Top 10 Retirement Challenges - Davie Kaplan (2024)

August 16, 2022

Samuel P. Irvine, CFP®, CRPC®, Financial Consultant/Investment Advisor

More than 60% of Americans are worried about having enough money for retirement, according to a recent Gallup poll. There are certainly challenges to preparing financially for a secure retirement, but they are not insurmountable. Here are the top 10 retirement-planning challenges our clients face, and how Davie Kaplan works to overcome them.

Saving Enough Early

The earlier you start saving for retirement, the less you will actually have to save. The money you save earlier in life has more time to grow and benefit from compounding interest – a mathematical principle that Albert Einstein once described as the “eighth wonder of the world.” A person who saves $5,000 per year starting in their thirties can save a lot more than someone in their fifties saving $50,000 per year.

Starting early can be a game changer for your retirement security, especially if you commit to saving a significant portion (at least 15%) of your income for retirement. Contributing to a 401(k) or other employer-sponsored retirement plan is a great way to get started, but it’s not the only option. You can also contribute to an IRA, health savings account (HSA) and college savings accounts to increase your savings in a tax-smart manner.

Minding the Gap Between Retirement Age and Social Program Availability

Many of our clients want to retire before they are eligible for Medicare or Social Security benefits, and it can be challenging to know how to bridge the gap until they reach the age of eligibility. It’s important to understand the cost of health insurance and the options that will be available until you’re old enough for Medicare. At Davie Kaplan, we work with Medicare specialists to ensure that our clients understand their options for healthcare from early retirement into later retirement.

In addition, we work closely with clients to determine the right time for them to start taking Social Security benefits and work to balance that with IRA distributions. For example, in some cases, it makes sense to take distributions earlier to cover cash flow before Social Security benefits begin.

Maintaining a Focus on the Long Term

Reaching retirement is only the first goal. Throughout your retirement years, it’s important to continue focusing on maintaining a portfolio that will see you through. Retirement can be long and fruitful, and for many people, it’s challenging to preserve and grow retirement funds that will last. That means regularly adjusting your portfolio for market volatility and temporary declines. Our team of Certified Financial Planners work with clients regularly to ensure that their portfolios are prepared for whatever ups and downs they might experience.

Managing Cash Flow

Financially, the biggest change most people experience when they retire is the lack of a regular paycheck. Turning your retirement savings into regular cash flow for your household is often challenging. We work with clients to explore options, timing and resources for distribution planning and maximizing all available income sources, while maintaining tax efficiency throughout retirement.

Planning for Estate and Legacy Objectives

Leaving a legacy for loved ones is a top priority for many families, but because families and legacy priorities change regularly, this can be a challenge. We recommend reviewing beneficiary information every year, and reviewing wills and healthcare proxies every 5 to 10 years. We also talk regularly about our clients’ charitable intentions and gifting plans.

At Davie Kaplan, we work closely with estate planning attorneys and other estate planning professionals to ensure that our clients understand their options and have a current estate and legacy plan that fits their specific vision.

Shifting State of Residency

Many people want to purchase a secondary property and/or change their state of residency in retirement, often to save on state income taxes. However, shifting your state of residency isn’t as easy as getting a new driver’s license in the new state. It’s important to understand your options, as well as understand the costs and necessary considerations that a potential relocation will encompass, to make sure the strategy will work for your situation.

Involving Family in Generational Wealth Planning

Parents and grandparents often resist informing their children and grandchildren about their estate plans, for various reasons. While it may not be necessary to inform kids and grandkids about all the details of your wealth and your plans for it, it’s a good idea to at least give them the basic information they would need to make sure your wishes are fulfilled after you’re gone.

At Davie Kaplan, we often host introduction meetings for clients’ children and grandchildren. Even if they don’t know all the details of your estate plan, simply knowing who to call and where to find important information can significantly ease the burden of handling a loved one’s final wishes while grieving.

Considering Long-Term Care

A person turning 65 today has a 70% chance of needing some type of long-term care during their remaining years, according to U.S. government data. Planning for that eventuality is an important part of retirement planning—and for many, it’s a challenge.

For example, long-term care insurance policies are very expensive, but relying on government-funded care requires a person to drain or divest all of their personal assets. Those aren’t the only two choices. We recommend that our clients make a plan for covering the costs of their own long-term care rather than planning to go into a state-run facility.

Reviewing Insurance Portfolios

If you have a term life insurance policy, it may lapse before or during retirement, so it’s important to plan ahead. At Davie Kaplan, we help clients look at their insurance portfolios alongside their investment portfolios and determine how they might work together. For example, some policies include a cash-out option that can be part of an estate plan. Take time to understand your policies, your options, and the long-term implications of your insurance choices.

Staying Busy

Nowadays, it’s very common for people to continue working in some capacity during retirement. For many, part-time work is vital to maintaining structure in their daily lives, as well as a sense of purpose. Volunteering is an important option, but paid work is also viable for many retirees. Be open to different opportunities and look for the right position for your particular situation.