The Truth About Retirement Income Most Advisors Won’t Tell You

There’s a lot of conventional wisdom out there about retirement income – some of it useful, some of it… not so much. If you’ve ever felt like financial advisors or investment companies aren’t giving you the full story, you might be right. Let’s pull back the curtain on a few truths about retirement income that you won’t often hear from many advisors (but you need to know). Being aware of these can help you make smarter decisions and avoid costly surprises.

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Truth #1: “Average” Investment Returns Don’t Guarantee Success

Many retirement projections assume you’ll earn, say, 6-7% average annual returns on your investments. While that might be a reasonable long-term average, the sequence of returns matters more than the average when you’re withdrawing money. Most advisors won’t explicitly warn you about “sequence of returns risk” – the risk of having bad markets early in retirement. If the market drops a lot in your first few retirement years and you’re drawing from your portfolio, you’ll be selling more shares at low prices, and your portfolio might not recover when the market bounces back. Two retirees can both average 6% over 30 years, but if one got a big chunk of negative years early on, they could run out while the other doesn’t.

What to do: structure your withdrawals and investments to mitigate this. This might mean keeping a couple years’ worth of expenses in cash or conservative assets as a buffer, so you aren’t forced to sell stocks in a downturn. It could also mean being flexible with spending. The key is recognizing that rosy average return charts gloss over a harsh reality: timing can make or break your plan.

Truth #2: Taxes Can Take a Big Bite Out of Your Income

When advisors talk about your retirement income, they might not emphasize just how much taxes will impact your net cash flow. If most of your savings are in tax-deferred accounts (like traditional 401(k)s or IRAs), remember that every withdrawal is taxable as ordinary income. That means if you withdraw $80,000 from your IRA for living expenses, you won’t get to spend all $80k – perhaps $60k-$70k after federal and state taxes (depending on your bracket). Many retirees are surprised at how high their tax bill is once Required Minimum Distributions (RMDs) kick in (at age 73, for those born 1951-1959, or 75, for those born 1960 or later, depending on current laws). Not all advisors dive deeply into tax planning, because some may focus just on managing investments.

What to do: look at strategies like Roth IRA conversions before you retire or in early retirement while you’re in a lower tax bracket – pay some tax upfront to enjoy tax-free withdrawals later. Consider the tax efficiency of which accounts you draw from first. And don’t forget, Social Security can be taxable too, and higher income can lead to increased Medicare premiums. A truly comprehensive plan factors in taxes, not just investment returns.

Truth #3: Fees and Expenses Erode Your Income More Than You Realize

This one advisors should tell you, but many don’t highlight it: the fees you pay – to advisors, in mutual fund expense ratios, annuity fees, etc. – directly reduce your retirement income. For example, if your portfolio yields 5% but you’re paying 1.5% in various fees, that’s 30% of your return gone to costs, leaving you effectively 3.5% after inflation perhaps. Over a 20+ year retirement, high fees can cost you tens or hundreds of thousands of dollars – money that could have been in your pocket. Some advisors won’t bring this up clearly, especially if they are compensated by selling high-fee products or charging a high Assets Under Management (AUM) fee without providing much value.

What to do: insist on transparency in fees. Know exactly what you’re paying your advisor, and what any fund or product fees. Opt for low-cost investment options (index funds, ETFs) where appropriate. Ensure that any fees you do pay are justified by the value you’re receiving (e.g., comprehensive financial planning, not just investment picks). Keeping more of your returns means more sustainable income for you.

Truth #4: Your Retirement Spending Probably Won’t Be a Flat Line

Many financial plans assume you’ll spend the same inflation-adjusted amount every year in retirement. But real life is different. Often, retirees go through spending phases: the “Go-Go years” (early retirement when you’re active, traveling, spending more on fun), the “Slow-Go years” (middle retirement where you slow down a bit, maybe spend a little less on travel but perhaps more on healthcare), and the “No-Go years” (later retirement, maybe more home-bound, spending mostly on comfort and healthcare). Most advisors won’t tell you that it’s okay (and expected) for your spending to change over time. You might spend more at 65-75, level off at 75-85, and then your discretionary spending drops in your late 80s.

What to do: Plan for flexibility. You don’t have to force yourself into a rigid budget if your lifestyle changes. In fact, you might be able to safely spend a bit more in the early years when you’re healthiest and most eager to do things, because you know your costs will likely go down later (apart from healthcare). Of course, keep an eye on the overall plan to ensure you’re not overspending early, but know that your retirement lifestyle might not be uniform year after year. A good plan is dynamic and adjusts to you, not static percentages on a page.

Wrapping Up

Not all advisors are cagey or withholding these truths, of course. There are many great, honest professionals out there. But it’s important for you, as someone planning retirement, to be armed with these truths: – Be mindful of sequence risk – a plan needs more than pretty average return assumptions. – Tax planning is crucial – consider your after-tax income, not just pre-tax. – Fees matter a lot – minimize them to maximize your income. – Retirement is fluid – your spending and plans will evolve, and that’s normal. – Work with advisors who are fully transparent and truly on your side.

At Legasure, we believe in giving you the full picture – even the uncomfortable truths – because that’s how you build a retirement plan that truly works. If you want an advisor who will tell it like it is and help you plan for all aspects of retirement income, schedule a consultation with us. We’ll help you craft a plan that’s realistic, tax-efficient, cost-conscious, and tailored to your life – not a one-size-fits-all brochure. The more you know, the more empowered you are to enjoy the retirement you deserve. Schedule a consultation with our team here.