Straight Talk About Financial Planning for Your Retirement

How much do you actually need to retire? It’s the question that keeps people up at night, and you deserve a direct answer before we dive into the details.

For many couples retiring around age 65 between 2026 and 2030, a nest egg in the range of $1 million to $3 million often provides a sustainable foundation—especially considering events led by significant financial and political developments in 2026. Where you land in that range depends on your lifestyle, your region, your health, and whether you want to leave money to family or ministry.

The math works like this: most planners today recommend a sustainable initial withdrawal rate of 3.5% to 4% annually, adjusted for inflation. A common guideline suggests you can safely withdraw 4% of your total portfolio in the first year of retirement, adjusting for inflation annually, to last roughly 30 years. But taxes on your withdrawals, escalating health care costs (the average couple may need roughly $315,000 for medical expenses in retirement, excluding long-term care), and your wishes for a legacy can push your required savings toward the upper end of that spectrum.

Consider Mark and Lisa, both age 60, living in suburban Georgia with $1.8 million saved. At a 3.5% to 4% withdrawal rate, they could draw $63,000 to $72,000 annually before taxes. Add Social Security benefits at 67, and their gross income looks comfortable. But a bear market in their first few years of retirement could change everything—which is why purpose-driven planning matters more than a single number on a page.

Aim to save 6–8 times your salary by age 50–60 and automate contributions to retirement accounts to stay on track.

This article is written from the perspective of Third Act Retirement Planning, a fee-only, fiduciary firm in Marietta, Georgia. We serve clients who have come into sudden wealth—through inheritance, business sale, or legal settlement—and want a retirement plan grounded in biblical stewardship. The rest of this guide walks step-by-step through income, investments, taxes, health care, and legacy for readers with roughly $500,000 to $5,000,000 in financial assets.

What Changes 5–10 Years Before Retirement

As you are approaching retirement—typically within the 5–10 years before you stop working—it’s crucial to reevaluate your financial plans and adjust your strategies for this transitional phase. The aggressive growth approach that served you during decades of accumulation gives way to preservation, protection, and building reliable income streams.

This period brings an emotional mix of anxiety and anticipation. Most people feel the weight of questions: Will my money last? Did I save enough? These feelings intensify for those who have recently inherited money or sold a business.

The core issue is sequence-of-returns risk. A 20% bear market in your first five retirement years can deplete your portfolio 30% faster than the same returns occurring later. The accumulation phase rewards patience and compound growth. The distribution phase demands that you protect what you’ve built.

Consider this scenario: A 58-year-old receives a $1 million inheritance from a family estate. It’s life-changing wealth that could accelerate retirement by several years. But if that cash sits in a single stock or gets invested aggressively just before a market downturn, the consequences are severe. Case studies from 2022 show undiversified windfalls losing 40% in a single bear market.

Key shifts in the 5–10 years before retirement:

• Move from 80%+ equities toward 50%–60% stocks with increased fixed-income allocation

• Build a cash reserve covering 2–3 years of expenses

• Stress-test your plan against historical downturns

• Focus on securing steady income rather than maximizing returns

Building a Realistic Retirement Income Plan

Retirement income planning is the central task: mapping when and where every dollar will come from, year by year, starting at a concrete date like age 65.

Here’s the truth most people overlook: retirees rarely need to replace 100% of their pre-retirement salary. With eliminated payroll taxes, a paid-off mortgage, and reduced work-related spending, 70%–85% of prior earnings typically maintains your standard of living.

Common income sources to map:

• Social Security: Claiming at 62 yields about 70% of your full retirement age (FRA) benefit. At 67 (FRA for those born 1960 or later), you receive 100%. Waiting until 70 boosts payments by 24% for your lifetime.

• Pensions: If available, these provide defined-benefit certainty covering 20%–30% of needs.

• Annuities: Offer guaranteed income streams but require giving up 20%–25% liquidity upfront.

• Systematic withdrawals: From IRAs, 401(k)s, and taxable brokerage accounts—the flexible core of most plans.

Example income timeline:

Timing Social Security is one of the most valuable financial decisions you’ll make. Waiting from 67 to 70 can increase your benefit by about 24% for life, but you must bridge the gap with savings.

Designing Sustainable Withdrawal Strategies

The 4% rule—derived from William Bengen’s 1994 research—serves as a starting reference, not a guarantee. Given lower bond yields and longer life expectancies, many planners in 2026 lean closer to 3.5%–3.8% for initial withdrawals.

