Financial experts advise that utilizing Roth accounts can help manage tax liabilities during retirement. Since contributions to Roth accounts are made with after-tax dollars, withdrawals from these accounts do not incur additional taxes. As a result, qualified distributions from Roth accounts do not add to taxable income, which can prevent retirees from moving into higher tax brackets.
Planning for Healthcare Costs in Retirement
Healthcare remains a significant and unpredictable expense for retirees. According to the 2026 Fidelity Retiree Health Care Cost Estimate, a 65-year-old can expect to spend around $185,000 on healthcare during retirement. Those with health issues may have even higher expenses, as not all medical costs are covered by insurance.
Retirees should consider various healthcare costs, including insurance premiums, copays, coinsurance, services excluded by insurance, and long-term care, which Medicare typically does not cover. “The first question I ask is, ‘What is the age or target age for retirement?’” said financial planner Seech. If individuals intend to retire before age 65, they must buy insurance through healthcare exchanges, which may vary based on income. Projections for these premiums may be inflated by 5% annually to allow for conservative planning.
Once individuals reach 65 and begin focusing on Medicare costs, Seech notes that while planning is not exact, current data with aggressive inflation estimates can help anticipate out-of-pocket expenses in retirement.
How to Make $1 Million Last in Retirement
While having $1 million may not suffice for everyone’s retirement needs, adjusting lifestyle choices can help stretch that amount. “You can work longer, or you can spend less money, or a combination of both,” Seech advised. The widely recognized 4% rule allows retirees to withdraw around $40,000 in the first year from a $1 million nest egg, which equates to about $3,333 monthly, with adjustments for inflation in subsequent years.
If current lifestyle expenses exceed that withdrawal amount, retirees may need to consider reducing expenses. Financial advisor Schmehil pointed out that while some may prefer not to extend their working years, they might be willing to make lifestyle changes, such as downsizing or traveling less in retirement. He emphasized that financial planners aim to present various options, weighing the pros and cons to help clients navigate their decisions.
When to Consider Working with a Financial Advisor
Engaging a financial advisor can be beneficial for planning retirement savings, especially as one accumulates assets. However, financial expert Schmehil suggested that it may not be necessary to seek professional help in the early working years, particularly when investments are limited. “If you’re only investing $10,000, $20,000 or $30,000, the cost of a wrong decision could be less significant compared to the learning experience,” he explained.
Younger investors are encouraged to familiarize themselves with their financial situations and ensure adequate savings in tax-advantaged accounts. The abundance of online resources can provide valuable information for those lacking the assets to hire a financial advisor. As one’s financial situation becomes more complex, seeking professional advice can become increasingly important.
Schmehil noted, “The best time to work with a financial advisor is when the costs of working with that individual justify the results.” At a certain point, a single misjudgment in strategy could result in significant financial loss. However, certain individuals with complicated finances may find it beneficial to consult a professional earlier, despite potential higher costs.
