Retirement
Planning

Longer than most people plan for. A 65-year-old couple today has a 50% chance that at least one spouse will live to 93. Many financial plans are built around averages, but if you live beyond average, a plan designed for 20 years of retirement may need to cover 30. That extra decade can mean the difference between financial security and running short.

This is called "sequence of returns risk," and it is one of the most overlooked dangers in retirement. If the market drops significantly in the first five years after you retire, you are withdrawing from a shrinking portfolio. That combination of losses and withdrawals can permanently reduce how long your money lasts, even if the market recovers later.

Two retirees with the exact same portfolio and the exact same average return can have wildly different outcomes depending on the order those returns happen. One could leave behind millions, while the other runs out of money decades early.

Healthcare costs in retirement are consistently higher than most people budget for. A 65-year-old couple can expect to spend over $300,000 on medical expenses throughout retirement, and that does not include long-term care. There is roughly a 70% chance someone over 65 will need some form of long-term care, and the national median for a semi-private nursing home room runs over $9,000 per month.

Healthcare costs also tend to rise faster than general inflation, averaging around 4.7% annually. That means what costs $500 a month at 65 could cost over $1,200 a month by 85.

Yes, and the impact is larger than most people realize. At a modest 3% annual inflation rate, your purchasing power drops by nearly half over 20 years. A retirement budget that covers everything comfortably at age 65 can feel genuinely tight by 80, without any change in your spending habits.

This hits especially hard in categories that rise faster than general inflation, like healthcare, insurance premiums, and utilities. In Arizona, summer cooling costs can be substantial, and rising utility rates add another layer to the inflation challenge for retirees here.

Social Security was designed to replace about 40% of pre-retirement income for average earners, not to be a complete income source. Yet 59% of seniors rely on it for at least half their monthly expenses. The average monthly benefit in 2025 is around $1,976, which may not cover housing, food, healthcare, and daily living costs on its own.

Arizona does not tax Social Security benefits, which is a meaningful advantage. But 401(k) and IRA withdrawals are still subject to the state's 2.5% flat income tax, and combined sales tax rates averaging over 8% can quietly eat into your purchasing power on everyday spending.

This is one of the most financially disruptive events in retirement, and it is rarely planned for well. When a spouse dies, the surviving partner typically loses the smaller of the two Social Security checks. At the same time, they move from filing taxes jointly to filing as a single person, which often pushes them into a higher tax bracket on the same income.

Many shared expenses like housing, insurance, and utilities stay roughly the same, but the income to cover them drops significantly. A solid retirement plan accounts for both lives and models what happens to the survivor's finances across multiple scenarios.

Arizona offers real advantages for retirees, including no state tax on Social Security, no estate or inheritance tax, and a low flat income tax rate of 2.5%. But there are costs that catch people off guard. Summer cooling bills can be significant in the Phoenix metro area, and HVAC replacement costs are rising due to new federal refrigerant regulations taking effect in 2026.

Property insurance in certain areas, especially wildfire-adjacent zones near Scottsdale, Fountain Hills, and the Tucson foothills, has seen sharp premium increases and even non-renewals. Water scarcity and long-term infrastructure costs tied to the Colorado River Basin are also worth watching. These are not reasons to avoid Arizona, but they should be built into any serious retirement budget.

Once you reach age 73 (or 75 if you were born in 1960 or later), the IRS requires you to start withdrawing a minimum amount from your traditional 401(k) and IRA accounts each year. These withdrawals are taxed as ordinary income, and they can be larger than people expect, especially if your accounts have grown substantially over decades of saving.

Without a strategy, RMDs can push you into a higher tax bracket, increase the taxes on your Social Security benefits, and raise your Medicare premiums through IRMAA surcharges. Many retirees benefit from strategic Roth conversions in the years before RMDs begin, which can reduce the long-term tax burden significantly.