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

Certain patterns separate thriving retirees from those scrambling in their later years, and they are not random. Americans repeatedly fall into the same traps, ones that are hard to spot in the near term but entirely plannable with enough foresight. The scale of the challenge is real: Fidelity’s Q4 2025 retirement analysis found the average baby boomer held $270,800 in their 401(k), while Northwestern Mutual’s 2026 Planning and Progress Study found workers believe they need $1.46 million to retire comfortably, a figure that jumped $200,000 in a single year. That gap of roughly $1.19 million per person is the backdrop for the three moves below, each one a step most advisors push boomers to take before they leave the workforce.

Create Passive Income Before It’s Too Late

Personal finance experts have long insisted that time in the market beats timing the market, and the data backs that up. Investing early and consistently gives workers the best shot at reaching their target balance before distributions begin. For most boomers, though, the compounding window has largely closed, and the gap to the retirement number is not going to close on its own. That reality demands a deliberate pivot toward income generation.

Once distributions begin, the investment mix matters as much as the total balance. Few retirees want to liquidate growth assets just to cover living expenses, especially in years when those assets are performing well. That is precisely where income-producing investments become essential. Dividend stocks, bonds, and annuities generate steady cash flows that help preserve the core portfolio through those critical early retirement years, when sequence-of-returns risk is at its most punishing.

Engineering a reliable retirement paycheck has more options than most people realize. Social Security covers a meaningful portion for most Americans, which is why delaying benefits to maximize that monthly check deserves serious consideration. The remaining gap typically gets filled through fixed income and dividend-paying equities. Many advisors recommend tilting a retirement portfolio away from the classic 60/40 stock-to-bond split toward something closer to 40/60, with dividend stocks making up a meaningful share of the income-producing side. Workers who still have time to build that position have the 2026 contribution rules working in their favor: the IRS raised the standard 401(k) limit to $24,500 this year, with a catch-up allowance of $8,000 for those 50 and older. Boomers between 60 and 63 qualify for an even larger “super catch-up” of $11,250 in place of the standard $8,000, courtesy of the SECURE 2.0 Act.

The goal is a cash flow stream that does not require forced asset sales. Retirees who depend entirely on selling shares for income are at the mercy of whatever the market delivers in year one or two. Those with a steady income layer already in place have far more flexibility to ride out volatility without locking in permanent losses.

Having a War Chest Matters

Sequence-of-returns risk is the quiet threat the personal finance community keeps raising, and for good reason. Anyone who retired around the 2008 financial crisis knows how devastating a major early-retirement drawdown can be. A market correction of 50% or more in the first few years of retirement forces brutal math: a depleted portfolio requires a higher withdrawal percentage just to maintain the same spending level, compounding the damage year after year with no obvious exit.

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 holding 30% to 50% equities, targeting a 90% probability of funds lasting 30 years. That figure rose from 3.7% in 2025, reflecting improved capital markets assumptions. It still sits below the classic 4% benchmark, and that gap highlights why every point of early-retirement loss carries such weight. 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 when markets rebound. Northwestern Mutual’s 2026 research found that 48% of Americans fear outliving their savings, and a separate Allianz Life 2026 Annual Retirement Study found that 67% of Americans now fear running out of money more than they fear death itself.

The practical 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, functions like an oxygen mask during market downturns. That buffer lets the equity portion of the portfolio recover without forcing the retiree to sell at the worst possible time. It is not glamorous, but advisors consistently point to this cushion as one of the most effective tools available.

Nobody wants to navigate a financial crisis in the opening chapter of retirement. Building conservative reserves before leaving the workforce is one of the most straightforward ways to guard against the timing risk that quietly derails so many otherwise well-prepared retirees.

Sort Out Healthcare and Tax Implications

Healthcare costs are where regret most commonly bites soon-to-be retirees. Fidelity’s 2026 Retiree Health Care Cost Estimate projects that a 65-year-old individual retiring this year will spend an average of $185,500 on healthcare and medical expenses throughout retirement, up 7.5% from the prior year’s estimate. For a married couple, that lifetime figure climbs to $371,000, and neither number includes dental, over-the-counter costs, or long-term care.

Long-term care is its own category of risk entirely. Genworth’s 2025 data puts the average cost of assisted living at $72,924 per year, while a private room in a nursing home carries a median annual cost ranging from roughly $129,575 to $131,583 depending on geography. 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 that catches many retirees off guard. Those who retire before claiming Social Security at full retirement age face a window during which healthcare costs fall almost entirely on the individual, before Medicare steps in and before Social Security income begins flowing. Northwestern Mutual’s 2026 study found that 46% of Americans do not expect to be financially prepared for retirement, a figure that captures just how many people are walking into this window unprepared. The 2026 standard Medicare Part B premium is $202.90 per month, up $17.90 from $185 in 2025, a nearly 10% increase in a single year. Higher-income retirees owe significantly more through income-related adjustment amounts layered on top of that base rate. Bridging that gap without a plan depletes reserves faster than most projections account for.

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 reduce the financial exposure that comes with a serious health event. For 2026, the IRS set the HSA contribution limit at $4,400 for individuals enrolled in a qualifying high-deductible health plan and $8,750 for families, with an additional $1,000 catch-up allowed for those 55 and older. With healthcare inflation running persistently above general inflation, every year of early planning translates to meaningfully lower exposure than scrambling after the fact.

Editor’s note: This pass added the specific 2026 catch-up contribution amounts ($8,000 for savers 50 and older, $11,250 for those ages 60 to 63 under SECURE 2.0), incorporated the Allianz Life 2026 Annual Retirement Study finding that 67% of Americans fear running out of money more than dying, and added the Northwestern Mutual 2026 companion statistic that 46% of Americans do not expect to be financially prepared for retirement.

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