Financial Surprises New Retirees Often Face
By Senior Advisor Kirk Ludwig, AIF®
Most people spend decades preparing for retirement. They save consistently, invest diligently, and build an investment portfolio designed to grow over time to replace their paycheck one day. But when retirement finally arrives, many investors discover that the real challenge is no longer saving money – it’s figuring out how to spend it wisely.
Even individuals who have spent years preparing financially often encounter surprises once they transition from saving money to living off it. Retirement is not simply a continuation of the accumulation phase. It is a shift into a new financial reality where spending, taxes, markets, and longevity begin interacting in ways that many people have never experienced before.
While every household’s situation is unique, many retirees experience similar adjustments during the first years of retirement.
Over time, we have seen several themes emerge. Below are four of the most common financial surprises:
Spending often looks different than expected.
Many retirees assume their spending will decline significantly once they stop working. In reality, the early years of retirement are often the most active. Travel, hobbies, home projects, and time with family frequently lead to higher discretionary spending during the first several years. Over time, expenses may stabilize or decline somewhat, but the initial phase of retirement can look very different from what people projected while they were still working.Market volatility feels different once withdrawals begin.
During the accumulation phase, market corrections can feel uncomfortable but manageable because investors typically are still earning income and contributing to their portfolios. In retirement, that dynamic changes. Withdrawals during market downturns can permanently reduce the capital available for future growth. Research shows that the order of market returns, often referred to as sequence of returns risk, can significantly influence the sustainability of retirement income, even when long-term average returns are similar.[1]Taxes remain a major factor in retirement income.
Many people assume their tax burden will drop significantly once they stop working. While that may be true in some cases, retirement introduces new tax dynamics. Social Security benefits may be partially taxable, and withdrawals from pre-tax retirement accounts - including required minimum distributions - can push retirees into higher brackets later in life. The order in which assets are withdrawn can influence lifetime tax exposure in ways that are often underestimated.Retirement may last longer than expected.
Advances in healthcare and improvements in lifestyle mean that many retirees will spend 25 to 30 years, or more, in retirement. Longevity research shows that there is a meaningful probability that at least one member of a healthy 65-year-old couple will live into their 90s.[2] A longer retirement horizon requires balancing growth potential with stability so that portfolios can sustain withdrawals over multiple decades.
In many cases, the surprises retirees encounter are not the result of poor planning. They are simply the natural outcome of transitioning from saving to spending. However, this highlights an important point: retirement planning does not end when the final paycheck arrives. In many ways, that is when some of the most important financial decisions begin.
At SJS, we help clients navigate this transition by integrating financial planning, tax awareness, and investment strategy into a cohesive framework. Rather than viewing retirement as a single milestone, we work with clients to evaluate how their income strategy, tax decisions, and investment portfolio can adapt throughout the different stages of retirement.
This planning process often includes helping clients evaluate important decisions such as:
When it may make sense to claim Social Security benefits
Whether Roth conversions could reduce lifetime taxes
How future required minimum distributions (RMDs) may affect tax brackets and whether earlier withdrawals from retirement accounts could help manage future taxes
How portfolio risk levels should evolve as retirement progresses
Each of these decisions interacts with the others, which is why retirement planning is rarely as simple as applying a withdrawal rule or relying on a single income source.
Our MarketPlus® Investing approach is designed with these tradeoffs in mind. By combining diversified market exposure with complementary investment strategies that seek to manage risk across changing market environments, MarketPlus® Investing aims to balance long-term growth potential with the stability retirees often need once withdrawals begin.
Retirement income planning ultimately requires managing competing priorities. Investors need enough growth to preserve purchasing power over time, but also enough resilience to navigate market volatility without disrupting their long-term plans.
The goal is not simply to make assets last – it is to create a financial strategy that allows retirees to live without worry, knowing their savings are positioned to support the many chapters of retirement still ahead.
Important Disclosure Information & Sources:
[1] “What’s a Safe Retirement Withdrawal Rate for 2026?” Amy C. Arnott, Christine Benz, & Jason Kephart, 03-Dec-2025, morningstar.com.
[2] “Period Life Tables: 2024 Trustees Report”. Social Security Administration, ssa.gov.
There is no guarantee investment strategies will be successful. Past performance is no guarantee of future results. Diversification neither assures a profit nor guarantees against a loss in a declining market.
Advisory services are provided by SJS Investment Services, a registered investment advisor (RIA) with the SEC. Registration does not imply a certain level of skill or training. SJS Investment Services does not provide legal or tax advice. Please consult your legal or tax professionals for specific advice.
Statements contained in this article that are not statements of historical fact are intended to be and are forward looking statements. Forward looking statements include expressed expectations of future events and the assumptions on which the expressed expectations are based. All forward looking statements are inherently uncertain as they are based on various expectations and assumptions concerning future events and they are subject to numerous known and unknown risks and uncertainties which could cause actual events or results to differ materially from those projected.
MarketPlus® Investing models consist of institutional quality registered investment companies. Investment values will fluctuate, and shares, when redeemed, may be worth more or less than original cost. The model's performance does not reflect advisory fees or other expenses associated with the management of an actual portfolio. There are limitations inherent in model allocations. In particular, model performance may not reflect the impact that economic and market factors may have had on the advisor's decision making if the advisor were actually managing client money.