A financial advisor may be worth considering as retirement approaches and financial decisions become more difficult to evaluate on your own. At that stage, decisions about taxes, withdrawals, Social Security, healthcare costs, and investment risk often become closely interconnected.
Imagine you're 57. Your latest 401(k) statement lands in your inbox. The balance is larger than you ever expected. Still, it doesn't feel as reassuring as you thought it would. As retirement gets closer, your attention begins to shift. Building wealth is no longer the only priority. You may also worry about decisions involving taxes, withdrawals, Social Security, and retirement income. If those decisions are becoming difficult to understand, professional retirement-planning advice may be worth considering.
If you're considering professional guidance, Finance Advisors can help you get started. Our short quiz matches you with up to three fiduciary advisors. Once connected, a fiduciary advisor can help with difficult retirement decisions involving taxes, withdrawals, Social Security, Roth conversions, and retirement income.
What Is Financial Advice for Retirement Planning?
Retirement planning advice helps you prepare for the financial decisions before and during retirement. That may include guidance on taxes, withdrawals, Social Security, insurance coverage, and estate planning. The real challenge is understanding how these decisions fit together and how they can affect your retirement over time.
This article covers the three stages most people pass through on the way to retirement: roughly ten years out, five years out, and the year they stop working. It explains how a retirement-planning financial advisor may help you address each stage.
What a Retirement Advisor Actually Does (and Doesn't Do)
Retirement advisors help clients make decisions about taxes, withdrawals, Social Security, and retirement income. However, they do not make retirement decisions for you or eliminate every financial risk. Instead, they help you evaluate your options and understand how different choices may affect retirement over time.
Before we move through the stages of retirement, it's important to make one distinction. For many people, retirement advice extends beyond investment management. In many cases, the focus is on helping you coordinate decisions involving taxes, withdrawals, Social Security, insurance coverage, and estate planning. Investments still matter. But the decisions surrounding those investments can become equally important.
It's also important to understand that not all financial advisors work under the same set of rules. For example, fiduciary advisors are legally required to act in your best interest. In comparison, brokers work under a different regulatory framework. Both can be qualified professionals. However, understanding that distinction may help you make a more informed choice.
Stage One: Ten Years Out
This is one of the most important stages of planning before retirement. At this point, decisions involving taxes, savings, and future income can still have a lasting impact on retirement outcomes.
For many people, this stage coincides with peak earning years. The kids may be finishing college, and the mortgage is well underway. Retirement savings may be growing steadily as well. Even so, many households have less saved than they expect. According to the Federal Reserve's 2022 Survey of Consumer Finances, the median retirement account balance for households ages 55 to 64 was $185,000. Against the reality of a retirement that could last thirty years or more, that amount may seem small in comparison.
At this stage, attention typically shifts to four key planning areas:
Roth Conversion Runway
For many households, this is the stage when Roth conversion planning can be especially valuable. While your income may still be relatively high, it may decline after retirement before Social Security benefits and required withdrawals begin. As a result, those lower-income years can create an opportunity to move money from a traditional IRA or 401(k) into a Roth account at potentially lower tax rates.
In some cases, Roth conversions may also decrease future required minimum distributions by reducing the portion of your retirement savings that remains subject to those rules. However, the potential benefits depend on several factors, including your current tax rate, state tax laws, charitable goals, and expectations for future tax rates. Because those factors vary from one household to another, Roth conversion strategies are rarely one-size-fits-all.
Catch-Up Contributions
Once you reach age 50, many 401(k) plans and IRAs allow additional catch-up contributions beyond the standard annual limits. For those approaching retirement, these higher limits can create an opportunity to increase retirement savings in the final years before retirement.
More recently, legislation increased catch-up contribution limits for certain workers between the ages of 60 and 63. However, many people are unaware that these additional opportunities for contribution exist. An advisor may help determine whether they apply to your situation and how they fit into your overall retirement plan, rather than being overlooked.
Asset Location
You may spend a lot of time focusing on how your assets are allocated. However, the type of account that holds those assets may affect your long-term results. Taxable brokerage accounts, traditional IRAs, and Roth accounts follow different tax rules. Because of those differences, certain investments may be more tax-efficient in one type of account than another.