Bucket strategies offer a practical framework for managing your money:

• Short-term bucket: 2–3 years of expenses in cash or money market funds yielding 4%–5%

• Intermediate bucket: Bond ladder maturing over 3–10 years, matching inflation

• Long-term bucket: 40%–60% in global equities targeting 6%–7% real returns

Numerical example: A $2 million portfolio at 3.5% generates $70,000 per year before taxes. Pair that with $40,000 in combined Social Security at age 67, and you cover $110,000 in gross income needs.

Third Act Retirement Planning customizes withdrawal strategies for each client, coordinating with their tax situation and charitable giving goals. We don’t use one-size-fits-all models.

Taxes: The Ticking Time Bomb in Retirement

For many retirees, taxes rank among the top two expenses after health care—especially for those with large pre-tax balances in 401(k)s and traditional IRAs.

Required Minimum Distributions (RMDs) create the pressure. Under current law, RMDs begin at age 73 for those born 1951–1959 and age 75 for those born 1960 or later. The IRS calculates your RMD by dividing your prior year-end balance by a life-expectancy factor (starting at 27.4 years at age 73).

The danger: RMDs can push you into higher tax brackets, increasing Medicare premiums and reducing your net spendable income.

What Congress might change: The Tax Cuts and Jobs Act provisions—including lower rates and doubled standard deductions—expire after 2025. Tax Policy Center projections estimate 80% of middle-income retirees could face higher effective rates by 2027 absent an extension. If you’re planning a retirement stretching into the 2040s and 2050s, this uncertainty demands attention.

Example strategy: A couple converts $50,000 annually from their traditional IRA between ages 63–70 while in the 22% bracket. They pay $11,000 in tax each year but reduce future RMDs by roughly $500,000 total—saving significantly more in the long run.

Third Act Retirement Planning builds multi-year tax maps, aiming to smooth taxes over time instead of just minimizing this year’s bill.

Strategic Roth Conversions and Charitable Planning

Roth conversions mean deliberately moving money from traditional IRA/401(k) accounts to a Roth IRA, paying tax now to potentially avoid higher taxes later. The converted funds then grow tax-free.

Concrete scenario: Converting $50,000 per year from ages 60–67 while in the 22% federal bracket costs $11,000 annually in taxes. But this reduction in pre-tax balances means smaller RMDs, lower Medicare premiums, and tax-free withdrawals for you—or tax-free assets passed to children or charities.

Qualified Charitable Distributions (QCDs) offer another powerful tool. Starting at age 70½, you can give up to $105,000 (indexed annually) directly from your IRA to charity. The distribution satisfies your RMD but doesn’t count as taxable income.

For clients whose plans integrate faith-based priorities, QCDs align charitable giving with tax efficiency—a form of biblical stewardship in action.

Third Act Retirement Planning often coordinates with clients’ CPAs and estate attorneys to align Roth strategies and giving plans with both financial goals and kingdom priorities.

Investing in Retirement: Beyond Just “Chasing Returns”

As you move toward retirement, the question shifts from “How do I beat the market?” to “How do I not run out of money and still sleep at night?”

The answer requires balancing growth (to combat 2.5%–3% annual inflation) with stability (to provide steady income). This typically means diversified portfolios of U.S. and international stocks, bonds, and cash. For some individuals who are house-rich but cash-poor, downsizing or using a reverse mortgage may be necessary to generate needed retirement income.

2026 concerns worth addressing:

• Elevated inflation compared to the 2010s

• Higher interest rates stabilizing at 3.5%–4.5%

• Volatile assets like Bitcoin exhibiting 50%+ annual swings—unsuitable for retirees who need predictability

Adapting your investment strategy to changing environments also means recognizing the importance of robust financial infrastructure to support innovative investment approaches and respond to technological and industry developments.

Third Act Retirement Planning operates as a fee-only fiduciary. We don’t earn commissions on products and use evidence-based, globally diversified portfolios with low-cost index funds (0.05%–0.15% expense ratios).

Conceptual allocation example: A moderate-risk retiree might hold 50% stocks (split between U.S. and international) and 50% bonds/cash. Others prefer 60/40. The right mix depends on your income needs, risk tolerance, and legacy goals.

Staying informed is crucial—keep up with the latest news and updates related to retirement planning and financial markets to make well-informed decisions.

Managing Risk and Volatility in Your “Third Act”

Sequence-of-returns risk deserves repeated emphasis: a retiree who starts withdrawals during a bear market may run out of money years earlier than someone who faces identical returns in a different order. Vanguard studies show a 20% early bear market can slash 30-year portfolio survival from 95% to 65% under 4% withdrawals.

Practical risk controls:

• Maintain 2–3 years of expenses in conservative holdings

• Rebalance annually to your target allocation

• Avoid concentrated positions in single stocks or sectors

• If you receive sudden wealth from a business sale, diversify gradually over 3–5 years to minimize tax impact

Clients who come to Third Act Retirement Planning with inherited wealth heavily concentrated in one asset work with us to create a diversification timeline. Rushing creates tax problems. Waiting creates risk. Balance is the goal.

