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For decades, retirement planning has been seen through the lens of one question: How much do I need to save? But placing too much focus on a single number is leaving many Americans with planning gaps.
A recent study from Lincoln Financial found most Americans are unprepared for key retirement scenarios including generating income, managing healthcare costs, protecting loved ones and passing on assets. Most people aren’t failing to save, but they are leaving key expenses in retirement unaddressed.
That’s why investors need to start thinking about retirement differently. Not as a single number you need to reach to be comfortable, but as a “retirement stack” designed to meet your specific needs.
A retirement stack is simply financial planning built in layers. Investments are one layer. Additional layers can include plans for income, protection and flexibility, all working together to help manage real-world risks.
And those risks are getting harder to ignore.
Market swings, inflation and rising healthcare costs are prompting practical questions such as:
What happens if the market drops right when I need income?
How do I pay for care later in life?
Will I have enough money if I live longer than expected?
Successful retirement planning shouldn’t rely on one answer but multiple layers that prepare for several scenarios.
Here are four considerations when determining your own retirement stack.
1. Income you can rely on beyond systematic withdrawals
Most retirement plans focus on accumulating assets. But once retirement begins, the conversation shifts from growth to income.
Social Security and pensions (where available) provide a foundation, but they often don’t cover all expenses. That leaves many retirees relying on withdrawals from investment accounts, which can be risky during market downturns.
This is where protected income sources, including certain types of annuities, can play a role. By creating a predictable income stream, they can help reduce the pressure to sell assets when markets are down.
2. A plan for healthcare and long-term care costs
Healthcare remains one of the largest — and most underestimated — expenses in retirement. Research from Fidelity suggests a 65-year-old retiring today could spend $165,000 on healthcare in retirement.
While many people plan for premiums and routine medical costs, fewer have a strategy to pay for long-term care. Without sufficient planning for these costs, fees are often paid out of pocket, which can quickly erode savings.
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Solutions in this space, such as hybrid life insurance and long-term care coverage, can play a role in a well-rounded plan by helping you prepare for potential care needs while maintaining flexibility in how assets are used.
The sooner this type of plan is put in place, the more cost-effective it tends to be. Starting earlier typically means lower costs and less money required upfront, making it easier to build coverage over time.
3. Flexibility for a longer retirement
Retirement isn’t a fixed period. People are living longer and expecting more from those years, so the challenge is planning to support a lifestyle that could last 20 to 30 years or more, making flexibility just as important as growth.
Investment portfolios are expected to serve a variety of needs, including generating growth, providing income and acting as a safety net during downturns. When markets are volatile, that can put pressure on the portfolio and create stress for investors.
A stronger approach is to define roles across different investment vehicles. Growth assets can stay focused on long-term performance, while other parts of the “stack” are positioned to provide stability or access to cash when needed.
Having the right mix of solutions in place can create peace of mind, especially during uncertain periods. It can also help investors stay committed to their strategy, rather than reacting to short-term market swings and making decisions at the wrong time.
Having at least one source of funds that isn’t tied directly to market performance, such as guaranteed income or protection-focused solutions, can make it easier to stick with the plan when it matters most.
4. A clear approach to legacy and wealth transfer
Lastly, complete retirement planning looks beyond retirement itself.
Some people want to leave assets to family or other beneficiaries, so having a clear strategy for how that transfer will happen is an important part of a holistic retirement strategy.
Estate planning basics, such as creating a trust, beneficiary designations and keeping documents up-to-date, play an important role. In some cases, life insurance can also be part of the overall strategy, helping provide liquidity or ensure that assets are passed on in a predictable way.
Like the rest of the stack, this isn’t a separate decision. It’s part of how the pieces fit together.
Putting the stack together
The idea of a retirement stack isn’t about making planning more complicated. It’s about creating a strategy that more completely ties specific investment strategies to specific needs.
Market-driven investments remain an important part of any strategy, but on their own, they can leave important questions unanswered.
A well-built retirement stack brings together:
Income for day-to-day needs
Planning for healthcare and unexpected costs
Flexibility to adapt over time
Confidence to meet defined outcomes regardless of market conditions
It won’t eliminate uncertainty, but it can help reduce the chances of having to make difficult financial decisions at the wrong time.
And for many investors, that’s what retirement planning is about.
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
