As more Americans approach retirement after decades of focusing on saving and investing, financial advisers say the hardest part often comes next: figuring out how to spend those savings without running out of money. That challenge, known in the industry as retirement “decumulation,” was the focus of a recent discussion between Dan Proft and Tim Stearns, president and founder of TJ Stearns Financial Planning and Benefits in Arlington Heights.
Stearns explained that many retirees are well prepared for the accumulation phase of investing but far less prepared for the transition into drawing income. The risks change dramatically once paychecks stop, he said, with market timing, taxes, sequence-of-returns risk, and emotional decision-making all playing a much larger role. A major market downturn early in retirement, for example, can have an outsized impact on long-term financial security if withdrawals are not carefully planned.
One of the most common problems Stearns encounters is retirees taking on more risk than they realize. After years of strong market performance, some investors grow complacent and treat retirement assets as if they were still decades away from being needed. Stearns said part of his work involves showing clients how their portfolios might behave in both bull and bear markets and comparing those outcomes with more conservative strategies designed to protect income during retirement years.
The conversation also touched on the current fascination with high-growth areas such as artificial intelligence, cryptocurrency, and individual stocks that have seen rapid gains. Stearns acknowledged the fear of missing out many investors feel but warned that volatility becomes far more dangerous when someone is close to or already in retirement. Strategies such as diversification, rebalancing, and setting limits on losses can help reduce the risk of a single market swing disrupting long-term plans.
Beyond investments, Stearns emphasized that retirement planning must account for taxes and spending patterns, which often surprise people. He described working with clients who overestimate their future tax burden or underestimate the impact of expenses such as property taxes, health care, and inflation. Careful tax planning, including the strategic use of Roth conversions, can significantly improve cash flow during retirement if done at the right time.
Long-term care planning was another major theme. Stearns noted that a majority of Americans over 65 will need some form of long-term care, yet most have made no financial preparations for it. Newer insurance and hybrid products, he said, can help cover that risk while still providing value if care is never needed, but understanding the costs and options requires expert guidance.
For younger workers and families, Stearns stressed the importance of starting early and separating long-term retirement savings from short-term or speculative investments. While there may be room for risk in discretionary accounts, he said, core retirement dollars should be guided by a clear plan. He also pointed to new savings vehicles, including recently proposed “Trump accounts” for children, as tools that could encourage long-term thinking and compound growth over decades.
The central message, Stearns said, is that retirement security is not just about growing assets but about managing risk, spending wisely, and planning for uncertainties. The earlier individuals begin thinking about how they will eventually draw down their savings, the more control they are likely to have over their financial future once retirement arrives.