Episode 509 – Ten Strategies for Retiring in 2026

The content shared on Your Life, Your Wealth Network reflects the views of the host and guests of the program only, and are not necessarily the views of Cordasco Financial Network or its advisors. This media production is educational in nature and should not be construed as financial, legal, or tax advice or a solicitation or presentation of sale of any financial products or solutions. Please consult a professional prior to making any financial, tax, or legal decisions.

Welcome to the Your Life Your Wealth Network, helping you find clarity and comfort for your life and wealth.

John Walker
Hey, welcome to the Your Life, Your Wealth podcast. I’m John Walker, regional vice president at Mercer Advisors. Always a pleasure to be with you. And today we’re gonna talk about some smart New Year’s resolutions for retiring in 2026, right? And we love ourselves a little list here and, you know, I thought it would be helpful if you’re considering retirement in 2026 to give you some helpful tips uh of how you should approach that, the things that you should be thinking about, and to help me have that conversation, Mike.

Good friend and colleague here, market leader and certified financial planner Mr. Jason O’Meara. Jay, thanks for joining me today. Yeah, thanks for having me back. Absolutely, we love ourselves a few lists here, right? But we, but we, you know, there’s some certainly some things, you know, if you are thinking about 2026 as a year for retirement, you want to make sure you have your ducks in a row. And one of the first things we would do, a common theme on this podcast is.

Number one, map out a plan, right? You really can’t retire or shouldn’t make that massive decision without running the numbers.

Jason O’Meara
And so otherwise you’re just guessing, right? If you don’t, if you don’t put pen to paper and actually come up with a game plan of how you’re going to retire, how do you know now is the time? How do you know you’re not setting yourself up for failure because failure won’t show tomorrow, right? Failure is gonna show 2015 years from now.

You know, so we need to have a plan…

John Walker
…and I think that’s the scariest thing for most people as they approach retirement, right? And we even have people we can say in utter sincerity that we show plans to who still don’t feel confident or still don’t think they have enough money saved or still have a really difficult emotional decision around choosing to retire, but you know, you really can’t retire without.

Running the simulations, estimating your odds of success, and then this is challenging for a lot of folks to do on their own, right? It’s not everybody has the tools and resources to do Monte Carlo analysis, right? And so we would really hesitate to say good to go unless you’ve built out a financial plan that includes your income, your savings, your investment strategy, your withdrawal strategy, the budget, you know, I, I know you don’t love that word, Jason, but having an idea of your spending, having a tax and estate plan, looking at your debt and doing an analysis and then considering all the risks that could unhinge that plan, that’s really, really critical. And so one of the things that we start with, that is always a good strategy, whether you’re hoping to retire in 2026 or not, is number two, right, Jason? You’ve got to size up your spending. You have to really need to look at, you need to know…

Jason O’Meara:
…it’s not what you make, it’s what you keep, right? So you, you have to know what’s going out the door. Now, I know I said I hate, I’m not a big fan of the term budgets. I’m not a fan of a constrictive budget, right? But reality is you have to know what you’re spending.

How do you know how long your savings is gonna last if you don’t know what your burn rate is, right? Exactly. If you don’t know what you’re, what you’re spending and where and what you’re spending on, if you put all your spending on a, on a spreadsheet and say, all right, this much is going towards streaming services, this much is going towards car insurance, this much is going towards food, uh, dining in and dining out, right?

What if you see a big glaring issue, you know, if you don’t do this exercise, that issue could compound for years.

So without knowing what you’re spending, it’s, it’s really difficult to say, does my plan work unless we know what you’re spending.

John Walker
100%, and that kind of leads directly into number 3, which is you need to understand what your guaranteed income sources are going to be, right? And so do you have sources of income that will help support your spending needs in retirement beyond just your savings, right? So that’s things like Social Security, pensions, annuities, rental income, having enough income to cover some of your bills. It is really, really helpful.

Jason O’Meara
It’s what percentage isn’t dependent on market returns, right? What, what percentage is coming in that you know, you’re able to kind of set your watch to is the most important thing you can do is, is determining how you were going to, what we just did a budget, right? How are we gonna pay for said budget now? So, and how are we’re gonna make sure that you’re, you’re recession-proof in your retirement.

Um, so one of the factors is, like you mentioned, John, maybe, you know, we, we determine when to elect Social Security, right? No two people elected at the same time, right? I know the rule of thumb is 70, but let’s be real, like sometimes we want to do it earlier, so, um, it, it depends on your situation.