Over time, those decisions can affect long-term results. For that reason, it may be worth addressing them before retirement. That may give you more time to benefit from any potential advantages in the years ahead.
The "Is the Number Big Enough" Question
This is one of the questions that concerns many people as retirement approaches. The answer rarely comes down to a single number. Instead, it depends on factors such as your spending needs, retirement lifestyle, housing plans, health, and life expectancy. While retirement calculators can be helpful, they rely on assumptions that may not reflect your situation. An advisor may help evaluate those assumptions and identify factors you may not have considered.
Therefore, ten years before retirement may be one of the most important periods for planning. During this time, decisions involving savings, taxes, and future income may affect many aspects of retirement. Despite the importance of this period, many people delay planning because retirement can still feel distant.
Stage Two: Five Years Out
Planning becomes more focused and time-sensitive during this period. Decisions involving withdrawals, Social Security, taxes, and health care begin moving from future considerations to near-term priorities. At the same time, the flexibility to adjust your retirement strategy gradually declines.
Here are several planning challenges that require more careful consideration during this period:
Sequence-of-Returns Risk
Two retirees may earn identical average annual returns and still get very different retirement outcomes. In many cases, the outcome depends on when those returns occur. A major market decline during the early years of retirement can be especially challenging when withdrawals are already being made from the portfolio. In comparison, the same market decline later in retirement may have a more limited effect on your portfolio.
This difference highlights an important retirement planning challenge known as sequence-of-returns risk. It is especially important during the years immediately before and after retirement. During this period, an advisor may help implement strategies to reduce its impact. These strategies may include a cash reserve, a bond ladder, a structured withdrawal strategy, flexible withdrawal rules, or a combination of approaches. The goal is not to pursue higher returns. Rather, the goal is to reduce the impact of a difficult market period on your retirement plan.
Social Security Claiming Strategy
Choosing when to claim Social Security benefits is more difficult than it seems. While you can start benefits as early as age 62, delaying until age 70 can increase your monthly payment by approximately 8% per year beyond full retirement age. For married couples, the decision can become even more complex because spousal benefits, survivor benefits, and two separate earnings histories may all affect the claiming strategy.
Because of these factors, claiming decisions need careful thought. One commonly used approach is for the higher-earning spouse to delay benefits in order to maximize the survivor benefit, while the lower-earning spouse claims earlier to provide income. However, that strategy is not appropriate for everyone. The right approach depends on factors such as age, health, earnings history, and other sources of retirement income. As a result, claiming Social Security without a well-considered plan could reduce lifetime benefits by tens of thousands of dollars. Although Social Security representatives can explain the available options, they cannot recommend which claiming strategy to choose.
Because this decision can affect your lifetime benefits, it is worth taking the time to consider your options carefully. In this case, SSA.gov's Retirement Planner can help you compare different claiming scenarios.
Health Care and the Medicare Gap
If you retire before age 65, you'll face a Medicare coverage gap. Several options may help bridge that gap, including ACA marketplace coverage, COBRA, a spouse's plan, or retiree benefits if available. However, each option comes with its own costs and tradeoffs. ACA premiums are based on your modified adjusted gross income. That means decisions about withdrawals, Roth conversions, and when to claim Social Security can all affect your healthcare costs. As a result, changing one part of the plan can affect several others.
In addition, once you reach 65, the planning doesn't stop. Medicare includes multiple parts, supplemental coverage options, and potential surcharges. One example is the income-related monthly adjustment amount (IRMAA). If your income from two years earlier exceeds certain thresholds, your Medicare Part B and Part D premiums can increase by hundreds of dollars per month. As a result, Medicare costs may be higher than expected throughout retirement without careful planning.
The Tax-Bracket Map
Most pre-retirees have never taken the time to map how their effective tax rate may change between ages 60 and 95. A financial advisor can help you lay out that path more clearly. In many cases, it begins with lower-income years before Social Security and RMDs start. Then, as those income sources come online, taxable income may gradually increase. Along the way, IRMAA surcharges and the widow’s penalty can also affect your overall tax situation throughout retirement.
Once that path becomes clear, important planning decisions become easier to evaluate. For example, you can more confidently determine when to convert, when to claim benefits, and how much to withdraw.
