When you were younger, you could invest more aggressively because you had time to recoup any losses you might have incurred. As you approach retirement, however, the game changes. You’re going to need the assets you’ve accumulated for day-to-day expenses and no longer have the cushion that comes with decades of saving years ahead of you.

It’s important to employ a strategy that considers capital preservation, especially during the early years of retirement when you’re beginning to withdraw assets from your nest egg. Without this consideration, the combination of spending and volatile markets might deal your portfolio a blow from which it may not be able to recover.

Hand in hand with a more conservative investment approach is a more conservative budget. You don’t necessarily have to compromise the retirement lifestyle you envisioned for yourself, but you do have to maintain a realistic view of your finances.

Since you’re no longer earning a steady paycheck—or you’re working less—your income may not be as high as it once was. A lifetime’s worth of retirement savings can look like an enormous source of assets that you can tap into whenever you like, but your retirement may last 30 years or more.  It’s a good idea to work with your Financial Advisor to take inventory of expenses, identify all sources of income and develop a strategy to maintain your retirement lifestyle for as long as you live.

Generally, once you reach age 70½, you must take annual distributions from your 401(k), IRA or other qualified plan, whether you need them or not (Roth IRAs are exempt from this requirement).

Distributions are generally taxable at your individual tax rate and if you fail to take them, you are subject to a substantial penalty—50% of the distribution or whatever portion of the distribution you neglected to take.

Distributions are based on IRS life expectancy tables and while you can access these tables online and do the math on your own, we suggest you seek the guidance of your accountant or tax advisor.

On a side note, if you are a participant in an employer-sponsored qualified retirement plan (other than an IRA-based plan) and are still working for the plan sponsor, you do not have to start taking RMDs at age 70½, unless you own more than 5% of the plan sponsor or the terms of the plan require all employees to start taking RMDs once they reach age 70½.

A 2015 survey by Nationwide Retirement Institute found that 79% of respondents have no clue what their healthcare costs will be or dramatically underestimate them.¹ The average retired couple now spends about $15,000 a year on health care, of which more than half goes to Medicare premiums.  Further, they will spend somewhere between $240,000 and $420,000 over the course of their retirement, depending on their lifespan and health conditions.¹

According to the American Association for Long-Term Care Insurance, more than two-thirds of adults will require some form of long-term care after age 65.²Because of statistics like these, recognizing the potential need for long-term care is an important issue to consider regarding asset erosion.

One option for retirees is a long-term care insurance policy to help protect the assets you’ve accumulated and allow you to provide your loved ones with a meaningful legacy. It may also provide more options for your care and relieve loved ones from full-time caregiver responsibilities.

How you plan your finances in retirement is just as important as your journey of saving for retirement. It’s important to understand the options available to help protect the assets you’ve spent a lifetime accumulating. Talk with your Financial Advisor today and start the conversation on ways to plan for an optimal retirement.

¹ Source: Nationwide Retirement Institute, Pre-Retirees Fear Health Care Costs, But Are Not Taking Action, December 2015