5 Questions You Need to Answer 5 Years Before Retirement

May 6, 2022 | All, Blogs/Articles, Financial Planning

By Kevin Boutwell, CFP®

Retirement is one of life’s greatest milestones. Not surprisingly, it’s both an exciting and worrisome prospect for many Americans nearing their golden years. According to a 2021 poll by the National Institute on Retirement Insecurity, 56% of Americans are worried about not having enough for retirement, 67% worry they will have to retire later due to the COVID-19 pandemic, and 58% are concerned that saving for retirement is getting harder. (1)

One of the best ways to alleviate uncertainty is planning ahead. As you approach or enter retirement, make sure you answer these 5 key questions.

1. How Will I Maintain a Consistent Cash Flow in Retirement?

On average, Social Security covers 40% of one’s income in retirement. (2) Where will the other 60% come from? It’s essential to have a proper cash flow plan for retirement so you can maintain a consistent income. There are a few potential sources of retirement income, including working part-time, retirement accounts, pensions, fixed annuities, savings, and other investments. Looking at all these income sources, you’ll want to determine if they’ll cover your needs. 

If your projected expenses don’t match your income and savings, you’ll either need to reconsider your expenses or increase your retirement income. Consider working part-time, contributing more to your retirement accounts, and developing a strategy to generate more income from your retirement portfolio. This can be done by ensuring your asset allocation still meets your risk tolerance and time horizon, and investing in assets that will diversify your income stream.

2. How Will My Investments Hold Up in Various Market Conditions?

Market volatility can mean the difference between living comfortably in retirement or just scraping by. Facing a decline in the early years of retirement can be disastrous. Considering those who retire during or near a bear market are 31% more likely to run out of money, (3) it is crucial to understand how your investments may react during an economic downturn.

It’s important to regularly analyze your portfolio to ensure that it lines up with your risk level and that you haven’t become too reliant on any one asset category. It may be time to diversify your portfolio (if you haven’t already), rebalance, and utilize a Monte Carlo simulation to stress test your plan. This can help you see how your portfolio will react to various market conditions.

3. When Should I Take Social Security Benefits?

Social Security benefits can be claimed between the ages of 62 and 70; however, the timing of benefits will impact the total amount received. 

Early Retirement

You can start receiving benefits as early as 62, but your monthly benefit will be lower than if you waited longer. Your basic benefit is reduced by a fraction of a percent for each month you begin receiving benefits prior to full retirement age. Retiring early can permanently reduce your benefit by up to 30%. (4)

Full Retirement Age

Your full retirement age (FRA) changes based on the year you were born. FRA is 66 for those born between 1943 and 1954 and increases by two months for every year after that you were born until it settles at age 67 for those born in 1960 or later. If you wait until you reach full retirement age to begin collecting your Social Security benefits, you will receive your full benefit amount. 

Delayed Benefits

If you’re still working or don’t need the money immediately, you can delay receiving your benefits. Your benefit will increase by 8% for each year that you delay. (5) You cannot delay and increase your benefit indefinitely, though. Once you reach age 70, the amount of benefits you receive will not increase any further. 

Be sure to reference your Social Security statement in the years leading up to retirement. This important document tells you a lot about your expected benefits, so it can help you in your decision-making process. 

In general, the best time for you to claim your benefits depends on your personal situation and health. If you expect to live longer than average, your overall lifetime benefit will be greater if you delay claiming your benefits to increase your benefit amount. If the opposite is true and you see little chance of making it into your mid-80s, you would likely receive a greater lifetime benefit by taking it sooner, even though it would be a smaller monthly payment. 

4. Am I Properly Utilizing Tax-Reduction Strategies?

As the saying goes: “It’s not how much you make, but how much you get to keep that matters.” This is especially true as you approach retirement. Once your income sources become fixed, managing and minimizing your taxes should be your top priority. If you haven’t already, consider working with a financial advisor to review your potential options, including:

  • Charitable donations
  • Qualified charitable distributions
  • Roth conversions
  • Health savings accounts
  • Tax-loss harvesting

Your income plan during retirement will also play a major role in how long your money will last and how much will be lost to taxes. 

Each retirement asset has different tax characteristics, whether it be a 401(k), a Roth IRA, an annuity, or some form of equity compensation, and understanding the timing of distributions from each source is a significant part of managing your overall tax bill in retirement.

5. How Much Can I Expect to Spend on Healthcare?

Choosing the appropriate insurance coverage is the first step to take when planning for unexpected healthcare costs in retirement. According to a Fidelity Retiree Health Care Cost Estimate, the amount needed at 65 to cover healthcare costs for a couple is roughly $300,000 after tax. (6) For those who had employer healthcare coverage, retirement may mean paying more for medical insurance (Medicare Parts B and D and Medicare Supplement policies). Even with insurance, some expenses will be paid out of pocket.

Planning for unexpected healthcare costs begins with choosing appropriate insurance. For those aged 65 and above who are eligible for Medicare, it means understanding options under Medicare and choosing insurance to supplement Medicare. Take a look at your eligibility and premium estimates to get an idea of what to expect. Thorough research of your supplemental coverage options can help ensure your healthcare costs won’t eat into your retirement savings.

Take the Next Step

The good news is you don’t have to plan for retirement on your own. We at Veracity Capital have the tools and resources to help you navigate your retirement transition with confidence. If you’re interested in learning more about how I serve my clients, I encourage you to contact me today for a no-obligation get-acquainted meeting. Reach out to me at 678.888.4952 or kevin.boutwell@veracitycapital.com to get started.

About Kevin

Kevin Boutwell is a wealth advisor and partner at Veracity Capital. With almost a decade of experience in the financial industry, Kevin has acquired expertise in managing equity compensation. He focuses his services on corporate executives who have complicated compensation packages and resulting tax headaches. He believes that proper financial planning drives the best investment decisions, and his customized process and strategies help his clients achieve better outcomes. Kevin prioritizes building long-term relationships and offers the perfect mix of analytical, problem-solving, and a personal touch so his clients can focus on what’s important while knowing their finances are taken care of. 

Kevin is a highly decorated veteran former U.S. Navy pilot. He got his start in the financial industry at Goldman Sachs and is a CERTIFIED FINANCIAL PLANNER™ practitioner. Kevin earned his Bachelor of Science in Mechanical Engineering from the Georgia Institute of Technology and an MBA from Indiana University’s Kelley School of Business. Out of the office, you can find Kevin staying busy with his family, including his young triplet sons. He stays involved with several non-profit veteran organizations and participates in the Georgia Tech mentoring program. When he has a spare moment, he enjoys staying active with CrossFit and an occasional round of golf. To learn more about Kevin, connect with him on LinkedIn.

Advisory services offered through Veracity Capital, LLC, a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.


(1) https://www.nirsonline.org/wp-content/uploads/2021/02/FINAL-Retirement-Insecurity-2021-.pdf

(2) https://www.ssa.gov/benefits/retirement/learn.html

(3) https://corporate.vanguard.com/content/dam/corp/research/pdf/Safeguarding-retirement-in-a-bear-market-US-ISGSRBM_062020_A4_Online.pdf

(4) https://www.aarp.org/retirement/social-security/questions-answers/how-much-does-early-retirement-reduce-benefits.html#:~:text=Filing%20at%2062%2C%2060%20months,benefits%20when%20you%20turn%2062.

(5) https://www.investopedia.com/ask/answers/102814/what-maximum-i-can-receive-my-social-security-retirement-benefit.asp

(6) https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs