New year, same retirement account balances. Or maybe not. If you're retired or getting close, January is a good time to check if your retirement income strategy is still doing what you need it to do.
Think of your retirement plan like a car. You can drive it for years without checking under the hood, but eventually you'll want to make sure everything's running right. You don't need to tear the engine apart every January, but a basic check can prevent bigger problems down the road.
Here are seven questions worth asking as you start 2026, especially if you've built a retirement portfolio north of $1 million through years of steady 401(k) contributions.
1. Did Your Spending Match Your Plan Last Year?
Start with the basics. What did you actually spend in 2025? Not what you thought you'd spend, but what really went out the door.
Most retirees underestimate their first-year retirement spending. You finally have time for all those projects and trips you put off during your working years. That costs money. If you spent significantly more or less than expected, you need to know why and adjust accordingly.
Look at your bank statements and credit card bills from the past year. Add it up. Compare it to what you planned to withdraw from your retirement accounts. If there's a big gap in either direction, figure out what caused it. Was it one-time expenses like a new roof? Ongoing lifestyle changes? Healthcare surprises?
According to the Employee Benefit Research Institute, many retirees experience spending patterns that differ significantly from their pre-retirement projections, particularly in the first five years of retirement.
2. Is Your Withdrawal Rate Still Sustainable?
The classic rule says withdraw about 4% of your retirement portfolio in your first year, then adjust for inflation each year after. But that's a starting point, not gospel. Your actual sustainable withdrawal rate depends on your portfolio allocation, your spending flexibility, and how long your retirement might last.
Do the math on your current situation. If you have a $1.2 million portfolio and you withdrew $60,000 last year, that's 5%. If markets were up and your portfolio is now at $1.3 million, that same $60,000 withdrawal drops to 4.6%. If markets were down and you're at $1.1 million, it jumps to 5.5%.
Higher withdrawal rates aren't automatically bad, especially if you have other income sources like Social Security or a pension. But you should know what percentage you're pulling and whether that rate gives you confidence your money will last.
Research from Morningstar suggests that withdrawal rates between 3.3% and 4% provide a high probability of portfolio success over a 30-year retirement, though individual circumstances vary significantly.
3. Are You Optimizing Your Tax Situation?
Here's where living in Orlando gives you an advantage. Florida has no state income tax, which means you have more flexibility in how you pull money from different account types without worrying about state tax brackets.
But federal taxes still matter. If all your retirement money sits in traditional 401(k)s and IRAs, every dollar you withdraw gets taxed as ordinary income. That's fine, but it might not be optimal.
Consider your tax situation:
- Are you pulling from traditional accounts, Roth accounts, or taxable brokerage accounts?
- Could you benefit from Roth conversions in years when your income is lower?
- Are you managing capital gains strategically in taxable accounts?
- Will Required Minimum Distributions (RMDs) push you into a higher tax bracket when you turn 73?
The IRS provides detailed information about RMD requirements and the age at which they begin.
Tax planning isn't just about this year. It's about the next 20 or 30 years. Small adjustments now can save substantial money over a full retirement.
4. Does Your Asset Allocation Still Match Your Needs?
You built your portfolio during your working years with a certain mix of stocks, bonds, and other assets. That allocation made sense when you had decades until retirement. Does it still make sense now?
If you retired five years ago with a 60/40 stock-to-bond allocation and the stock market has had a good run, you might now be sitting at 70/30 or even 75/25 just from market movement. That's more aggressive than you planned. Alternatively, if markets struggled, you might have drifted too conservative.
Rebalancing isn't about timing the market. It's about maintaining the risk level you're comfortable with and the one that fits your income needs. If you need to pull $50,000 from your portfolio this year, where does that money come from? Selling stocks when they're up feels good. Selling stocks when they're down feels terrible but might be necessary if you haven't maintained enough in bonds or cash.
A common approach for retirees is keeping one to three years of spending in relatively stable investments like bonds or cash equivalents, allowing the rest to grow in stocks. This gives you a buffer during market downturns without forcing you to sell stocks at bad times.
5. Are You Coordinating Your Social Security Strategy?
If you haven't claimed Social Security yet, when you claim matters. A lot. Claim at 62 and your monthly benefit is roughly 30% lower than waiting until your full retirement age. Wait until 70 and it's about 24% higher than your full retirement age.
The decision isn't just about break-even calculations. It's about how Social Security fits with the rest of your retirement income. If you have a substantial portfolio, waiting to claim Social Security while drawing from your retirement accounts first can make sense. You're essentially using your portfolio to buy a higher guaranteed income stream later.
For married couples, the coordination gets more complex but more important. Spousal benefits and survivor benefits change the equation. The higher-earning spouse's claiming decision affects the survivor benefit, which can last for decades after the first spouse passes.
The Social Security Administration offers calculators and resources to help you understand your claiming options and their long-term impact on your retirement income.
