Baby Boomers: The 3 Retirement Moves Financial Advisors Say You Can’t Afford to Skip

I’ve spent years digging into what separates thriving retirees from those scrambling in their golden years, and it’s not rocket science. It’s more about dodging the pitfalls most people trip over. My research keeps circling back to the same issues, and the patterns are hard to ignore.

Certain cohorts of Americans find themselves in strikingly similar predicaments, largely because they fall into key traps that are hard to see in the near term but relatively easy to plan for if you’re thinking long enough ahead. The scale of the challenge is real: Fidelity data shows the average baby boomer held just $267,900 in their 401(k) at the end of 2025, while Schwab’s 2025 participant survey found Americans believe they need $1.6 million to retire comfortably. That gap of roughly $1 million per household is the backdrop for the three moves below. Here are the financial steps most advisors push boomers to take — steps I’m working into my own retirement planning as well.

Create Passive Income Before It’s Too Late

Passive income visual

There is a reason personal finance experts repeat the idea that time in the market beats timing the market. Investing early and consistently is time-tested, and it gives workers the best chance of filling a 401(k) or IRA to the level needed by the time distributions begin. The hard truth, though, is that most boomers are well short of those targets.

The investing mix matters just as much as the balance itself once distributions begin. Very few retirees want to liquidate growth assets in a strong market just to cover living expenses. That’s where income-producing investments become essential: dividend stocks, bonds, and annuities can generate steady cash flows that preserve the core portfolio, at least through those critical early retirement years when sequence-of-returns risk is highest.

Engineering a reliable retirement paycheck has more options than most people realize. Social Security will cover a portion for most, which is why delaying benefits to maximize that monthly check is worth serious consideration. The remaining gap typically gets filled through fixed income and dividend equities. Many advisors suggest tilting a retirement portfolio away from the traditional 60/40 stock-to-bond split toward something closer to 40/60, with dividend-paying equities making up a meaningful share of the income-producing allocation.

The point is to build a cash flow stream independent of forced asset sales. Retirees who depend entirely on selling shares for income are at the mercy of whatever the market hands them in year one or two. Those with a built-in income layer have far more flexibility.

Having a War Chest Matters

Money visual

Sequence-of-returns risk is the quiet threat the personal finance community keeps warning about, and for good reason. Anyone who retired around the 2008 financial crisis knows the damage a major early-retirement drawdown can do. If a market correction of 50% or more strikes in the first few years of retirement, the math turns brutal: a depleted portfolio means a higher percentage withdrawal is required just to maintain the same spending level, compounding the damage year after year.

Morningstar’s December 2025 State of Retirement Income report puts the safe starting withdrawal rate for 2026 retirees at 3.9% for a balanced portfolio (30% to 50% equities), targeting a 90% probability of funds lasting 30 years. That is a meaningful refinement of the classic 4% benchmark, and it highlights why every point of early-retirement loss matters so much. A portfolio that drops sharply right after retirement forces a retiree to sell more shares at depressed prices, locking in losses that cannot be recovered.

The antidote is a dedicated cash reserve. Holding roughly five years of living expenses in cash or cash-equivalent investments, such as a laddered portfolio of Treasuries maturing at staggered intervals, can provide what amounts to an oxygen mask during market downturns. That buffer lets the equity portion of the portfolio recover without the retiree being forced to sell at the worst time.

No one wants to navigate a financial crisis in the opening chapter of retirement. Setting aside ultra-conservative reserves before leaving the workforce is one of the most straightforward ways to protect against the timing risk that catches so many retirees off guard.

Sort out Healthcare and Tax Implications

Older man getting a checkup at the doctor

This is where regret most commonly bites soon-to-be retirees: underestimating what soaring healthcare costs will do to a retirement budget over time. The numbers are sobering. According to Creative Planning, the average monthly healthcare cost for a 65-year-old couple in their first year of retirement runs about $1,070, covering premiums, copays, and related out-of-pocket expenses. Zoom out to a lifetime view, and Fidelity’s 2025 Retiree Healthcare Cost Estimate puts the total figure at $345,000 for a couple, not counting dental, over-the-counter costs, or long-term care.

Long-term care is its own category of risk. Genworth’s 2025 data puts the average cost of assisted living at $72,924 per year and a nursing home at $131,583 per year. Those figures are expected to climb further by 2030. For a generation already stretched thin on savings, a multi-year care event can devastate even a well-constructed retirement plan.

There is also a timing gap worth understanding. For those who retire before claiming Social Security at full retirement age, there is a window during which healthcare costs fall almost entirely on the individual, before Medicare steps in and before Social Security income begins. The 2026 standard Medicare Part B premium is $202.90 per month, and that covers only a portion of total healthcare exposure. Retirees who bridge that gap without a plan can find their reserves depleted faster than projected.

Incapacity planning rounds out this section. Powers of attorney, long-term care insurance riders, and health savings accounts built up during working years can all limit the financial exposure that comes with a serious health event. With healthcare inflation likely to remain a persistent pressure for retirees, planning early is far less expensive than scrambling later.

Editor’s note: This update added the Fidelity 2025 figure of $345,000 in projected lifetime healthcare costs for a 65-year-old couple and Genworth’s 2025 long-term care cost data ($72,924 annually for assisted living, $131,583 for a nursing home), replaced the original vague monthly healthcare estimate with Creative Planning’s sourced figure of $1,070 per month, and incorporated Morningstar’s December 2025 finding that the safe starting withdrawal rate for 2026 retirees is 3.9%. The article also added Fidelity and Schwab data showing the average boomer 401(k) balance stood at $267,900 at end of 2025 against a self-reported retirement target of $1.6 million.

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