We encourage stress-testing portfolios against historical scenarios like 2000–2002 and 2008–2009. Seeing how your income would hold up in severe downturns builds both confidence and realistic expectations.

Health Care, Long-Term Care, and Protecting Your Family

Health care and long-term care costs can derail an otherwise solid retirement. This is especially true for those retiring before Medicare at age 65 or living into their late 80s and 90s.

Medicare basics:

Medicare is a comprehensive government program that provides health insurance coverage for individuals age 65 and older.

Initial enrollment at 65 is critical. Late enrollment penalties add 10% to Part B premiums for each year delayed. Medicare coverage is determined by specific 'passes,' which refer to periods or types of care when coverage begins or ends, so understanding these eligibility windows is essential.

The long-term care challenge: Assisted living in Georgia costs $5,000–$7,000 monthly. A private nursing home room averages $9,000 per month in 2026 dollars. Options include self-funding (allocating 10%–15% of your portfolio), traditional LTC policies (facing availability issues), or hybrid life/LTC products that pay benefits tax-free after premiums.

Almost 70% of individuals turning 65 today will need some type of long-term care services, which can significantly deplete retirement savings if not planned for properly.

Third Act Retirement Planning helps clients map realistic health-care assumptions using current regional cost data. We prepare for what care actually costs in Georgia—not national averages that may not affect your situation.

Health care costs are one of the largest and most underestimated expenses for retirees, second only to taxes, making it crucial to plan for these unpredictable costs to protect retirement savings.

Estate, Legacy, and Biblical Stewardship

Estate planning isn’t just for the ultra-wealthy. Anyone with a home, retirement accounts, or an inheritance should have up-to-date wills, powers of attorney, and health-care directives. This documentation protects your family when it matters most.

Critical action: Beneficiary designations on IRAs, 401(k)s, and life insurance override wills. Review these every 3–5 years or after major life events like a death, divorce, or birth of grandchildren.

A complete estate plan goes beyond legal documents:

• Letters to children explaining your values and decisions

• Family meetings to discuss inheritance expectations

• Written statements of charitable priorities

• An advance directive expressing your health care wishes

For clients who desire it, Third Act Retirement Planning integrates biblical wisdom with financial decisions. Themes from Proverbs about generational provision or the parable of the talents in Matthew 25 frame our approach to stewardship. Wealth isn’t just yours to spend—it’s yours to invest wisely on behalf of those who come after you.

Family case example: One client couple used intentional planning—including 529 contributions for grandchildren and a charitable trust for ministry support—to preserve over $500,000 per heir while honoring both family and kingdom priorities. Clear communication prevented conflict and created peace among adult children.

Finding the Right Advice for Your Retirement Stage

The “middle wealthy”—those with $500,000 to $5 million—often feel stuck. Investors at this level need tailored financial advice, as DIY software can’t handle complex tax planning. Banks and private wealth firms focus on clients with $10 million or more, and many middle-income investors do not qualify for ultra-premium services, leaving a gap for those who need customized guidance. Yet this group faces real complexity around taxes, inheritance, and charitable giving.

Not all advisers are the same. Some are primarily investment managers tracking benchmarks. Others—like Third Act Retirement Planning—offer holistic guidance spanning retirement income, taxes, estate planning, health care, and charitable strategies. Choosing an adviser who provides holistic guidance is crucial for long-term financial success.

Questions to ask a prospective adviser:

• Are you a fiduciary 100% of the time?

• How are you compensated? (Fee-only means no commissions)

• Do you provide multi-year tax planning projections?

• How do you coordinate with my CPA and attorney?

• Can you show me a written plan, not just an investment report?

Practical advice: Make sure you are contributing enough to your 401(k) to capture the full employer match—this is essentially free money and should be prioritized.

Third Act Retirement Planning’s process:

1. Discovery call to understand your situation and goals

2. Detailed analysis of current accounts, taxes, and income needs

3. Creation of a written, customized plan

4. Implementation with ongoing guidance

5. Annual reviews (or more frequently as events demand)

If you’ve experienced sudden wealth in the last 1–3 years—through inheritance, business sale, or settlement—don’t navigate this stage alone. Visit our office in Marietta or schedule a free discovery conversation through our website. We serve clients across multiple locations who value honest, purpose-driven planning rooted in biblical stewardship.

Your third act deserves more than generic advice. It deserves a plan built for your life, your family, and your future. To stay informed and receive ongoing insights, sign up for our newsletter or book a discovery call today.