retirement planning | december 5, 2023
Three Themes to Help Investors Tailor Their Retirement Planning in 2024
Our 2024 U.S. retirement outlook explores how these topics may shape the retirement landscape in the coming years.
Key Insights
Successful retirement income planning involves active management of your sources of income and sequence of withdrawals.
Diversifying an asset allocation strategy is important to help achieve security in retirement, as is having varied account types to hold those assets.
A trusted financial planner can help you understand and coordinate the complexities of accumulating and drawing down your assets in retirement.
Lindsay Theodore, CFP®
Thought Leadership Senior Manager
Roger Young, CFP®
Thought Leadership Director
Looking ahead to 2024, three major trends have emerged that could affect the way people are saving for and withdrawing income in retirement. Woven throughout these themes is the concept of active management, serving not just as a conventional method of investment selection, but also as an essential foundation for helping to achieve a prosperous financial future.
Considering the perspectives of financial professionals and individuals, we identified the following:
Retirement income is an active and individualized experience.
Retirement income cannot be solved by a single investment plan or solution. With growing demand from retirees, increasingly supportive legislation, and a continued evolution of products and services, we think the time is now for broader innovation and adoption of retirement income experiences.
Diversification is more than investment allocation.
Diversification is fundamental to helping investors reduce exposure to risk and achieve successful retirement outcomes over the long term. Investors are looking for a broader set of practical retirement solutions that can help address market risks and support tax efficiency throughout the accumulation and decumulation stages of retirement.
Personalization can drive changes in behavior.
Consumers are increasingly looking for personalization in all aspects of their lives. The retirement experience is no different. Data from our workplace retirement plan participants shows that tailored and targeted experiences can drive behavioral change and help improve an investor’s likelihood of sticking to their plan.
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Retirement Income: Actively managing your sources of income and sequence of withdrawals.
The Pew Research Center estimates that 10,000 baby boomers are expected to turn age 65 each day until 2030. Up until this point, retirement strategies for this cohort have emphasized accumulation—how much you need to accrue in your retirement accounts to maintain your lifestyle with a reasonable level of certainty. Once retired, however, decumulation—i.e., a withdrawal or drawdown strategy—becomes the priority.
Retirement income as a process‑based experience.
In our view, individuals’ retirement income needs can best be met through process-based experiences that involve the strategic coordination of variables such as your sources of income, Social Security claiming strategies, sequence of withdrawals, and cash flow. Along these lines, investors need to think of their portfolios holistically across all accounts (at the household level) rather than each account separately.
Our view on how individuals should consider these experiences is as follows:
When developing a withdrawal strategy, coordinating income sources and benefits (such as Social Security and Medicare) with the sequence in which you make withdrawals from different account types can help minimize tax impacts.
Tax-efficient concepts such as asset location, household-level rebalancing, and withdrawal strategies that emphasize managing taxes over time are becoming a higher priority to investors. (See “The importance of tax-efficient account diversification” on page 5 within the full outlook PDF below.)
The goal is to make retirement income generation more tax‑efficient while maintaining the right risk/reward balance.
Current financial planning software emphasizes ways to liquidate assets and uses a simple default strategy for the order of withdrawals by account type, but more sophisticated solutions are gaining traction.
The key to success will be active coordination of many factors, dynamically and over the course of what could be a retirement lasting multiple decades.
The decisions retirees typically face are interdependent. For example, your Social Security claiming strategy and timing may affect which accounts you draw from and when. Other factors that require active coordination are:
Changing goals and spending patterns, including areas prone to change such as health care, housing, travel, and gifting goals.
Different tax circumstances over various phases of retirement (caused by timing of required minimum distributions (RMDs), Social Security claiming, and possibly years as a surviving spouse).
Potential for a lengthier drawdown period—due to both longer life spans and a growing shift to earlier partial retirement and later full retirement.
Recent and potential tax and legislative changes (tax cut reversion, SECURE Act).
Interest, dividends, and capital gain distributions. While some investors equate these with “retirement income,” they could be seen as a tax liability (in taxable accounts) and should be viewed as part of the broader solution.
Current financial planning software... uses a simple default strategy for the order of withdrawals by account type, but more sophisticated solutions are gaining traction. 
Education, financial tools, products (investment and insurance), and personalized services—including advice, calculators, and insights—can help retirees get the most out of all their retirement savings.
Establishing your withdrawal strategy before you reach retirement can help ensure you distribute your savings across accounts in a way that best supports your retirement income needs. This is particularly important to keep in mind as catch-up contribution limits increase in the years approaching retirement and as opportunities for Roth conversions arise.
Important Information
This material is provided for general and educational purposes only and is not intended to provide legal, tax, or investment advice. This material does not provide recommendations concerning investments, investment strategies, or account types; it is not individualized to the needs of any specific investor and not intended to suggest any particular investment action is appropriate for you, nor is it intended to serve as the primary basis for investment decision-making.
Any tax-related discussion contained in this material, including any attachments/links, is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding any tax penalties or (ii) promoting, marketing, or recommending to any other party any transaction or matter addressed herein. Please consult your independent legal counsel and/or tax professional regarding any legal or tax issues raised in this material.
The views contained herein are as of the date written and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.
This information is not intended to reflect a current or past recommendation concerning investments, investment strategies, or account types, advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Please consider your own circumstances before making an investment decision.
Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy.
Past performance is not a reliable indicator of future performance. All investments are subject to market risk, including the possible loss of principal. All charts and tables are shown for illustrative purposes only. Diversification cannot assure a profit or protect against loss in a declining market.
T. Rowe Price Investment Services, Inc., distributor, and T. Rowe Price Associates, Inc., investment adviser.
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202311-3232300
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