Retirement Retirement Planning

15 Things Financial Advisors Wish All Retirees Knew Before Retirement

A lot more goes into retirement planning than many people realize.

By Laura Gesualdi-Gilmore

Edited by Chris Kissell

Updated Dec. 17, 2024

When it comes to planning for retirement, most Americans have some basic ideas about best practices. We commonly hear advice such as max out your 401(k), don’t spend frivolously right before retirement, and consider downsizing as you enter your golden years.

But those are just the basics. Financial professionals say there are other important moves that too many people overlook.

Here are 15 things financial advisors wish people knew about retiring.

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It’s crucial to start saving early

When people start their careers, too many fail to think about how putting away money early on can help them build wealth that will make a big difference decades down the line.

“It isn’t something we are generally taught to start thinking about at 18,” says Aaron Cirksena, founder and CEO of financial planning company MDRN Capital. “But the sooner you begin, the more your investments can grow.”

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Cirksena believes there should be more emphasis on compounding your savings. Cash shouldn’t be left in accounts where it just sits there and earns little to no interest.

“I wish my clients invested into things that will compound,” he says. “Even small, consistent contributions can add up over time.”

Roth IRA conversions help prevent large tax bills

Those hoping to retire early — and who do not plan to apply for Social Security right away — should consider converting money from a traditional 401(k) or traditional IRA to a Roth IRA, according to Doug Carey, a Chartered Financial Analyst and founder of retirement/financial planning software WealthTrace.

Converting to a Roth IRA allows retirees “to avoid the high tax rates that will hit them when they begin taking Social Security and have required minimum distributions,” Carey says.

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Waiting to claim results in bigger Social Security checks

Waiting to claim Social Security helps you to secure a bigger monthly payment for the rest of your life.

“When it comes to Social Security, waiting as long as you can to start claiming can make a huge difference,” Cirksena says.

Just remember that the benefit of waiting ends when you turn 70. In addition, it’s important to understand whether and how your state taxes Social Security benefits.

Retirement is not all about money

While a lot of retirement planning involves finances, it’s not all about the money.

Stuart Schiffman — a Certified Financial Planner and founder of Compound Wealth Advisors — urges people to consider what matters in day-to-day life, too.

“Many people don’t realize how their social life is extremely correlated to their happiness in retirement,” he says.

For example, being near family and friends can be important for emotional well-being. “Don’t make the mistake of going to live on some exotic island because it’s so pretty,” Schiffman says.

Testing a retirement plan can reveal important insights

Before sitting down with a financial advisor, Schiffman says it’s important to know what you want out of retirement. He suggests testing out what life could be like in your planned retirement location.

“Go live in a community for a few weeks where you think you will retire,” he says. “Can you see yourself there for ‘X’ years in the future? If not, try somewhere else.”

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Health care costs are likely to grow during retirement

People should be realistic and not underestimate how much health care will cost during retirement.

“Before retirement, people need to heavily consider health care costs and taxes,” Cirksena says. “Because without that in mind, you could end up outliving your savings.”

Maximizing 401(k) contributions is the key to a sound retirement

Employees — especially those further away from retirement — don’t always take full advantage of 401(k) programs at work. Experts say this is a mistake.

“Understanding the specifics of your 401(k) and maximizing contributions is another must,” Cirksena says.

Learning about required minimum distributions work can reduce taxes

Required minimum distributions (RMDs) are the minimum amount you need to withdraw from your retirement account each year. For most folks, this begins once you reach age 73.

Financial advisors wish more people understood RMDs and how they work.

“The federal government requires anybody with a tax-deferred retirement account to pay RMDs once they turn a certain age,” Carey explains. “These distributions are then taxed at ordinary income tax rates.”

Carey says retirees who don’t understand this “can be setting themselves up for big tax bills that they did not expect.”

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Early withdrawals can be costly

It may be tempting to withdraw from your 401(k) for a large purchase, but this should be avoided unless you have no other choice.

People must understand the tax implications of withdrawals, Cirksena says. “Early withdrawals can come with penalties and unnecessary taxes,”he says.

It’s foolish to wait until retirement to make money work for you

No one should wait until retirement to make their money work for them, says Shana Hennigan, chief business officer at savings platform Raisin.

So, don’t let money remain stagnant in a checking account that pays little to no interest. “You can make your money work harder by prioritizing safe, guaranteed investments, like CDs and high-yield savings accounts,” Hennigan says.

The hidden costs of relocating can be high

Many factors should go into the decision to relocate in retirement, experts say.

“Relocation isn’t just about finding a sunny place to retire,” Cirksena says. “You need to know about how state taxes, cost of living, and health care could impact your financial situation.”

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Thinking about taxes throughout the year pays off

Smart money management should begin long before retirement. That includes being wise about taxes throughout the entire year, every year.

“If you only think about how to minimize your taxes in April, you missed your chance,” says Stephen Kates, a Certified Financial Planner and principal financial analyst for RetireGuide. “The tax game is played between January 1 and December 31.”

Cash flow becomes more important during retirement

Kates emphasizes the importance of estimating how much income you can generate after retiring. “Retirement is primarily a cash-flow problem,” he says.

For example, if you live in a $2-million home with just a few other assets, “you will struggle to be able to support yourself in retirement until you downsize and put that spare cash to work in income-producing assets,” Kates says.

Slow and steady is the best approach

When it comes to retirement planning, experts know that the slow, steady path is the smart one.

“Slow and steady is the path forward,” Hennigan says. “Saving for retirement doesn’t happen overnight. Small, regular deposits into a retirement account or savings product today will pay off in years to come.”

As your money compounds, you might even build a nest egg big enough for you to retire early.

Bottom line

Experts agree that the path to a stress-free retirement begins with early planning, knowing what you want, and being realistic about your budget during your golden years.

So, take another look at the items on this list and make sure you incorporate the advice into your retirement planning.

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