Think You’re Ready to Retire?

You’ve built the portfolio. Your think your numbers work. Your spouse is ready. On paper, retirement might look like the obvious next step.

But having enough money to retire and having a plan that is actually ready for retirement are two different things.

For high earners especially, the transition from earning a paycheck to living off your assets can expose risks that were easy to overlook during your working years.

Before you are ready to retire, here are five warning signs worth addressing.

Keep reading, or if you prefer to listen or watch… check out the Podcast or full YouTube video.

1. Too Much of Your Wealth Is Concentrated in One Investment

Concentrated investments can be incredibly effective for building wealth. A successful company stock, a high-growth investment, or equity compensation may have played a major role in getting you where you are today.

The problem is that the same concentration that helped build your wealth can become a much bigger risk once you retire.

It is not unusual for someone approaching retirement to have 15%, 20%, or even significantly more of their portfolio tied to a single company or investment.

While you are working, market volatility may be easier to tolerate because you are still earning income and contributing to your accounts. Once that paycheck disappears, significant swings in your portfolio can feel very different.

Retirement planning requires thinking beyond growth. You also need to consider how much risk you can realistically afford to take when your portfolio becomes a primary source of income.

2. Your Portfolio Is Still Built for Accumulation

The portfolio that helped you build wealth may not be the same portfolio you want to carry into retirement.

During your working years, you may be able to tolerate an aggressive allocation because you have time to recover from market downturns. You also have income coming in, which reduces your dependence on the portfolio.

Retirement changes that equation.

Once you begin withdrawing money, you need to think about diversification, risk tolerance, your time horizon, and how much income you will need from your investments. A portfolio that remains heavily weighted toward aggressive or highly correlated investments may create more volatility than you are comfortable with once withdrawals begin.

The goal is not necessarily to eliminate risk. It is to make sure the level and type of risk you are taking fits the next stage of your financial life.

3. You Haven’t Calculated Your Real Retirement Tax Bill

One of the most common assumptions about retirement is that taxes will automatically go down.

For some retirees, they do.

For high earners with substantial assets, however, the reality can be much more complicated.

Retirement income can come from a variety of sources, including:

• Traditional IRAs and 401(k)s
• Brokerage accounts
• Dividends
• Real estate income
• Pensions
• Social Security
• Other investments

Many of those sources can create taxable income.

If you need significant annual cash flow to maintain your lifestyle, your tax bill in retirement may remain much higher than expected.

This is why the years surrounding retirement can be so important for tax planning. Decisions about when to take distributions, when to complete Roth conversions, and how to manage future required minimum distributions can have consequences that extend decades into retirement.

The question should not simply be, “How much money do I have?”

It should also be, “How much of that money will I actually get to spend after taxes?”

4. You Don’t Know Your Real Retirement Burn Rate

How much do you actually expect to spend once you retire?

The answer may be higher than you think.

People often assume their spending will decline after they stop working. But the first several years of retirement can be some of the most active and expensive years.

You finally have the time to travel. You may take longer vacations, visit family more often, tackle home projects, pursue hobbies, or start checking items off your bucket list.

That is not necessarily a problem. In many ways, that is exactly what the money was built for.

The problem is failing to plan for it.

Retirees can spend substantially more during the early years of retirement because they finally have the combination of time, money, and health to enjoy it.

Your retirement plan should reflect the life you realistically intend to live, not an artificially low spending number that makes the projections look better.

Understanding your actual burn rate gives you a much clearer picture of whether your portfolio is truly prepared to support your lifestyle.

5. You Don’t Have a Withdrawal Sequence Plan

You have a traditional IRA, a brokerage account, and Roth assets.

Which one do you spend first?

That decision can be far more important than many retirees realize.

A common approach is to spend down taxable brokerage assets first, then move to traditional retirement accounts, and save Roth assets for last. While that may work in some situations, retirement income planning is rarely that simple.

The better decision can change from year to year.

One year, it may make sense to take more from a brokerage account. Another year, you may intentionally withdraw from an IRA while remaining within a particular tax bracket. In some cases, using taxable assets may create room for a Roth conversion that helps reduce future required minimum distributions.

Your income needs, tax brackets, deductions, market conditions, and future RMDs can all affect the decision.

That is why a withdrawal strategy should not be something you create once and forget.

It should be actively managed throughout retirement.

Retirement Readiness Is More Than a Portfolio Number

A large account balance can create a sense of security, but retirement planning is not simply about reaching a number.

You need to understand how your investments, taxes, spending, and withdrawal decisions interact once you stop earning a paycheck.

Before you retire, ask yourself:

• Is too much of my wealth concentrated in one investment?
• Is my portfolio still positioned as though I am 10 or 20 years away from retirement?
• Do I understand what my tax bill could actually look like?
• Have I realistically modeled what I plan to spend?
• And do I know which accounts I should withdraw from each year?

For high earners approaching retirement, these decisions can have a significant impact on how efficiently your wealth supports you over the next 20 or 30 years. Without addressing these areas, wealth can gradually be lost to taxes, market risk, and lifestyle spending that was not properly planned for.

The objective is not simply to make it to retirement. It is to enter retirement with a plan designed for what comes next.

If you’re approaching retirement and want to make sure all the pieces of your financial life are working together, schedule a conversation with our team. Through the Bonfire Method, we look at your investments, taxes, income, insurance, and overall retirement strategy together to help identify gaps and build a more coordinated plan for what comes next.