Uh, pensions are few and far between anymore, but they’re, they still, they’re still out there. People still have them, right? They do exist. And then most people when they have pensions have a million election options, right? How do you know which one’s gonna be the best for you in your situation, right? So we, we need to basically run the plan to determine that rental income is one. If you are a landlord, and you have tenants and whatnot, your rentals, great. Otherwise, we can, you can always, you know, take a look at annuities. Uh, annuities got a bad rap in the, in the industry or profession, mostly because they were kind of used wrong. Um, annuities aren’t bad. Annuities are great, assuming you need it.

If you don’t need an annuity, they are bad, you know, it’s like, uh, I always liking all these things to tools cause that’s, that’s my background, what I’m familiar with, you know, the annuity hammer, you know, and if all you have is a hammer, everything looks like a nail. So, you know, so there’s a lot of people out there that sell only annuities. So yeah, to them, everybody needs an annuity because they have a car payment. That’s right, you know, the salesperson needs to make, but used appropriately. Annuities are a great source of guaranteed income for a piece of your portfolio.

John Walker:
Yeah, and, and really like understanding what levers can you pull, right? It’s really just having enough income to help cover, support some of your spending needs can really reduce.

The risk of the plan, it makes it a little easier to budget, keeps more of your assets working towards growth maybe in, in their savings vehicles, whether it’s an IRA or a taxable account, right? But what’s the breakdown between the two, right? What do you have? When’s the right time to do certain things? And Jason, you brought this up, so we might as well spend a little more time on, on the Social Security piece because the 4th thing we would suggest is really cementing a Social Security strategy.

Right, so, you know, doing an analysis to determine the claiming strategy that optimizes both your benefits and if you have a spouse, their, their benefits as well over their lifetime is, is really critically important because you will have options and the consequences of those decisions can be significant, right? Do I take it early at 62 or do I delay all the way to 70, and somewhere on that spectrum there’s an answer.

Jason O’Meara
Exactly. And, and, you know, each year that you delay that, you know, you could potentially get an 8% jump, um, you know, plus inflation, right? So it really comes down to different things. Like for instance, most of the time, and again, uh, uh, again, this is, this is not advice, this is just something we always, I’m always looking at is where are your other sources of guaranteed income, which is why that was number 3 and this is number 4 on the list, right? So.

If you have a pension, you have guaranteed income, yeah, we’re gonna push Social Security off as long as possible, right, till age 70 most likely, because you have this guaranteed income source, which is pulling some of the pressure off of your investments, you know. Whereas if you don’t have a pension and you’re living off of just your investments, well, maybe it would make sense to then start taking Social Security a little bit earlier.

You know, so again, this, this is something that’s very specific to you, you know, um, you want this built around you based on your situation. Uh, you know, what works for your neighbor may not work for you. So we need to make sure whatever we’re doing is very intentional and very custom.

John Walker
Yeah, I, I think that’s such a, an important point. There’s math to this. This is a math equation to an extent.

But there is a lot of nuance to it as well, you know, what makes the most sense also has to factor in things like your marital status, your health, your health and your expected longevity, right, are critically important. You may not feel.

You have the ability to delay, even though the math might say it makes the most sense if you’re going to live to 95, you may say I have a preexisting condition from a health standpoint that says that’s not going to be my reality. Well, that might really factor in to their claiming strategy, that is where the math and the nuance really meet. So, you know, some folks don’t have an option.

They have to choose it early because they need that income. Other folks have the ability to delay. It can be really helpful to have someone who’s a financial professional map that out for you, and I will candidly say the Social Security folks are very, very good at walking you through what those options look like and what the payments will be, um, and then dovetailing that with someone who has expertise in the modeling side of it, you can really figure out what the best thing to do is.

Jason O’Meara: Right, exactly.

John Walker:
You know, Jason, the other thing that we talk about before you choose to retire. Number 5 is we really do need to assess your debt, right? We need to look at the debt that you are carrying and how you carry it and how that fits into the plan, right, because different debt impacts you different ways and so, and it kind of and it and it and it fits into our overall conversation here around, you know, what part of your spending could be debt that maybe we can address, right? So. So, let’s talk a little bit about that one.

Jason O’Meara
Yeah,absolutely. So, one thing we, we take a look at is, again, right from the top, first thing I always look for is categorizing the debt between good debt and bad debt, right? So, what’s, what’s a good debt? Your mortgage, you know, interest as tax deductible, uh, is, is what we consider to be quote unquote, good debt.