Stage Three: At Retirement and Just After
Retirement is the stage when your savings begin supporting your income needs. As a result, the focus shifts from building wealth to managing withdrawals, controlling taxes, meeting distribution requirements, and maintaining long-term financial stability.
A well-structured retirement income plan often involves several planning challenges:
The Withdrawal Strategy
The classic “4% rule” can be a useful starting point, but it is not a complete retirement income strategy. Instead, income planning often needs to adjust as circumstances change. When markets are performing well, spending may have room to increase. In contrast, during market downturns, a more conservative approach may be appropriate.
Over time, market performance, sequence-of-returns risk, and changing income needs can all affect how much you withdraw each year. The account selected for each withdrawal can be equally important. Because different account types are subject to different tax rules, withdrawal sequencing can affect both taxes and long-term portfolio growth. In many cases, taxable accounts are used first, allowing tax-advantaged assets more time to grow.
At the same time, earlier IRA withdrawals may help reduce future RMDs, while preserving Roth assets longer can support continued tax-free growth. Because these decisions are closely connected, annual tax planning plays a central role in your withdrawal strategy.
RMD Timing
Under previous rules, required minimum distributions (RMDs) began at age 70½. However, recent SECURE Act 2.0 updates have changed RMD starting ages. This means that if you were born between 1951 and 1959, RMDs now begin at age 73. If born in 1960 or later, they begin at age 75. This extra time can create planning opportunities, including Roth conversions and tax bracket management, which may help reduce future RMD pressure. As a result, the years before RMDs begin can play a key role in your tax strategy.
In this situation, IRS guidance on Required Minimum Distributions (RMDs) explains how withdrawals are calculated based on account balances and life expectancy factors.
Moreover, the required amount is calculated each year using your prior year-end balance and IRS life expectancy factors. Missing an RMD can be costly, with penalties generally set at 25% of the amount not withdrawn, though this may be reduced if corrected in time. For this reason, a structured withdrawal process is more preferable than relying on memory alone.
The First Down Year
The real challenge begins when you experience your first market decline after relying on your portfolio for income. At some point, that down year may arrive. It may even come early in retirement. Markets can fall, and your statement may show a significant paper loss. In those moments, the urge to move out of the market and into safer assets can be difficult to resist.
During market downturns, the planning completed in Stage Two can provide valuable flexibility. A dedicated cash reserve may help reduce the need to sell investments after a decline. Likewise, a structured withdrawal strategy can lessen the pressure to make important financial decisions during periods of market volatility. An advisor may also help you maintain a long-term perspective when emotions threaten to interfere with a well-designed plan.
A Specific Scenario
Consider a 60-year-old couple with $1.4 million in retirement savings. Their portfolio consists of approximately $1.1 million in traditional IRAs and 401(k)s, $200,000 in a taxable brokerage account, and $100,000 in a Roth account. With retirement planned for age 65, they currently have a combined annual income of $240,000.
Without a plan, the path is relatively simple. They continue saving, retire at 65, claim Social Security at 67, and begin taking RMDs at 73. However, once those income sources come into play, their tax bracket may start rising again just when they expected it to decline. Retirement may still go well, but they could end up paying more in lifetime taxes than necessary.
In addition, the surviving spouse may eventually face an even greater tax burden, as the same withdrawals could be taxed at higher rates when filing as a single taxpayer.
In this situation, a retirement advisor may identify a different path. For example, they may recommend Roth conversions during the lower-income years between ages 65 and 70 to reduce future tax exposure. They may also suggest delaying Social Security for the higher earner until age 70 to increase the survivor benefit. At the same time, assets can be repositioned to improve tax efficiency. A dedicated cash reserve may also provide flexibility during a difficult start to retirement and help reduce the need to sell investments at unfavorable times.
Of course, results vary by household, and no outcome is guaranteed. Even so, for couples in a similar situation, a well-planned strategy may lead to lower lifetime taxes, greater withdrawal flexibility, and larger survivor benefits.
How to Decide if Now Is the Right Time
You should consider professional retirement guidance when the financial decisions ahead become too important to handle with confidence on your own. As retirement gets closer, professional guidance can help you evaluate your options, avoid costly mistakes, and make more informed decisions.
