatever the decision, be sure you’ll be able to live with it, and it doesn’t cause a financial disaster. ALWAYS resist making a change to something that has the potential to disrupt an otherwise perfectly functioning financial plan. These may be situations where it makes sense to seek the guidance of a trusted advisor.

To learn more about developing a risk tolerance, see our article 7 Steps To ‘Personalize’ Your Risk Tolerance.

Editor’s note: This blog offers informal investment and financial planning advice. We know nothing about your unique financial situation. The buying and selling of any financial product or security should only be considered in context. If appropriate, seek the counsel of experienced, ideally objective, financial, tax, or estate planning professionals. Past performance is not indicative of future performance.

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