Interest that is not or high interest like credit cards or potentially even car payments, um, we look at and say, all right, do we need to carry this, this credit? Credit card, credit card debt is one where I, you know, if someone says to me, I wanna pay off my credit card, that’s important because most of the time that interest is, is high double digits, right? Like 20 some 24%, some size 30%.

Um, that’s, that’s debt that if you get rid of, you know, if we play the interest rate game where, you know, your investments are returning, let’s say 12, but your credit card debts at 24, well, it makes more sense to get rid of that 24% of debt than it would be to continue to earn that 12 and barely pay off the, you know, credit card.

John Walker:
So that’sbad debt, right?

Jason O’Meara
That’s bad debt exactly. And as far as good debt is concerned, you know, with the mortgage, that’s probably the one I get the most. Hey, I’m about to retire. Should I pay off my mortgage, you know.

And different things come into the factor. Like, for instance, what’s the balance? What’s the balance of your mortgage compared to the balance of the accounts, right? Where are we taking this money from to pay off this, this debt, right? Are we pulling it out of, out of your brokerage account that’s earning on average 789, 10%, whatever it is, to pay off a mortgage that’s 34, 5%, right? That, that to me does not make a whole lot of sense. But, if you said to me, hey, I have a very low balance. I would love to just not have this extra $1100 a month going out the door once I retire next year, that’s where we have a conversation, and we run the numbers, and we see if it does make sense. And then there’s also the whole, it’s not a dollars and cents question, sometimes it’s a feelings question where just being debt-free makes you feel more secure.

Yeah, you know, in retirement, so we can look at that. But what we don’t want to do is pay off using like IRA money or something, cause then you’re, you have to pay tax on that when you’re pulling it out. So, you know, so again, I, I just said a lot of things, but those, I, I, I didn’t intentionally because I want you to understand that the, the debt question.

John Walker
There’s a lot of factors that go into making the right decision there, right? Absolutely.

Jason O’Meara
And it’s, it’s complex, and it, and it, it’s very specific, and there’s no one size fits all, um, you know, recommendation here, you know, it depends on your, your, your situation.

John Walker
Absolutely, right. And, and debt is a claim on your future income because you have to make those payments. So, you know, if you’re carrying a lot of credit card debt.

It’s generally a sign maybe that we need to really look at your spending, right? And that might be a really important factor as you consider retirement. You know, Jay, one of the other things that we do, the 6th thing I guess we’d suggest is to move into the retirement phase of life a little more comfortably. You want to make sure that you have enough liquidity to feel comfortable, and that generally means ramping up your emergency fund, making sure that you have a, a, a plan in place.

That if you need, you know, something, you know, unanticipated happens, a medical expense, a roof repair, you know, something like that, that you have a bucket of, of resources that you can go to easily and that are liquid to be able to, to, to cover that, that.

Right? And so, you know, we work with families to figure out what that should mean. It could be 3 to 6 months of living expenses. It could be a year. It could be, you know, there’s no magic answer there. It’s really understanding your level of comfort, but, but having some actual liquidity in cash so you can avoid pulling from investment accounts during, you know, potential down markets or unexpected expense is really, really important.

Jason O’Meara
Yeah. And by cash, that can be short-term CDs, that can be money market savings. So it doesn’t have to go into something earning no interest, you know, it doesn’t have to sit in your checking account, which you’re actually, I’d recommend it not sitting in your checking account, you know, sit in some sort of high yield savings, if you will, you know, some level of cash that you can, you can just get without having to call anybody, right?

John Walker: That’s, that’s the big one, right? I think, I think what we, when I mean cash, liquidity, you need liquidity, you need something that doesn’t, you know, necessarily isn’t exposed to the market the way other things are. And, and, you know, depending on the interest rate environment, you’re right, that could be.

It still might be something earning, you know, a reasonable amount of interest. We don’t want you having to sell retirement assets in an emergency for a new roof if we can, if we can have different, you know, buckets to pull from. That’s, that’s really what we’re looking for, Jay. We’ve talked a lot about spending, income, cash, and very little about this, but this is, you know, critically important is, and something that whether you’re choosing to retire in 2026 or not, we would always recommend you do.

Look at your portfolio, asset mix. Is it still properly aligned with what you are trying to accomplish in your plan, right? I think that’s just a good piece of advice regardless of, of where you’re at in your life stage, at least once, twice a year you should be looking at, oh yeah, is my port portfolio balanced in the way that it should be so that my plan will work, yeah?

