Koehler Wealth Insights

What Do Most People Get Wrong About Retirement Planning?

Most people approaching retirement have done the hard part — saved consistently, contributed to the 401(k), lived below their means. What follows is where it gets complicated: a series of decisions that interlock in ways almost nobody expects, where one choice quietly reshapes the value of the others.

Whether you're planning your exact retirement date or wondering what happens if that date gets moved up on you — these questions apply either way.

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If You Retired Next Month, Which Account Would You Spend From First?

Almost nobody has an answer to this. It sounds like a detail. It isn’t.

Most people arrive at retirement with money in three different tax environments — tax-deferred accounts like a traditional 401(k) or IRA, where every withdrawal is taxable income; Roth accounts, where qualified withdrawals aren’t; and taxable brokerage or savings accounts, generally taxed as capital gains rather than ordinary income. The order you draw from those three isn’t a preference. It determines your taxable income every year — and your taxable income determines a great deal more than your tax bill.

The assumption worth retiring: that taxes will simply be lower once you stop working. That’s true for some people. For others — particularly anyone with a substantial traditional 401(k), a pension, and Social Security arriving at the same time — retirement can push income higher, not lower.

How I work on this. I don’t provide tax advice, and I’m not your CPA. What I do is bring the withdrawal and conversion questions to the table early, model what different approaches would mean for your income, and work through it alongside your tax professional — so the investment decisions and the tax decisions are made by people who are actually talking to each other.

What Happens to Your Income If the Market Falls the Year You Retire?

While you’re still working and saving, the order good years and bad years arrive in doesn’t actually matter — only the average. A hypothetical $100,000, growing for ten years at returns averaging 6% a year, ends in the exact same place whether the strong years come first or last:

Hypothetical example for illustration only. Assumes $100,000 growing for 10 years with no withdrawals, at annual returns averaging 6%. Does not reflect any actual account, taxes, or fees.

The moment you begin withdrawing, that stops being true. A downturn now means selling investments at depressed prices to pay your bills — and those shares are gone. They don’t participate in the recovery. This is called sequence-of-returns risk, and here’s what it did to a hypothetical portfolio, using real, historical market returns.

Source: S&P 500 price returns, macrotrends.net, 1999–2018. Hypothetical example using actual historical index returns; does not represent any actual account. Past performance does not guarantee future results. Full year-by-year data, plus a second real case study using the 2007–2025 period, available in the free download below.

Same starting balance. Same withdrawal amount. Same twenty years of market history. The only variable was which four years the withdrawals happened to fall in. That’s sequence-of-returns risk — and it’s the reason two people can retire with identical savings and end up in very different places.

What’s Your Plan If You Don’t Get to Choose Your Retirement Date?

Almost every retirement plan quietly assumes you’ll work until you decide to stop. The data says otherwise.

Workers generally expect to retire around 65. In practice, most leave closer to 62 — and the gap isn’t usually a choice.

Sources: Employee Benefit Research Institute, 2026 Retirement Confidence Survey; Allianz Center for the Future of Retirement, 2026 Annual Retirement Study.

Why three years matters more than it sounds. Retiring early does several things at once, and each compounds the others. It ends your contributions sooner. It lengthens the years your money has to last. It often arrives before you’re eligible for Medicare. And it can pressure you into claiming Social Security earlier than you intended — permanently.

The assumption worth retiring: that “I’ll just work longer if I need to” is a plan. It’s a hope — and for nearly half of retirees, it doesn’t hold. A plan that only works if you stay healthy and employed until 67 isn’t a robust plan. It has a single point of failure, and that point is your health and your employer.

When You Claim Social Security, Whose Benefit Are You Actually Deciding?

For a married couple, this is the question that reframes everything — because the higher earner’s claiming decision doesn’t only set their own benefit. It sets the survivor benefit the surviving spouse will live on, potentially for decades.

Most couples approach the decision as two separate calculations. It’s closer to one joint decision with two people’s lifetimes riding on it.

Source: Social Security Administration, 2026 benefit rules and claiming data.

