Retirement Planning
Accumulation to decumulation
Retirement planning is two problems. In accumulation, contributions, employer match, asset location, and tax deferral dominate. In decumulation, the risks shift to longevity, sequence of returns, inflation, health care, and cognitive decline.
Key rules to know
Social Security: full retirement age 67 for those born 1960 or later; reduction for early claiming; 8% per year delayed credits to age 70; spousal and survivor benefits differ. Required minimum distributions: age 73 for those born 1951–1959, age 75 for those born 1960 or later. 2025 limits: $23,500 elective deferral, $7,500 catch-up at 50+, $11,250 for ages 60–63. Medicare enrollment at 65 with IRMAA surcharges based on modified AGI from two years prior - a cliff, not a phase-in.
Withdrawal strategy
Understand the 4% rule's assumptions (30-year horizon, portfolio mix, inflation adjustment) and its limits - it is a planning heuristic, not a guarantee. Sequence-of-returns risk is mitigated by a cash or short-bond reserve, flexible spending, and partial annuitization (SPIA, QLAC). Roth conversions in the gap years between retirement and RMDs reduce future bracket and IRMAA pressure.
Traps
- Treating the 4% rule as a guaranteed outcome.
- Ignoring the survivor's shift to single-filer brackets and reduced Social Security.
- Forgetting IRMAA's two-year lookback when doing a large Roth conversion or business sale.
- Assuming a pension is inflation-adjusted when it is not.
Rule of thumb
Fund two to three years of spending needs in cash and short-duration bonds before retirement. That reserve is what lets the client stay invested through a drawdown - behavior protection as much as cash-flow planning.