Jason O’Meara:
Especially because, listen, as, as time goes by, if you’re not actively rebalancing your portfolio, your portfolio can get out of whack. You could, you could be way too exposed to certain either asset classes, as in stocks or bonds or international versus US or just individual equities, you know, if, if the tech boom, you know, happens or continues, whatever they’ll say.

You might be overexposed in your portfolio, right? So we should be constantly reevaluating where your portfolio is at, how to bring it back into alignment with your, with your plan, right? Now there’s rules of thumb out there, you know, 120 minus you is how much you should have in equities or, uh, and, and the reality of that is, I, I strongly disagree with that sentiment. Uh, the reality of it is we have to determine how much you’re gonna be pulling out of those portfolios, and the idea is we wanna backfill, right? So you wanna have enough equity exposure to backfill what you’re pulling out of the accounts. Let me tell you, nothing better than when you’re talking to a family, John, and they pulled out $100,000 and their account’s still up $100,000 right? Absolutely, right. Right. Nothing better. But at the same time, growth isn’t necessarily always the goal. So things you can do is maybe switch your portfolio to maybe a little bit more of a value or dividend tilt, right? Um, make sure your bonds are, are suited for the one, what you need, and two, the bond environment that we’re in that time, right? So there’s, there’s little things that we need to do just to fine tune, just to make sure that the portfolio is doing what you need it to do when you need it to do.

John Walker
Absolutely, yeah, I, I, I just want to underscore, portfolio drift, as we call it, is completely natural, right? The markets move. And if you don’t move to account for that, right? You know, we see run-ups in certain sectors. We see things that, you know, we see a lot of families who have overexposure to, you know, tech because that’s what the market did. It’s not because they did it. They didn’t choose that. Their portfolio followed the market trends, and that’s what happened. And so understanding, as you said, Jason, there’s no right or wrong answer here. It’s, it’s having a portfolio working for you that actually accomplishes the objectives that you need for your plan to work, right? Maybe it does mean dialing down the risk. Maybe it needs you need a little more balance. Maybe you need something that produces a little more income. Maybe you need, you, what you need is going to be dependent on your plan, and that is really, you know, a very specific individual part of this conversation.

Jason O’Meara
On thing to remember is um, there’s this mindset when it comes to investing for retirement that the day you retire is the goal. The reality is, no, this portfolio has to last you maybe another 30 years, you know, if you’re retiring at 65, you may live till 95. That’s not out of the, out of the, you know, context of reality here, so you know, you, you still have another 30 years of this portfolio needing to be there. So we can’t go, oh, I retired, now I need to put everything in the most secure, safe investments. Now, you still need, you still need a level of, of risk, you know, you still need a level of equity in your portfolio, um, and, but everybody needs a different level.

John Walker
And one of the reasons why you need that is because there’s something in your plan that we anticipate kind of consistently rising, and it’s not just inflation. The 8th thing we talk about is healthcare costs are often one of the biggest line items in everyone’s financial plan as they…

Jason O’Meara
…make or break your plan.

John Walker
Exactly as they go to consider retirement is what have you budgeted for healthcare, right? Because it’s, you know, people worry about, I mean, Jason, we, we talk to people all the time and one of the things they worry about is the costs of long-term care. And we kind of have to, which is certainly a consideration, but, but what were your, what were your costs of, of be in general, right? What is your budget for health insurance, right? And if you’re planning to retire prior to being eligible for Medicare, you know, that budgeting line item is usually really significant.

Jason O’Meara
Right? So I listen, John, I’ve had people reconsider retiring because of the healthcare costs, you know, it’s, it’s, it’s very expensive if you’re covering your own healthcare, your own health insurance.

John Walker
Yeah, so the need to cover health costs in retirement is significant. So, what is the plan and what is your budget and how have you evaluated that as a factor of when you choose to retire? So if 2026 is, is on your radar for retirement, do you have a plan to offset those costs, right? If it’s particularly if you are not eligible yet for Medicare, because several years, you know, the, the, it, it may really be your intent to retire early, but if you retire, retire in your late 50s and you’ve got 7+ years of, of covering medical care costs out of pocket, you know, you might be looking at $100,000 to $15,000 per person easily to, to, you know, just in premiums. Uh, and, and so, have you evaluated that? Have you considered it? One of the other things, Jason, the ninth thing we’d suggest is before you retire, is always a good opportunity to update your estate plan.