Where it leads. How much of your benefit is taxable depends on your other income — which loops back to how you’re drawing from your accounts. If you retire before 62, you may need a bridge strategy to carry you until you claim. And if you’re divorced after a marriage of at least ten years, or widowed, entirely different rules may apply that many people never learn about.

The assumption worth retiring: that claiming early is the safe, conservative choice. Sometimes it genuinely is — if you need the income, if your health is a concern, if you’re the lower earner in a couple. But “safe” is doing a lot of work in that sentence. For the higher earner in a married couple, an early claim can permanently reduce what a surviving spouse lives on.

What’s Your Plan for Healthcare Between Your Last Day of Work and 65?

If you retire at 62 — which, as we just saw, is roughly when most people actually do — you have about three years before Medicare eligibility, and no employer plan. That gap is one of the most expensive and least planned-for stretches in retirement.

And Medicare isn’t the finish line. The standard 2026 Medicare Part B premium is $202.90 a month — a 9.7% jump from the year before. The 2026 Social Security cost-of-living adjustment was 2.8%, roughly $56 a month for the average retired worker. The Part B increase alone consumed about a third of that raise before any other healthcare cost.

A separate 2026 Fidelity survey found that 54% of pre-retirees believe Medicare will cover all of their health expenses. It won’t.

Sources: Fidelity Investments, 2026 Retiree Health Care Cost Estimate; Centers for Medicare & Medicaid Services, 2026 premium schedule; Social Security Administration, 2026 COLA.

Where it leads. The income you generate to live on during the pre-Medicare years determines your ACA marketplace subsidy — which means the withdrawal decisions from Question One directly change what your health insurance costs.

The assumption worth retiring: that Medicare handles it. Medicare is essential, and it is not comprehensive. Premiums, deductibles, coinsurance, dental, vision, hearing, and long-term care all live outside what most people picture when they say the word.

How I Think About This

Five questions, and each one opened onto two or three more. That’s not a failure of explanation — that’s what retirement planning actually is. The decisions are connected, and the connections are where the value is.

Here’s the organizing idea I come back to: you can’t control when a downturn arrives, so build a plan where a downturn can’t force your hand.

That means separating your money by when you’ll actually need it.

The part that actually manages the risk. Around year five, we look at rebuilding that ten-year segment using long-horizon funds — but only if conditions make sense. If markets are down, we don’t sell to refill. That would be sequence-of-returns risk all over again, one layer removed. Instead we wait, because five years of income are still set aside and there’s no deadline. We rebuild when it’s sensible, not when it’s necessary.

You’re never a forced seller. Not because anyone predicted the market, but because the need for cash and the exposure to markets were deliberately separated.

And where it goes beyond what I do. Retirement planning runs into tax law and estate law constantly — Roth conversions, charitable strategies, beneficiary designations, wills and trusts, powers of attorney. I don’t practice in either field. What I do is recognize where those questions arise, raise them before they become problems, and work directly with your CPA and estate attorney so the pieces fit together. Too often those professionals have never spoken to one another, and the client is left carrying information between them. That’s not a plan — it’s three partial plans that happen to belong to the same person.

What This Honestly Doesn’t Do

Any approach that claims to remove risk from retirement deserves skepticism. This one manages a specific risk — it doesn’t erase it.

It reduces sequence-of-returns risk. It doesn’t eliminate it. What it buys is time and flexibility. If a downturn runs longer than the runway that’s been built, the pressure returns.

It doesn’t guarantee your money will last. Longevity, spending, inflation, and long-term care needs all matter enormously, and no allocation framework solves for them by itself.

It requires holding meaningful assets conservatively. In strong markets, that segment will lag a fully invested portfolio. That’s the trade, and it’s a real one, not a technicality.

It only works if it’s maintained. A plan built once and never revisited isn’t a plan. The rebuild decision has to actually get made.

If you’d rather stay fully invested and accept the volatility, that’s a legitimate choice — and I’ll tell you so.

Is This Conversation Worth Having?

Frequently Asked Questions

If a Few of These Gave You Pause

That’s a normal reaction, not a sign you’ve done something wrong. It just means the part of retirement most people never get real help with is the part you’re standing in front of right now.

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