Introduction

As a fee-only financial advisor and CFP® professional, I am frequently asked about effective retirement strategies and the best ways to invest for retirement while preparing for future health care needs. In an environment marked by economic uncertainty and market volatility, it’s natural for individuals to seek financial security in seemingly stable vehicles like certificates of deposit (CDs), money market accounts, or annuities. However, while these products may offer some peace of mind in the short term, they fall short in providing the long-term growth and flexibility required for a secure retirement.

At Milestone, we believe that a well-diversified investment strategy with adequate stock exposure, grounded in low-cost mutual funds and exchange-traded funds (ETFs), remains the most effective way to accumulate, preserve, and ultimately spend and distribute wealth in retirement.

Protecting Your Retirement Savings: Strategies for Market Declines

It’s no secret that over time, equities have historically outperformed bonds and cash-based investments by a wide margin. The challenge lies in managing volatility, the market’s inevitable ups and downs, especially when you’re drawing income from your portfolio.

One of the greatest concerns retirees face is sequencing risk—the risk that the order of investment returns, especially poor returns early in retirement—will negatively impact a portfolio’s long-term sustainability as you must sell more assets at a loss to cover withdrawals. Fortunately, strategic planning and portfolio management can minimize this risk.Key Tactics Include:

1. Diversification Across Asset Classes, Companies, and Countries

   A diversified portfolio spreads your risk across asset classes (stock, bond, and real estate), industries, and geographic regions. This approach reduces your exposure to any single economic event or sector downturn and helps ensure that your investments are not solely reliant on the performance of a single stock or sector, which can be more vulnerable to fluctuations. ETFs and mutual funds are cost-effective investment vehicles used to implement this strategy and reduce concentration risk.

2. Perspective: Mind the Horizon

   Preparing for retirement means thinking beyond just the accumulation phase. Even in retirement, your investment horizon can span 20–30 years or more. Planning for longevity requires growth-oriented strategies that outpace inflation and preserve purchasing power over time. It’s crucial to remember that you only need to withdraw a small portion of your portfolio every month to pay your bills. Since none of us know how long we will live, we need to plan for the long term, so we don’t outlive our money.

3. Adopt a Dynamic Withdrawal Strategy

   Instead of a fixed withdrawal rate (e.g., the traditional 4% rule), consider a “guardrails approach,” which allows for withdrawal adjustments based on market performance. Determine in advance what levels trigger adjustments. For example, reduce withdrawals by 10% the following year if the portfolio value falls below a certain level (guardrail threshold). In years when markets are up, you could withdraw a bit more, while in years when your portfolio falls below a certain level, you can adjust your withdrawals down to increase the likelihood that your portfolio will last a lifetime.

Example:

Starting portfolio: $1,000,000

Annual withdrawal: $50,000 (5%)

Guardrail threshold: $715,000

If your portfolio drops below $715,000, you reduce withdrawals to $45,000 (90% of $50,000) the following year. This approach increases the probability that your assets will last throughout your lifetime—especially if you live well into your 90s or beyond.

4. Regular Rebalancing

   Rebalancing helps maintain your desired asset allocation by systematically selling overperforming assets and buying underperforming ones—buy low, sell high. This discipline not only keeps your portfolio aligned with your long-term goals but also counteracts emotional decision-making during downturns.

The Illusion of Safety: CDs, Money Market Accounts, and Annuities

While CDs and money market accounts are often viewed as “safe,” they rarely outpace inflation and gradually erode your purchasing power. A 4% interest rate may sound attractive, but if inflation is running at 6%, you’re effectively losing money in real terms. These instruments are better suited for short-term expenses and emergency reserves, not for funding a multi-decade retirement. Holding too much cash is detrimental to many retirement plans.

The Hidden Costs of Annuities

There are many different types of annuities. Some, such as a single premium income annuity (SPIA), can play a positive role in a retirement portfolio, but many others (variable, indexed, and fixed) promise guaranteed income streams and protection against all or some losses. There are caveats, and these popular annuities often are not the best choice for funding your retirement.