And you know, if you haven’t yet reviewed your will, your trusts, your, you know, your broader estate planning strategies. You know, now is the time to do it, right? Especially since we see a lot of folks who, you know, have a plan in place, but it hasn’t been updated since the kids were little or it’s been 5, 10 years and their life has materially changed. They’ve moved, they’ve significantly increased their wealth, right? It’s things change. So, you know, do you have that plan in place?

Jason O’Meara
And also like little things like, you know, are the beneficiaries right on your retirement plans, ah, you know, like that’s a big one. Like that, that’s probably, probably the one I see overlooked the most, you know, when we’re going through these is, is all of a sudden I’m like, well, what’s the beneficiaries like on your 401(k).

And they don’t know. They set that up when they started working there. They don’t remember, you know, and they never looked at it again. So it’s something that, that should be reviewed every couple of years just to make sure that it’s still in line. Um, but, you know, when you’re making a big change, it’s a great time to, to put the push the reset button on the estate plan and make sure that it’s where you need it to be, uh, especially if now we’re looking at retirement, right? Big change there.

You may now have grandkids that weren’t there when you had, when you put these things in place, right? So you wanna make sure that everyone’s included in the way that you want them to be included and that the accounts are all titled in the way that you want them to be titled.

John Walker
Absolutely, yeah. So whether it’s looking at your wills, your trusts, your powers of attorney, your healthcare directives, or just making sure your beneficiaries are properly updated, you know, that’s a really, really critical step. And one, you know, candidly, you should do every, as a matter of course, every few years anyway, but, you know, certainly if you’re considering retirement.

And Jason, the last thing we, we just want to talk on is the 10th item, you know, on our top 10 list here of, of, you know, New Year’s resolutions is you need to stress test, and that’s the big one. So the reason why that was left for last is everything kind of flows into that point, right? So we figured out your budget, we figured out your investment allocation, we figured out your Social Security planning strategy. We figured out what other guaranteed incomes you have. Um, we figured all this out.

Jason O’Meara
And now what we need to do is just run some tests around different scenarios, different markets outcomes, right? What if you live longer? What if you live shorter, you know, what if there’s, what if we have 20 of the best years in the market ever? What if you have 20 of the worst years in the market ever? Like, how does your plan stack up against those scenarios, to basically give you that peace of mind that and no matter what happens, you’re good. Like we, we want you to go back to work cause you got bored and you wanna go back to go do something else, right? Nobody wants to go back to work cause they have to. Um, and one of the best ways we can, you know, insure against that is by stress testing, by doing the Monte Carlos, the 1,000 different what if scenarios or whatever we do, right? Um, you, you, those are super important just to make sure that the things we say we wanted, we should be doing hold up in all weather.

John Walker
Absolutely right, you know, it’s, there’s so many things that could. You know, unhinge a good plan and, and identifying what those risks and what those variables are for you, right? What are the biggest risks to your plan being successful? Is it longevity? Is it market conditions? Is it?

Inflation. What happens, right, if these things happen and do we have, you know, mechanisms in place to adjust, to pivot? Will the GPS reset and take us a different direction if there’s an accident ahead, right? That’s the kind of mindset that you need. And so, you know, again, it’s not always easy for families to navigate this on their own. They most folks don’t have the planning tools and resources to be able to do this. But, you know, understanding before you make such a vital decision in you and your family’s life, you know, have you done the analysis to do so? And do you, do you have a plan and do you have confidence that that plan is built for success?

That’s really, really important. If you are thinking about retirement in 2026, hopefully this list is helpful, and we’re always here to help, you know, if there are questions you have, we can answer them too. Jason O’Meara, CERTIFIED FINANCIAL PLANNER®, market leader here at Mercer Advisors, thanks so much for joining me for such an important conversation.

Jason O’Meara
Yeah, absolutely. This was great. Appreciate it.

John Walker: And so if you, you know, have questions, if this is something that’s on your mind, if you do want to talk to us, we’re always here to help. You can call us anytime at 215-558-3500. That’s 215-558-3500. Or you can email me at jwalker@merceradvisors.com. That’s jwalker@merceradvisors.com.

John Walker: And as always, we highly encourage you to listen to our Market Perspectives podcast with our Chief  Investment Officer, Mr. Don Calcagni, where he shares our thoughts on the markets and our investment strategy here at Mercer Advisors. I’m John Walker, Regional Vice President of Mercer Advisors. Thanks so much for listening to the Your Life Your Wealth podcast. Talk to you again soon.

If you’re interested in learning more about applying the principles we discussed to your personal financial circumstances, please visit Cordasco Financial Network at CFNplan.com.