When people think about retirement success, they often focus on investment returns. Questions like “Am I too conservative?” or “Am I taking enough risk?” come up all the time.
The truth is, five key numbers matter far more. These are the numbers that can quietly derail your retirement if you are not planning for them.
Let’s break them down below.
Contents
1. Healthcare Costs
Healthcare is one of the most underestimated expenses in retirement. There are two distinct phases to consider.
The first phase is standard medical coverage. Once you leave your employer plan, you transition to Medicare. Costs include premiums, doctor visits, hospital care, and prescriptions. Medicare expenses can be affected by your income, not your net worth. Higher income can mean higher monthly premiums for the same coverage.
The second phase comes later in life. Long-term care and home healthcare are not generally covered by Medicare. These costs can be substantial and often catch families off guard.
Fidelity estimates that a 65-year-old individual may need substantial after-tax savings to cover healthcare expenses in retirement.¹ Many families are nowhere close to being prepared for that number.
A strong retirement plan should account for both early retirement healthcare costs and potential late-life care needs. The goal is to help ensure you can cover these expenses without becoming a burden on your family.
2. Required Minimum Distributions (RMDs)
Required Minimum Distributions are one of the biggest tax surprises retirees face.
If you have money in pre-tax accounts such as IRAs or 401(k)s, those funds have been growing tax-deferred for decades. Once you reach the applicable RMD age, you are generally required to start withdrawing money whether you need it or not.
The amount you must withdraw is based on your age and the size of your accounts. As both increase, so do your required withdrawals.
These withdrawals are generally taxable as income. For many retirees, this can mean:
- $40,000 to $80,000 per year in forced income
- In some cases, $200,000 or more
This can push you into higher tax brackets and increase Medicare premiums.
Planning ahead is critical. Strategies such as Roth conversions or early withdrawals can help reduce the size of future RMDs and limit the tax impact later in life.
3. Inflation
Inflation does not usually make people go broke overnight. It slowly erodes purchasing power over time.
A retirement budget that works today may not work in 10 or 20 years. Everyday costs such as groceries, utilities, property taxes, and healthcare will continue to rise.
A 3 percent annual inflation rate may not seem significant, but over time it compounds dramatically. Many retirees underestimate how much their lifestyle will cost in the future.
Most people are not looking to cut their lifestyle in retirement. Many want to maintain or even improve it. That means your financial plan must account for inflation from day one.
4. Portfolio Risk
Your investment strategy plays a major role in whether your money lasts.
The level of risk you were comfortable taking during your working years may not be appropriate in retirement. Market downturns can have a much larger impact once you are drawing income from your portfolio.
A well-designed portfolio should include:
- Assets that generally grow to help keep up with inflation
- Assets that may remain relatively more stable during market downturns
- Income-generating investments to support withdrawals
This balance helps protect against sequence of returns risk, where early market losses combined with withdrawals can significantly reduce long-term portfolio value.
Risk should be viewed as a tool. Once you have enough, the goal often shifts from maximizing growth to preserving and sustaining wealth.
5. Tax Liability
Taxes are often the largest hidden expense in retirement.
Several factors contribute to this:
- Up to 85 percent of Social Security benefits may be taxable
- Pension income is generally taxable at the federal level
- Required Minimum Distributions are generally taxed as ordinary income
- Roth conversions increase taxable income in the year they occur
Many retirees expect to be in a lower tax bracket once they stop working. In reality, some move into higher brackets later in life due to Required Minimum Distributions and accumulated savings.
It is not uncommon to see retirees move into higher brackets once Required Minimum Distributions begin.
The key is proactive tax planning. Managing your mix of accounts and timing withdrawals properly can help you keep more of your wealth over time.
Final Thoughts
These five numbers can determine whether your retirement succeeds or falls short:
- Healthcare costs
- Required Minimum Distributions
- Inflation
- Portfolio risk
- Tax liability
Most people focus on returns. The real drivers of success include these underlying factors.
For more on related retirement planning topics, see All About Required Minimum Distributions (RMD), Understanding Medicare, How to Optimize Your Medicare Plan, How to Create a Sustainable Retirement Cash Flow, and 4 Big Retirement Tax Ambushes, How to Avoid Them.
See How These Numbers May Affect Your Retirement Plan
If you want clarity on how these numbers may impact your future, a financial adviser may be available to help you explore your options. REAP Financial can support retirement planning with guidance around retirement income, tax planning, Medicare-related costs, and long-term financial security.
Contact REAP Financial
Phone: (512) 249-7300
Email: admin@reapfinancial.com
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REAP Financial
9414 Anderson Mill Rd #100
Austin, TX 78729
Chris Heerlein, a Texas native, is an Investment Adviser Representative and CEO at REAP Financial, servicing its private client group, helping private business owners, top-level executives and affluent individuals create, transition, preserve and grow their wealth over generations. REAP serves corporate and private clients, offering objective financial and investment advice, tax planning, business succession planning, access to webinars, and exceptional service that creates generational relationships built on trust. Affluent families and individuals look to Chris and his team of advisers to empower them by providing organization, accountability, objectivity, proactivity, education, and partnership. Chris is a multi-published author with his most recent release, “How to Retire Rich and Look Poor in Retirement: The Millionaire’s Tax Playbook” (2026), “Divorce With Dignity” (2019) and “Money Won’t Buy Happiness But Time To Find It” (2017).
In addition to his work with clients, Chris hosts Wealth Radio each Saturday at 11 a.m. on NewsRadio KLBJ and has been a featured speaker on other podcasts. He is also the host of Retire Ready TV on KXAN each Monday and Wednesday at 6 p.m., as well as REAP Financial’s YouTube channel.
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