Help clients make 3 critical shifts in retirement

With approximately 10,000 Baby Boomers turning 65 every day, the need for retirement planning has never been greater, particularly when it comes to seeking advice on transitioning into retirement. The No. 1 reason why people would hire a financial adviser is to understand how much they can safely spend in retirement, according to research by Michael Finke, a professor of wealth management at the American College of Financial Services.

For CPAs whose practices feature a high percentage of individual clients, whether the specialty is tax, small business advisory, or personal financial planning, it’s likely that many clients would desire help with this transition even if they are not asking for it.


Helping clients determine their retirement readiness involves more than just crunching numbers and constructing a taxefficient income stream based on a safe withdrawal rate, although those are important aspects. As clients contemplate their workforce exit, CPAs can help with several additional financial planning areas. 

Retirees need to make three critical shifts in thinking to obtain the most enjoyment out of their golden years. While a practitioner, depending on experience, may wish to refer a client to another professional for help with tangible steps, guiding clients toward the awareness of the need is a valuable and necessary service.

Those shifts in thinking are:

  • Shifting away from earning toward spending savings without its feeling like a moral failing;
  • Shifting the tax goal away from minimizing taxes on a yearbyyear basis toward sometimes intentionally incurring taxation to minimize the total retirement tax bill; and
  • Shifting from the belief that durable and medical powers of attorney should be given to one’s spouse toward naming younger family members or trusted local professionals who could potentially manage both spouses’ daytoday financial and/or health care affairs.

Shifting from saving to spending

When clients say that they are looking for help answering the question of how much they can safely spend in retirement, what they’re also looking for is coaching around how to even start spending when most of their adult life has likely been focused on earning and saving. The way clients approach the shift from saving to spending will depend greatly on their established money habits.

For more frugal clients, a CPA’s role may actually be to encourage spending. For instance, many wealthy retirees got that way because they’ve mastered the art of thrift; they are proud of how little they spend and often skimp to live solely from guaranteed income sources such as Social Security, annuities, and/or pension payments. During their working years, having to tap savings was often a sign that things had gone wrong, and this mindset doesn’t go away in retirement.

For other retirees, transitioning from a regular paycheck that essentially determined how much they could spend each month to a savings drawdown may put them at risk of outliving savings. Clients who are used to spending according to what’s available may view their penaltyfree access to larger sums of money as a windfall and be more inclined to elevate their lifestyle through overspending, especially in the early years of retirement. In these cases, CPAs may opt to center retirement plans around spending/withdrawal limits. Helping to shift clients’ thinking here can include encouraging thrift by cautioning them about running out of money and emphasizing the need for advice on how much their savings can support in annual withdrawals. But the recommended plan must also include guideposts for when it may be more appropriate to withdraw from savings above and beyond basic needs and when retirees will need to rein in spending to preserve assets.

Create a spend-down plan that works for the client

While guidelines about safe withdrawal rates, such as the 4% rule, are often used to advise clients on how much they can afford to spend each year, the perfect rate is up for debate and will vary drastically depending on market conditions in the early years of retirement withdrawals. Rather than giving a percentage or set dollar amount that a client can draw down each year and expecting them to fit their spending into that amount, consider an approach where the investment allocation matches the spending needs and may vary year by year.

For thriftier clients needing permission to spend, a spenddown plan should emphasize that retirement assets have been allocated to allow for spending beyond the basics, as will be described below.

For clients needing more guardrails to avoid overspending, the plan should also include a system that mimics the paycheck stream to which they are accustomed to help control spending. One approach that can help implement those spending guardrails is to establish a savings account separate from investment assets and funded to the amount the client needs for a year’s worth of expenses. Setting up monthly transfers from that account to the client’s spending account can help recreate the paycheck effect. Because the client doesn’t have to look at their larger investment account on a regular basis, it is kept psychologically out of the category of “available to spend today.”

For all clients, putting together the spenddown plan will require them to identify their full spectrum of expenses, starting with spending that is deemed inflexible or fixed (utilities, groceries, health care, etc.), followed by estimating expenses that have some flexibility, such as clothing, transportation, holidays, and household goods, and then finally leisure spending, which typically brings the most life satisfaction but is also the most flexible — hobbies, travel, gifts, dining out, etc.

Match the asset allocation to spending needs

One approach, described by Finke in a recent conference presentation, is to help clients set up an asset allocation that funds fixed/inflexible spending with stable income sources such as bonds or guaranteed income. For the mediumflexible spending that can be postponed or managed during times of volatility, allocate some stock. And to fund the leisure spending, allocate highergrowth/higherrisk investments.

This way, when markets perform well, clients can more freely partake in flexible and leisure spending, but during downturns or times of uncertainty, they can minimize withdrawals from that asset bucket and avoid liquidating at inopportune times.

Note that Social Security, pension, or guaranteed annuity income would be considered part of the bond or fixedincome allocation, which could make the case for delaying Social Security at least to full retirement age.

Shifting the tax planning approach

Besides rethinking their ideas about spending, another critical mental shift for retirees involves taxes. The change to their taxation in retirement often catches newer retirees by surprise. Not only are different retirement income sources taxed differently, but tax withholding rates also vary depending on the asset. This doesn’t necessarily require CPAs to make their clients experts on the various ways that retirement income sources are taxed, but it will likely necessitate a conversation around withholding choices as well as possibly implementing estimated tax payments to avoid underpayment penalties.

