Retirement planning can feel a little like aiming at a moving target. Rules change, markets shift, and life itself has a way of throwing in surprises when you least expect them.
Trying to predict the future perfectly is not only difficult – it can be a bit unrealistic. A better approach is to expect change and build a plan that can adapt as those changes happen.
That’s where it helps to understand the key moving pieces that could impact your retirement plan; three of the biggest ones to pay attention to are Social Security, Required Minimum Distributions (RMDs) and inflation. Each one can affect how much income you have, how much you keep after taxes, and how long your money lasts.
Once you understand how these pieces work, you’re in a much better position to build a plan that can actually hold up over time. So instead of worrying “What if things don’t play out the way I expect?”, you can move forward knowing things won’t play out the way you expect – but you’ll be ready for whatever comes next.
Want a partner who can help you navigate the intricacies of retirement planning? Talk with a member of the Curio Wealth team to see how our approach can be personalized to meet your needs.
1. Social Security
There’s been growing uncertainty in recent years around whether Social Security will still be a source of income for retirees in the next decade.
Rather than continue to worry and speculate, here’s my advice: Plan based on what you know. Right now, you know (or can find out) your expected benefit amount, your spouse’s amount, and the age at which you can start to access it.
Build your retirement plan around those existing factors. And if you want to protect yourself a little bit more in the event of Social Security’s demise, be conservative in your planning. Run an analysis based on the assumption, for example, that only half the benefit will only be available, or none at all. What would that look like in your situation and what can you do to be ready should either of these scenarios occur?
At Curio Wealth, we run this conservative analysis routinely for every couple engaged in financial planning with us. Why? Because when one spouse dies, the remaining spouse can collect only one Social Security payout – the higher of the two – going forward. This fact alone greatly impacts a couple’s future financial situation.
For example, say that one member of a couple was receiving $4,000 a month and their spouse’s benefit was $2,000 a month, for a total monthly benefit of $6,000. If the spouse with the higher payout passes away, the remaining spouse’s social security goes from $2,000 to $4,000—which reduces their usual monthly payout by $2,000. This could have a major impact on the remaining spouse’s financial situation, particularly if they continue to maintain the same living expenses. That’s why it’s wise to build in some protections such as life insurance.
2. Required Minimum Distributions
A Required Minimum Distribution, or RMD, is a government law dictating the amount you have to take out of your retirement accounts (like traditional IRAs and 401(k)s) once you hit a certain age. When you take money out of those accounts, you’ll have to pay taxes on it. The RMD age has risen over the last several years; it’s currently 73 and in 2033 it will be 75.
Theoretically, the RMD amount will become larger because, based on life expectancy, you have a shorter period of time to take it out. So when the age gets pushed back to 75, those distributions will be greater than they would have been if you started taking your RMD out at age 70.
The extra five years has given your money more time to grow tax-deferred, which is valuable, but the larger amounts will be taxed more. Thus, taxes become a very large part of the equation.
We’ve seen some situations where people have done a great job saving but it’s all in pre-tax accounts. As a result, they’re facing very large tax bills when they pull the money out. And it’s not only the taxes you could incur; there are other costs as well; for instance, Medicare premiums go up when you have higher income.
Think about your personal situation. If you’re sixty, retired, and you’re not yet required to take out these minimum distributions, it may make sense to start pulling money out and converting it to a Roth IRA. This reduces your future RMD amounts and you may even be able to pay a lower tax rate if you do it right.
This strategy can make a huge difference in how much tax you’re paying and how much money you get to actually keep.
Be aware, however, that it can become complicated – there are a lot of moving parts! At Curio, we do a lot of work in this area for you to help you avoid doing things like unintentionally increasing your Medicare premium as the result of an IRA–Roth IRA conversion, for example.
The extra five years has given your money more time to grow tax-deferred, which is valuable, but the larger amounts will be taxed more. Thus, taxes become a very large part of the equation.
3. Inflation
We’re often asked about how inflation will impact retirement savings. Inflation must be considered as part of the planning process, but it’s only one thing to consider as you create the roadmap to your financial future.
At Curio, we put a conservative assumption on everything – your investment returns, inflation, your spending, and your life expectancy – and create a plan around that. And then we have the ability to pull some different levers and see what the impact looks like to ensure you’re able to withstand changes in inflation.
People tend to forget that what is happening now will not always be the case. No one can predict the future, so the best thing you can do is make a plan based on the things you know to be true at this time.
Build A Plan That Can Handle What’s Next
Retirement planning isn’t about getting every detail exactly right from the start. It’s about building something that can adjust as your life and the world around you inevitably change.
Yes, Social Security may look different than expected. And taxes and RMDs can shift your income in ways you didn’t anticipate. Inflation will rise and fall over time. None of these factors exist in isolation, and each one has the potential to impact your plan in meaningful ways.
But when you understand how these pieces work together, you’re no longer reacting. You’re prepared. You can make informed decisions, adjust when needed, and stay focused on the bigger picture.
At Curio Wealth, our approach to retirement planning is personalized to you. Together, we’ll build a plan around your goals and values, and help you figure out questions like whether you’re on track for retirement, how to manage your income in retirement, how to reduce taxes, and how to coordinate decisions across accounts and life stages. That kind of personalized planning is what helps create a strategy that can adapt as your life, and the world around you, changes.
Because at the end of the day, a successful retirement plan isn’t one that avoids change – it’s one that’s built to handle it.
