Retirement planning is complicated.
Fewer retirees can rely on pensions, so more people have to find retirement income elsewhere and navigate issues like managing taxes while withdrawing from different kinds of accounts, when to take required minimum distributions, and determining the appropriate asset allocation for their retirement portfolios.
Decision 1: How Much to Withdraw Each Year in Retirement
It’s impossible to determine the “right” withdrawal rate at the outset of retirement.What to Do
Vary your withdrawal rate based on your time horizon. Older retirees can reasonably take higher withdrawals than should younger retirees with longer expected spending horizons.Be flexible. Much of the research on withdrawal rates points to the value of being flexible with withdrawals, especially taking less when the portfolio is down.
Decision 2: Whether to Buy Long-Term-Care Insurance
Long-term care is an uncomfortable topic. The prospect of needing such long-term care is unappealing, and paying for it can be financially devastating. In 2025, Genworth pegged a year’s worth of long-term care at $111,325—up 7 percent from the previous year. Most such care isn’t covered by Medicare, except for “rehab” following a qualifying hospital stay.
The question is whether and how to protect yourself against those costs. The likelihood of needing long-term care is basically a coin flip: According to a 2019 study, about half of people turning 65 will need some type of paid long-term care in their lifetimes. If I told you the odds were 50/50 that you’d total your car during retirement, there’s almost no chance you’d decide to go without insurance.
Twenty years ago, buying long-term-care insurance was the standard prescription for covering long-term-care costs for middle-income and upper-middle-income adults. (Wealthier people could afford to self-fund long-term-care expenses, while lower-income adults would have to rely on long-term-care coverage via Medicaid.)
But the long-term-care insurance market is deeply troubled today. While recent interest rate hikes have improved the economics of the long-term-care insurance industry, premiums have increased and several insurers have exited the business altogether. Consumers who thought they were doing the right thing in purchasing insurance have had to choose between abandoning the policies they’ve paid into, settling for cuts in their benefits, or paying the higher premiums.
What to Do
Take a hard look at your retirement portfolio to decide whether your assets are sufficient to self-fund, you’re likely to qualify for Medicaid, or you fall somewhere in between. Then, you can create a long-term-care action plan.Decision 3: Whether to Buy an Annuity
Researchers have long championed the idea of purchasing simple income annuities for retirement, arguing that they provide longevity risk protection and a higher payout than you could get from fixed-rate investment products like bond funds. Annuities have been getting more attention recently as a component of retiree toolkits, as payouts tend to improve when interest rates rise.Annuity types vary widely, from ultra-utilitarian single-premium immediate annuities to more complicated products that provide equity exposure, guaranteed minimum living benefits, and death benefits.
What to Do
There’s disagreement on whether annuities are a must-have or which annuities to buy, but there’s little doubt that the lifetime income they offer is in short supply. That’s especially true given that only about a fourth of baby boomers retiring today have pensions, and that number trends down for the generations behind them.The starting point when thinking about lifetime income isn’t an annuity. Instead, it’s maximizing your payout from Social Security, which is basically an annuity backed by the U.S. government. As Social Security expert Mike Piper points out, delaying filing until age 70 often makes sense for moderately healthy single people.
For married couples, it often makes sense for the higher-earning partner to delay filing to elevate the couple’s lifetime payout. Only after maximizing lifetime income through Social Security should an annuity come into play, if a retiree needs an additional baseline income beyond what Social Security delivers. Annuities will be less useful for retirees who derive a healthy share of their income needs from pensions.