Most retirement account administrators default to the standard 20% withholding rate, while Social Security doesn’t require any withholding, which is a departure from the way payroll tax withholdings are calculated. It’s not uncommon for newer retirees to have an unexpected balance due on their taxes their first postretirement tax season after decades of refunds or a minimal balance due. Couple this with the varying ways that states tax retirement income, and clients may need a tax projection to aid in cash flow planning each year.

For clients with larger balances in taxdeferred retirement vehicles such as traditional IRAs, a shift in thinking around intentionally incurring taxation may also be necessary. Depending on their other sources of income, it may be a good idea to make taxable withdrawals that go beyond current spending needs to “fill up” lower tax brackets, which will reduce future required minimum distributions that could be taxed at a higher rate in the clients’ 70s. This strategy doesn’t require those funds to be spent — they can be converted to a Roth IRA or shifted to taxable municipal bonds or other stable options to supplement inflexible spending needs in future years. (For more on this topic, including a numerical illustration, see “Building a TaxEfficient Retirement Income Plan for Clients,” JofA, May 12, 2022.)


The third critical shift in thinking for retirees involves estate planning, especially beliefs about who should be given powers of attorney. Many clients will head into retirement with outdated estate plans that were put in place when their children were minors, so they already may be aware of the need to address this area. To be of value, help them to think beyond just updating (or creating) a will or trust by raising the question of whether currently named parties are still the appropriate choice for all estate planning documents.

For example, it’s common to give one’s spouse the durable and medical powers of attorney during working years, but as both spouses age, it’s best to reassign those responsibilities to a nearby family member or trusted friend who is younger than 50. The reason to give someone a power of attorney goes beyond planning for incapacity to simply planning for practicality. A common task filled by the person with the power of attorney is billpaying, which some clients will need someone else to handle due to physical challenges such as arthritis and not necessarily due to a lack of mental faculties.

When it comes to a medical power of attorney, a spouse can serve this role initially, but it may be wise to add a secondary party to account for times when both spouses may need health care assistance. Most estate planning attorneys suggest giving just one person a power of attorney, so encourage clients to think carefully about who in their circle is in a life situation where accepting responsibility for their health care management and decisions would be least disruptive.

While a qualified estate planning attorney should be the professional who handles estate planning changes, a CPA may be in a better position to discuss who would be the best choice for powers of attorney due to years of familiarity with a client.


The landscape of retirement has changed in recent decades, and many people continue to work in their golden years, either by choice or for the income. When the pandemic hit in 2020, an estimated 2.4 million Americans retired earlier than planned, but now, presumably due to inflation combined with a serious labor and skills shortage, a higherthanaverage number of people are “unretiring,” according to job placement site Indeed.

When helping clients make the shift to retirement, consider discussing a Plan B that includes some type of return to work, whether that means returning to a previous employer or engaging in freelance or consulting opportunities. This may be project– or hourlybased consulting or even filling labor gaps by performing lowerlevel tasks that can be done remotely and easily. This would allow a retiree to earn some extra spending money without the same level of stress that comes from working in more demanding or highpowered roles.

For clients retiring from industries that are more reliant on employees who are onsite, such as manufacturing or retail, the conversation may center less on returning to the floor in the same capacity as preretirement and more on making their job knowledge available to newer employees. They should be sure to leave room for negotiation around hours worked, supplemental health care benefits, or larger blocks of time away than are typically allowed with a fulltime role.

Note that a decision to return to work or engage in other earning opportunities will affect the conversations around the spending and tax shifts.

You don’t have to become an expert in personal financial planning topics to effectively guide your clients toward a successful transition to retirement, although the more knowledge and expertise you have the better. By helping them shift their thinking in the ways discussed above, and referring them to other professionals to assist with implementation when necessary, you can maintain and enhance your role as the trusted adviser while also diversifying your expertise.

About the author

Kelley C. Long, CPA/PFS, CFP, is a personal financial coach in Tucson, Ariz. To comment on this article or to suggest an idea for another article, contact Courtney Vien at

PFP member section and PFS credential

Membership in the Personal Financial Planning (PFP) Section provides access to specialized resources in the area of personal financial planning, including complimentary access to Broadridge Advisor. Visit the PFP resource page. Members with a specialization in personal financial planning may be interested in applying for the Personal Financial Specialist (PFS) credential.



Building a TaxEfficient Retirement Income Plan for Clients,” JofA, May 12, 2022

Talk About More Than Money When Readying Clients for Retirement,” JofA, Sept. 2020

Podcast episodes

Transitioning to Retirement and the 4% Rule,”, May 20, 2022

Taxes and Financing Retirement Healthcare,”, Sept. 27, 2019

PFP Section resources (for members)

PFP Tax Bracket Management Chart

Guide to Retirement & Elder Planning: Healthcare Coverage Planning, 6th Ed.

TaxEfficient Draw Down Strategies


For more information or to make a purchase, go to or call the Institute at 888-777-7077.

Retirement Planning Certificate Program

Designed for practitioners who want a thorough understanding of retirement planning, the AICPA’s Retirement Planning Certificate Program is a series of courses covering the retirement planning life cycle, including planning for aging and chronically ill clients.




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