March Madness & Retirement: Avoiding Financial Brackets You Can’t Win

March Madness isn’t just about basketball—it’s also a great reminder of the financial challenges retirees face. Just like in a tournament, smart planning and strategic decisions are crucial to avoiding financial “brackets” that could leave you out of the game.

In this post, we’ll explore how you can avoid retirement pitfalls, protect your savings, and ensure you don’t get eliminated early from financial security.

Bracket 1: Overspending in Retirement

Many retirees enter retirement with a solid financial plan, only to overspend in the early years. This can lead to running out of savings too soon.

How to Avoid Elimination:

✔ Stick to the 4% Withdrawal Rule – Withdraw no more than 4% of your savings annually to ensure longevity.

✔ Create a Retirement Budget – Track your expenses and separate needs vs. wants.

✔ Use a Cash Flow Strategy – Set up automatic monthly withdrawals from retirement accounts to mimic a paycheck.

💡 Tip: If the stock market drops, adjust your spending to avoid selling investments at a loss.

Bracket 2: Ignoring Taxes on Retirement Income

Retirement doesn’t mean tax-free income! Taxes can take a big bite out of your savings if you’re not careful.

How to Avoid Elimination:

✔ Be Strategic About Withdrawals – Take money from taxable, tax-deferred, and tax-free accounts in the right order to minimize taxes.

✔ Consider a Roth Conversion – Converting a traditional IRA to a Roth IRA now can save on taxes later.

✔ Factor in Required Minimum Distributions (RMDs) – If you don’t take RMDs from traditional retirement accounts starting at age 73 (in 2025), you’ll face penalties.

💡 Tip: Work with a tax advisor to plan a tax-efficient withdrawal strategy.

Bracket 3: Underestimating Healthcare Costs

Many retirees don’t realize how expensive healthcare will be. Long-term care costs alone can wipe out savings if not planned for.

How to Avoid Elimination:

✔ Enroll in Medicare on Time – Sign up for Medicare at age 65 to avoid late penalties.

✔ Consider a Medicare Supplement Plan – Helps cover out-of-pocket costs.

✔ Plan for Long-Term Care – Look into long-term care insurance or hybrid life insurance policies that include care benefits.

💡 Tip: A Health Savings Account (HSA) is a great way to save tax-free for medical expenses if you’re still working.

Bracket 4: Not Adjusting Investments for Retirement

Many retirees either stay too aggressive with their investments or become too conservative, both of which can be risky.

How to Avoid Elimination:

✔ Balance Risk and Growth – Keep a mix of stocks, bonds, and cash to sustain long-term growth.

✔ Rebalance Your Portfolio Annually – Adjust your investment mix based on market conditions.

✔ Keep a Cash Reserve – Maintain at least 1-2 years of expenses in liquid cash to avoid selling investments in a downturn.

💡 Tip: Consider dividend-paying stocks and annuities for steady income.

Bracket 5: Failing to Plan for Inflation

A retirement budget that works today might not hold up in 10-20 years due to inflation.

How to Avoid Elimination:

✔ Factor in Inflation in Your Budget – Assume a 2-3% annual increase in expenses.

✔ Delay Social Security Benefits – Waiting until age 70 increases payments, which helps offset inflation.

✔ Invest in Inflation-Protected Securities – Consider TIPS (Treasury Inflation-Protected Securities) and other investments that adjust for inflation.

💡 Tip: If your expenses are rising faster than expected, look for ways to cut costs without sacrificing quality of life.

Bracket 6: Not Having an Estate Plan

Many retirees fail to prepare an estate plan, leaving loved ones with legal complications and financial stress.

How to Avoid Elimination:

✔ Update Your Will & Beneficiaries – Ensure assets go to the right people.

✔ Set Up a Trust – A trust can help minimize estate taxes and avoid probate.

✔ Create Advance Directives – Establish a healthcare proxy and power of attorney in case of medical emergencies.

💡 Tip: Review your estate plan every 3-5 years or after major life changes.