The New Retirement Reality: Planning Beyond the 401(k)

“Retirement planning used to be simple—work for one company, contribute to a pension, and enjoy a steady paycheck for life. But that world has changed.”

For most Americans today, the 401(k) has become the cornerstone of retirement savings. While it remains a powerful tool, it’s no longer enough on its own to ensure the kind of retirement most people envision. Rising healthcare costs, longer life expectancies, inflation, and the decline of traditional pensions have reshaped the retirement landscape. To navigate this new reality, it’s essential to build a strategy that goes beyond the 401(k).

1. Diversify Your Retirement Income Sources

Relying solely on a 401(k) can expose you to unnecessary risks—especially if most of your assets are tied to market performance. Consider incorporating other income streams that behave differently in various economic conditions, such as:

• Roth IRAs for tax-free withdrawals later in life.

• Health Savings Accounts (HSAs) for tax-efficient healthcare funding.

• Permanent life insurance cash values for supplemental liquidity.

• Taxable investment accounts that provide flexibility before age 59½.

• Real estate or private investments for income diversification.

A well-designed financial plan blends multiple asset types to manage taxes, liquidity, and risk over time.

2. Think Beyond Accumulation — Focus on Distribution

Many savers make the mistake of treating retirement planning solely as an exercise in growing a portfolio. The real challenge comes when you need to convert those assets into sustainable income.

Coordinating when and how to draw from various accounts—taxable, tax-deferred, and tax-free—can extend the life of your portfolio by years. Strategic withdrawal sequencing, Roth conversions, and Social Security timing decisions all play key roles in ensuring your income is both reliable and tax-efficient.

3. Plan for Longevity and Healthcare Costs

Retirement is lasting longer than ever. According to the Social Security Administration, a 65-year-old couple today has nearly a 50% chance that one spouse will live to age 90. Longevity risk—the risk of outliving your money—is one of the most pressing financial challenges today.

Healthcare adds another layer of complexity. Fidelity estimates that a 65-year-old couple retiring in 2025 will need roughly $350,000 for healthcare expenses alone throughout retirement, not including long-term care. Strategies like long-term care insurance, hybrid life/LTC policies, or self-funding through dedicated assets can make a significant difference.

4. Manage Taxes Before and During Retirement

Your 401(k) contributions may have saved you taxes today, but withdrawals in retirement will be fully taxable. Without planning, retirees often find themselves in higher-than-expected tax brackets once required minimum distributions (RMDs) begin.

Consider building “tax flexibility” into your plan:

• Incorporate Roth contributions or Roth conversions when appropriate.

• Strategically realize capital gains in low-income years.

• Use charitable giving strategies such as qualified charitable distributions (QCDs) to offset taxable income.

Tax diversification provides control over your income in retirement, helping you adapt as tax laws and personal circumstances change.

5. Reassess Regularly — Retirement Planning Is Not a Set-It-and-Forget-It Exercise

The retirement landscape is constantly shifting. Tax laws evolve, investment markets fluctuate, and personal goals change. Reviewing your financial plan annually ensures that your strategy remains aligned with your vision and adaptable to new realities.

Final Thoughts

A 401(k) is an excellent foundation—but it’s only one piece of the puzzle. Building true retirement security requires integrating multiple income sources, managing taxes strategically, and preparing for healthcare and longevity risks.

At Capstone Wealth Advisors, we help clients design coordinated retirement income strategies that go beyond accumulation and focus on creating financial independence that lasts a lifetime.

Ready to rethink your retirement plan?
Schedule a conversation today to explore how a holistic approach can help you plan with confidence for the next chapter.

Any discussion of taxes is for general information purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax, or accounting advice. Clients should consult with their qualified legal, tax, and accounting advisors before implementing any strategy discussed herein.

CRN202809-9652928