6. Have Your Healthcare Costs Changed?
Healthcare expenses in retirement tend to increase over time, not stay flat. If you're on Medicare, did your premiums change? Did you need more medical care than expected last year? Are your prescription costs climbing?
According to the Fidelity Retiree Health Care Cost Estimate, a 65-year-old couple retired in 2024 can expect to spend approximately $315,000 on healthcare costs throughout retirement. That's a significant chunk of your portfolio, and it's worth reviewing annually.
Medicare covers many healthcare costs, but not everything. You might need Medicare Supplement Insurance or a Medicare Advantage plan. You'll likely need Part D prescription drug coverage. And Medicare doesn't cover long-term care, which is a separate planning consideration for many retirees with substantial assets.
If you're not yet 65 or if you retired before Medicare eligibility, healthcare coverage through the Health Insurance Marketplace may be an option. Florida residents can explore plans and costs through the federal marketplace.
7. Is Your Estate Plan Current?
Estate planning isn't just about what happens when you die. It's also about what happens if you become incapacitated. Do you have updated powers of attorney? Is your healthcare directive current? Do your beneficiary designations match your wishes?
Beneficiary designations on retirement accounts and life insurance policies override what's in your will. If your 401(k) still lists your ex-spouse from 15 years ago because you forgot to update it, that's who gets the money. If you've had kids or grandkids since you last reviewed your estate plan, they won't automatically be included.
Florida has specific rules about wills, trusts, and estate administration. If you moved to Orlando from another state, your old estate planning documents might not align perfectly with Florida law. It's worth having a Florida estate planning attorney review your documents to make sure everything works as intended.
The federal estate tax exemption for 2026 is closer to $15 million per individual, according to IRS projections. Most Orlando retirees won't hit that threshold, but if you're close or if your estate has appreciated significantly, proper planning becomes more important.
What to Do with Your Answers
If you asked yourself these seven questions and everything looks good, great. You can move on with your year knowing your retirement income plan is on track.
If you found some gaps or concerns, that's normal. Retirement planning isn't set-it-and-forget-it. Life changes, markets change, laws change, and your plan needs to change with them.
Consider making a list of the issues you identified. Some you can handle yourself. Pull your spending reports, rebalance your portfolio, update your beneficiary forms. Other issues might benefit from professional guidance, particularly around tax planning, Social Security optimization, or estate planning where mistakes can be expensive.
The goal isn't perfection. It's making sure your retirement income strategy continues working for you as you move through different phases of retirement.
Common Retirement Income Mistakes to Avoid
While you're reviewing your retirement plan, watch out for these common mistakes that can derail even well-designed retirement income strategies.
Ignoring Inflation
Your expenses will likely increase over time. If you locked in a withdrawal amount five years ago and haven't adjusted it, you're effectively taking a pay cut every year as inflation erodes purchasing power. Most sustainable withdrawal strategies build in annual inflation adjustments.
Taking Income Only from One Account Type
If you have money in traditional IRAs, Roth IRAs, and taxable brokerage accounts, consider pulling from all three strategically rather than draining one account first. This gives you more control over your tax situation and more flexibility to manage your income in different market conditions.
Failing to Plan for Required Minimum Distributions
RMDs begin at age 73 (for those born in 1951 or later). If you've spent your entire career contributing to traditional 401(k)s and IRAs, RMDs can push you into higher tax brackets and increase your Medicare premiums. Planning for this several years in advance gives you more options.
Not Building in Spending Flexibility
The most resilient retirement income strategies have some flexibility built in. Can you reduce spending by 10% in a bad market year? Can you increase spending when markets are strong? This flexibility dramatically improves the odds your portfolio lasts throughout retirement.
Creating Your 2026 Action Plan
Turn your answers to these seven questions into specific action items for the year. Here's what a simple action plan might look like:
January
- Calculate actual 2025 spending and compare to plan
- Review current withdrawal rate and portfolio balance
- Check asset allocation and rebalance if needed
February
- Gather tax documents and assess opportunities for Roth conversions
- Review Social Security statement and claiming strategy
March
- Review and update beneficiary designations on all accounts
- Schedule estate planning review if documents are over five years old
Q2-Q4
- Monitor spending quarterly to stay on track
- Review investment performance and make adjustments as needed
- Track healthcare costs and adjust budget if necessary
Breaking these tasks into manageable chunks makes them less overwhelming. You don't need to solve everything in January. You just need to identify what needs attention and schedule time to address it.
When to Consider Professional Help
Some retirement income questions you can answer yourself. Others benefit from an experienced perspective. Consider working with a fiduciary financial advisor if:
- Your retirement portfolio exceeds $1 million and you want to optimize tax efficiency
- You're trying to coordinate complex Social Security claiming strategies with your spouse
- You're unsure whether your withdrawal rate is sustainable long-term
- You're approaching RMD age and need to plan for the tax impact
- You want someone to review your complete retirement picture and identify gaps
- You value having a partner to help you make decisions and complete important tasks
Fee-only, fiduciary advisors work in your best interest without commissions or conflicts. If you're in the Orlando area and want someone who understands Florida's specific tax advantages and retirement landscape, consider finding a local CFP® professional who specializes in retirement income planning.
