The Top 5 Financial Planning Challenges in the First 10 Years of Retirement

By Net Worth Advisory Group

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Retirement marks the beginning of an entirely new chapter—one that’s vastly different from anything you’ve experienced before. Gone are the days of a steady paycheck and structured routine, replaced by the uncertainty of fixed resources and newfound freedom. It’s a major shift from the life you’ve always known, and now is the moment to see how well your years of preparation will serve you.

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Through our experience, we’ve identified five common financial challenges retirees encounter within their first decade. Curious to learn more? Keep reading below.

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1. Not Creating a Withdrawal Strategy

Financial planning doesn’t stop once you enter retirement. Capitalize on your wealth by deciding the most tax-efficient way to withdraw funds in your golden years. 

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Different financial accounts are taxed at different rates. Traditional IRAs and 401(k)s are taxed at the ordinary income tax rate when you withdraw. Roth IRAs and Roth 401(k)s are taxed beforehand, so the money is withdrawn tax-free. Funds in a taxable investment account are typically taxed at the capital gains tax rate. 

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As you can see, calculating the best time to pull from each account is enough to give anyone a headache. But the last thing you want is to get hit with a hefty tax bill.

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Create a withdrawal strategy with the help of a trusted professional who can make sure you’re withdrawing funds at a sustainable rate and that you’re doing it in a tax-efficient way.

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2. Overspending in Retirement

Many people spend their retirement years doing all the things they never got to do when they were working—starting a passion project, remodeling the house, traveling the world, and more.

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It’s easy to underestimate the amount of money you’ll spend those first few years when you don’t account for all these “extras.” Overspending, even for a short period, can shave years off the longevity of your assets. My advice? Create a spending plan. Calculate your monthly income given your withdrawal strategy (See #1) and then create a budget. 

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3. Ignoring Inflation

Another major challenge we see new retirees face is the desire to play it safe in the stock market. This does more harm than good as it leads to inflation risk. 

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While healthcare expenditures are typically affected less by inflation than other spending categories, from 2021-2022 there was a 4.0% increase in medical care services compared to the historical average inflation rate in the United States of 2.5%-3%. What does this mean? Retirees are more likely to feel the effects of inflation due to mandatory expenses, such as healthcare costs. 

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As tempting as it may be, resist the urge to worry about short-term stock market volatility. With a retirement that could easily last 20 to 30 years, inflation is one of the biggest threats to your nest egg. Sit down with a trusted professional who can help you strike a balance between protection and growth. 

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4. Not Having an Emergency Fund

Could you comfortably pay an unexpected, major expense in retirement without jeopardizing your financial future? For most of us, the answer is no. 

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That’s why we recommend a two-tiered approach to emergency savings in retirement. First, keep a small emergency fund (just a few months’ worth of living expenses) in a bank account for incidentals and unexpected costs like home repairs or medical bills. Second, set aside 1 to 3 years of estimated withdrawal needs in a conservative cash or cash-equivalent investment vehicle. This helps safeguard against market volatility and gives you access to funds during downturns, so you’re not forced to sell investments when prices are low. This strategy helps you keep calm while also keeping the rest of your portfolio positioned for long-term growth.

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5. Facing Retirement Without Support

You’ve spent decades carefully building and safeguarding your wealth—don’t leave your retirement to chance. Navigating this next phase alone can be risky, but with a trusted financial advisor, you can create a strategy that makes your savings last. The right guidance can mean the difference between running out of money and enjoying a stable, worry-free retirement.

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Call us today at 801-566-6639 or schedule a complimentary, no-obligation consultation to see if we are a good fit to help you pursue your goals.

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To learn more, visit our website.

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About Net Worth Advisory Group

Founded in 2003, Net Worth Advisory Group is an independent, fee-only, CERTIFIED FINANCIAL PLANNER® and investment advisory firm located in Salt Lake City, Utah. We specialize in helping people transition from the workplace into retirement and ensuring that those who are already retired will not outlive their nest egg. Our top priority is to have clients experience a greater sense of ease with diligent, personalized wealth care and the implementation of customized financial plans and ongoing personalized asset management. We equip all clients with a comprehensive financial plan, meeting every six months to update as needed and review investment performance. Our team is passionate about providing comprehensive financial planning with the fee-only model, and we love feeling like we’re making a difference in our clients’ financial lives.

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As a NAPFA-registered fee-only advisory firm, our recommendations are untainted by a hidden agenda to sell financial products paying large commissions. Unlike our competitors at brokerage firms, insurance companies, and banks, we are compensated solely by our clients, so we are financially motivated to provide objective advice that is always in our clients’ best interests. Anyone can call himself or herself a financial planner, but only an advisor with the CERTIFIED FINANCIAL PLANNER®, CFP® designation has met the education, examination, experience, and ethical requirements mandated by the CFP® board. According to the CFP Board, there are 97,000+ CFP® professionals in 2023, representing about 1 in 3 financial advisors in the U.S. Net Worth advisors are also members of NAPFA, which only has about 4,600 advisors, and are either CFP® professionals or CFP® professionals in training.

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Net Worth Advisory Group’s mission is to significantly improve the lives of our clients by delivering exemplary financial planning and wealth management advice that enables them to live the lives they have imagined.

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