On the other hand, you may not need a retirement advisor yet. If retirement is still more than 15 years away, your financial situation is relatively simple. In addition, your 401(k) may already be invested in a target-date fund that requires limited ongoing management. In that case, staying consistent with your savings plan and revisiting the decision later may be enough.
However, the need for guidance increases as retirement approaches. In your 50s, financial decisions require more careful evaluation. At the same time, you may be managing equity compensation, an inheritance, business ownership, or multiple account types. In that situation, a one-time planning engagement may provide a clear roadmap without the cost or commitment of an ongoing advisory relationship.
On the other hand, as retirement approaches, ongoing retirement advice may provide greater value, especially if your assets are spread across multiple account types. At that stage, planning decisions become more interconnected. You may be evaluating Roth conversions, coordinating a Social Security claiming strategy, weighing pension options, or planning an early retirement. You may also be managing a large taxable account or prefer not to make important portfolio decisions during a market decline.
Ultimately, the decision is not tied to a specific age. It depends on the complexity of the decisions ahead and how much they may affect your retirement over time. As the stakes increase and the choices become more difficult to evaluate, professional guidance may provide more value.
Complex Retirement Decisions Ahead? A Fiduciary Advisor Quiz Can Help You Evaluate Your Options!
Retirement decisions become increasingly interconnected as you approach retirement. Choices involving taxes, withdrawals, Social Security, and healthcare can have long-term consequences for your financial future. Without a clear plan, it can be easy to overlook opportunities, make costly mistakes, or claim benefits at the wrong time.
A fiduciary advisor can help you evaluate these decisions within the context of your broader retirement plan. By evaluating how different decisions affect one another, they can help you make more informed decisions and identify strategies that align with your goals. Take the quiz to get started with a fiduciary advisor who can help you handle the decisions ahead.
FAQs
How Much Does a Retirement Advisor Cost?
Retirement advisor costs vary based on the services you need and how the advisor is compensated. You may pay a percentage of assets, a flat planning fee, an hourly rate, or a retainer. But before hiring an advisor, request a complete fee schedule in writing.
What Is the Difference Between a Fiduciary and a Non-Fiduciary Advisor?
The key difference is the standard that guides the advice you receive. A fiduciary is required to act in your best interest. Other financial professionals may operate under different regulatory frameworks. Understanding that distinction can help you assess recommendations and potential conflicts more carefully.
Can I Just Use a Robo-Advisor for Retirement Planning?
Yes, you can rely on a robo-advisor if your retirement needs are relatively simple. However, retirement planning extends beyond portfolio management. As decisions about taxes, income, and withdrawals begin affecting one another, personalized guidance may provide additional value.
What Questions Should I Ask a Potential Retirement Advisor?
Focus on understanding how the advisor works and whether their approach fits your needs. Ask about their fiduciary status, compensation, planning process, and experience. You should also discuss meeting frequency and review a sample plan before making a decision.
Is It Too Late to Get an Advisor If I'm Already Retired?
No, retirement does not eliminate the need for financial planning. You may still have to make important decisions about withdrawals, taxes, healthcare expenses, and estate planning. Although some opportunities may be more limited, professional guidance can still help you make informed choices.
What Does Financial Advice for Retirement Planning Actually Include?
Retirement planning advice typically helps you develop a strategy to generate income throughout retirement. In addition, it may cover tax planning, Social Security timing, withdrawal strategies, healthcare costs, and estate considerations. The exact scope depends on your needs and goals.
Finding a Fit
The hardest part of getting retirement advice isn't deciding you need it. It's finding someone whose approach fits your situation, whose fee structure makes sense for the work involved, and whose communication style you actually want to deal with for the next twenty years. That match matters as much as the credentials.
Take the free quiz at FinanceAdvisors.com. Get matched with a fiduciary advisor.
This article is for general educational purposes only and does not constitute financial, tax, legal, or investment advice. FinanceAdvisors.com is a matching service that connects users with independent fiduciary financial advisors; it does not provide financial advice, calculate projections, or guarantee any specific outcome. Tax laws, contribution limits, and benefit rules change; verify current figures with a qualified professional before acting. Past performance is not indicative of future results. Consult a licensed advisor regarding your individual circumstances.