The CFP Board offers a search tool to find CERTIFIED FINANCIAL PLANNER® professionals in your area.
Frequently Asked Questions
How often should I review my retirement income plan?
At minimum, review your retirement income plan annually, typically in January or after you receive year-end statements. Additionally, review your plan whenever you experience major life changes like the death of a spouse, significant health issues, major market movements, or changes in tax laws. The first few years of retirement often require more frequent reviews as you establish spending patterns and adjust to your new normal.
What's a safe withdrawal rate for retirement?
The traditional guidance suggests a 4% initial withdrawal rate, adjusted annually for inflation. However, safe withdrawal rates depend on your portfolio allocation, retirement timeline, spending flexibility, and other income sources. Some research suggests rates between 3.3% and 4% provide high confidence over 30-year retirements. If you have a pension or significant Social Security income, you might be able to use a higher withdrawal rate from your portfolio. Conversely, if you're retiring very early or want extra security, consider a lower rate.
Should I convert traditional IRA money to a Roth IRA in retirement?
Roth conversions can make sense in retirement, particularly in years when your income is lower and before RMDs begin at age 73. Converting traditional IRA assets to Roth creates a tax bill now but allows tax-free growth and withdrawals later. This can be especially valuable in Florida where you won't pay state income tax on the conversion. The decision depends on your current tax bracket, your expected future tax bracket, and whether you have cash outside retirement accounts to pay the conversion taxes.
How much should I keep in cash or stable investments?
Many financial advisors suggest keeping one to three years of living expenses in relatively stable investments like bonds, money market funds, or short-term CDs. This creates a buffer so you don't have to sell stocks during market downturns. If you need $60,000 annually from your portfolio, consider keeping $60,000 to $180,000 in stable investments, with the remainder invested for growth. Your specific allocation should reflect your risk tolerance and overall financial situation.
What happens if I spend more than planned in my first year of retirement?
Higher first-year spending is common as retirees make one-time purchases, take deferred trips, or adjust to new spending patterns. If your spending was significantly higher than planned, determine whether it was one-time expenses or a new baseline. One-time expenses are less concerning and can often be absorbed without major plan changes. If your baseline spending increased, you'll need to adjust your withdrawal strategy, cut back on expenses, or potentially re-examine your retirement timeline and assumptions.
Can I change my Social Security claiming age after I've decided?
If you've already started collecting Social Security, you have limited options to change your decision. You can withdraw your application within 12 months of first claiming benefits, but you must repay all benefits received. Alternatively, if you've reached full retirement age, you can suspend your benefits to earn delayed retirement credits, then restart them later at a higher amount. These rules are complex, so consider consulting with the Social Security Administration or a financial advisor before making changes.
Should I pay off my mortgage in retirement?
The decision to pay off your mortgage in retirement depends on your interest rate, tax situation, cash flow needs, and psychological comfort. If your mortgage rate is low (below 4%) and you have a diversified portfolio earning more than your mortgage rate, keeping the mortgage might make mathematical sense. However, many retirees value the peace of mind that comes from eliminating monthly mortgage payments, even if it's not the optimal financial decision. Consider your complete financial picture, including emergency reserves and other obligations, before using retirement savings to pay off your home.
How do I know if my investment fees are reasonable?
Investment fees include fund expense ratios, advisory fees, and transaction costs. For mutual funds and ETFs, expense ratios below 0.50% are generally considered reasonable, with many index funds charging 0.10% or less. For financial advisory services, fee-only advisors typically charge 0.50% to 1.50% of assets under management annually, often with lower percentages on larger portfolios. Review your fee structure at least annually. Even small differences in fees compound significantly over a 20 or 30-year retirement. All-in costs exceeding 2% annually should prompt a careful review of whether you're receiving commensurate value.
The Bottom Line
Your retirement income plan isn't a one-time project you completed five years ago. It's an ongoing strategy that needs regular attention to keep working well.
These seven questions give you a framework for your annual review. You don't need to become a financial expert. You just need to understand whether your current approach is still serving you and where adjustments might help.
Most Orlando retirees who built substantial portfolios through years of disciplined 401(k) saving have the resources for a comfortable retirement. The key is making sure those resources are deployed efficiently, taking advantage of Florida's tax benefits, and adjusting as circumstances change.
Start with these questions. See where you land. Make your adjustments. Then get back to enjoying your retirement knowing your financial foundation is solid.
Important Disclosure: This article provides general information about retirement income planning and is intended for educational purposes only. It is not personal financial, investment, tax, or legal advice tailored to your specific circumstances. Retirement planning involves numerous variables including market conditions, tax laws, personal health, and individual goals that can significantly affect outcomes. Before making any financial decisions, consider consulting with a qualified financial advisor, tax professional, or attorney who can evaluate your specific situation. Past performance does not guarantee future results, and individual circumstances vary.
