Your Guide to a Secure Financial Plan for Retirement

Most Americans worry they won’t have enough money for retirement, and they’re right to be concerned. Only 36% of workers feel confident about their retirement readiness, according to the Employee Benefit Research Institute’s 2024 survey.

We at Devine Consulting believe a solid financial plan for retirement starts with understanding your specific needs and timeline. The right strategy can help you build wealth while protecting against common retirement risks like healthcare costs and market downturns.

How Much Money Do You Actually Need for Retirement

Most financial advisors throw around the 70-85% replacement income rule, but this generic advice misses the mark. The Federal Reserve Board found that households ages 55 to 64 have a median retirement account balance of just $14,500, which proves that one-size-fits-all approaches fail miserably. You need a personalized calculation that reflects your actual expenses and retirement goals.

Track Your Real Monthly Expenses

Monitor every dollar you spend for three months to get an accurate baseline. Housing typically drops 15-20% in retirement as mortgages end, but healthcare costs jump dramatically. Medicare covers basic needs, but long-term care averages $4,500 monthly according to Genworth’s 2023 Cost of Care Survey. Add travel, hobbies, and potential family support to create your true retirement budget. Multiply this monthly figure by 12, then by 25-30 years to account for longevity.

Calculate Your Income Sources and Fill the Gaps

Social Security replaces about 40% of pre-retirement income for average earners, but you can increase benefits by 76% if you delay claims until age 70 versus age 62. Calculate your projected Social Security benefit with the SSA’s online calculator, then subtract this from your total retirement needs. The remaining gap must come from personal savings, 401k accounts, IRAs, and other investments. If your gap exceeds your current savings trajectory, increase contributions immediately or consider additional work years to close the shortfall.

Adjust for Inflation and Market Reality

Inflation erodes purchasing power over decades (the average retiree lives 20+ years after age 62), so factor in 2-3% annual increases to your expense calculations. Market volatility can devastate portfolios just before retirement, which makes sequence-of-returns risk a major threat. Your portfolio needs enough flexibility to weather early retirement market downturns without forcing you to sell investments at losses. This reality makes asset allocation and withdrawal strategies just as important as your total savings amount.

How Do You Build a Portfolio That Actually Works

Your retirement portfolio demands aggressive growth in your 20s and 30s, then gradual shifts toward stability as you approach retirement. T. Rowe Price research shows you should maintain 90% stocks when you’re young, drop to 60% at age 60 and 40% at age 70. This timeline-based approach works because you have decades to recover from market crashes when you’re younger, but need stability when you’re five years from retirement.

Max Out Tax-Advantaged Accounts First

Focus on your 401k contributions first, especially if your employer offers match funds. The 2025 contribution limit reaches $23,500, plus an additional $7,500 catch-up for those 50 and older. Workers aged 60-63 can now contribute an extra $11,250 under the SECURE 2.0 Act (total contributions reach $34,750 annually). Roth IRAs provide tax-free withdrawals after age 59½, which makes them perfect for younger workers who expect higher tax brackets in retirement. Traditional IRAs offer immediate tax deductions but require minimum distributions at age 73.

Choose Low-Cost Index Funds Over Expensive Management

Financial advisors typically charge 1-2% annually, which destroys long-term returns through compound fees. Vanguard’s low-cost index funds average 0.04% expense ratios compared to 0.5-1.5% for actively managed mutual funds. A $100,000 investment with 1% annual fees costs $28,000 over 30 years versus just $1,200 with index funds. Target-date funds automatically adjust your asset allocation as you age, which removes guesswork from portfolio management.

Focus on Broad Market Exposure

Try broad market exposure through total stock market funds and international diversification rather than individual stocks or expensive fund management. These funds spread risk across thousands of companies while maintaining low costs. International funds protect against domestic market downturns and currency fluctuations. Your next step involves protection against the biggest threats to your retirement security: healthcare costs and market volatility that can derail even the best-planned portfolios.

What Retirement Risks Will Destroy Your Financial Security

Healthcare expenses represent the biggest threat to your retirement savings, with a 65-year-old retiring today potentially spending $165,000 on health care in retirement. Long-term care adds another devastating expense layer, with private nursing home rooms costing $108,405 annually based on Genworth’s latest data. Medicare covers only basic medical needs and excludes long-term care entirely, which means you need separate insurance or substantial cash reserves.

Plan for Healthcare and Long-Term Care Costs

Purchase long-term care insurance in your 50s when premiums stay affordable, or set aside $200,000-$400,000 specifically for care costs. Health Savings Accounts provide triple tax advantages (deductible contributions, tax-free growth, tax-free medical withdrawals) and become regular retirement accounts after age 65. Medicare supplement insurance fills gaps in standard coverage, while dental and vision insurance address costs that Medicare ignores completely.

Combat Inflation With Real Assets and TIPS

Inflation destroys fixed-income retirement plans over decades, with 3% annual increases cutting purchasing power in half every 23 years. Treasury Inflation-Protected Securities offer direct inflation protection through principal adjustments that match Consumer Price Index changes, though returns stay modest. Real estate investment trusts provide inflation protection through property values and rental income that typically rise with costs.

Structure Tax-Efficient Withdrawal Strategies

Tax planning becomes critical once you start withdrawals, with poor strategies costing thousands annually in unnecessary taxes. Withdraw from taxable accounts first to let tax-deferred accounts compound longer, then tap traditional IRAs and 401ks before age 73 when required minimum distributions begin. Roth conversions during low-income years between retirement and RMDs can reduce future tax burdens significantly.

Protect Against Market Volatility

Sequence-of-returns risk threatens portfolios when market crashes occur early in retirement, forcing you to sell investments at losses. Keep 1-2 years of expenses in cash or short-term bonds to avoid selling stocks during downturns. Dollar-cost averaging through systematic withdrawals smooths market volatility over time. Consider geographic arbitrage through moves to states without income taxes (Florida, Texas, Nevada), which can save 5-13% on retirement income depending on your previous state’s tax rates.

Final Thoughts

Your financial plan for retirement requires immediate action, not wishful thinking. Start with calculations of your real expenses and income gaps, then maximize contributions to tax-advantaged accounts while you still have earning power. The median retirement savings of $14,500 for Americans who approach retirement proves that delays cost everything.

Build wealth through low-cost index funds and proper asset allocation to give yourself decades to recover from market downturns. Healthcare costs that average $165,000 per retiree and long-term care expenses that exceed $100,000 annually demand specific plans beyond basic savings strategies. Professional guidance becomes invaluable when you navigate complex tax strategies, withdrawal sequences, and risk management.

We at Devine Consulting provide strategic financial planning that helps businesses and individuals achieve long-term financial stability. Your retirement security depends on decisions you make today (every month of delay reduces your compound growth potential and increases the savings burden on your future income). Start with realistic expense calculations, maximize tax-advantaged contributions, and build portfolios that balance growth with protection against inflation and market volatility.