• High Fees: Commissions, administrative fees, M&E charges, participation rates, return caps, and surrender charges can significantly reduce your returns. Many agents receive higher compensation for selling some contracts than for others.
• Tax Rules: The federal tax deferral rules that apply to variable annuities can be complicated. In addition, there may be state tax implications. Retirement plans, such as IRAs, provide you with tax-deferred growth, and there is no additional tax benefit when you buy a qualified annuity with IRA assets.
• Limited Growth: Fixed annuities, like cash, may not keep pace with inflation. Variable annuities often underperform due to excessive fees and poor investment options called sub-accounts. You can lose money buying an annuity.
• Liquidity Constraints: Annuities are designed to provide income over an extended period, and accessing your funds early can be costly. Surrender charges and penalties for early withdrawal can significantly reduce the value of your investment if you need access to your money before the end of the annuity contract.
• Complexity: Many annuities are difficult to understand, making them risky for the average investor. If the annuity you’re considering comes with a phonebook size prospectus or no prospectus at all, STOP and reconsider.
• Regulation: Not all indexed annuities are regulated by the SEC, and many are not investment securities. Indexed annuities are regulated by state insurance commissions.

Important takeaway: Simplicity, flexibility, and transparency are your allies in retirement planning. Annuities often fail to deliver on those fronts. You can listen to our own Jennifer Climo, CPA CFP®, talk in detail about annuities as part of this talk on retirement planning.

Funding Long-Term Care

One of the largest potential retirement expenses is long-term care (LTC). Here are some funding options to consider:

1. Long-Term Care Insurance

One of the best options for funding future long-term care is long-term care insurance, but options have narrowed due to stricter underwriting making it harder to qualify. Premium costs have increased.

2. Self-Funding Through Your IRA

   Earmark $300,000–$500,000 in a stock-heavy IRA that can be tapped for future care needs. These funds can grow tax deferred and be used for tax-deductible qualifying LTC expenses once they exceed 7.5% of your adjusted gross income.

3. CCRC

CCRC stands for continuing care retirement community. It’s a type of senior living community that offers a continuum of care in one location, starting with independent living and then progressing to assisted living and then to skilled nursing and memory care. The goal is to allow residents to “age in place” without having to move to different facilities as their care needs increase and provide guaranteed nursing care if needed.

4. Qualified Longevity Annuity Contracts (QLACs)

   For those with large IRAs and a long-life expectancy, a QLAC offers:

• Deferred RMDs until 85, helping to lower taxable income
• Regular payments for as long as you live
• RMD tax exclusion for up to $210,000 (for 2025)
• Protection against late-life longevity risk

While QLACs share some of the downsides of traditional annuities (limited liquidity, lack of growth), they can be appropriate in some cases, particularly if you have a large IRA, are over age 80, expect to live well into your 90s or beyond, and don’t have legacy goals.

A Comprehensive Plan: Investing with Purpose

True retirement security doesn’t come from chasing returns or hiding in low-yield options. It comes from a comprehensive, tax-aware financial strategy that evolves with your needs.

At Milestone, our advisors are all CFP® professionals, and our approach is rooted in long-term planning—not short-term reactions. We help you focus on what you can control, such as:

• Reducing lifetime tax liability
• Funding retirement with confidence
• Planning for long-term care
• Managing Medicare premiums
• Optimizing Social Security timing
• Creating a meaningful legacy

Final Thoughts

Retirement is not just a financial milestone—it’s a decades-long chapter that deserves careful preparation and ongoing management. A combination of proven retirement planning strategies, including a well-diversified portfolio, a tailored withdrawal strategy, and proactive tax and health care planning are your best tools for building and preserving lasting wealth.

Don’t let market noise or fear drive your decisions. Let a thoughtful, evidence-based plan guide your journey.

If you’re uncertain about where to invest your savings, how to plan for long-term care, or how to make the most of your retirement years, our team is here to help. Whether you have worked with one in the past or shopped around before, a fee-only financial advisor can be a great partner throughout retirement.