How to Review Your Financial Plan Annually in Retirement

Key Takeaways:

• An annual retirement review helps keep your income, spending, taxes, and investments aligned with your current life—not outdated assumptions.
• Small decisions around withdrawals, taxes, and portfolio strategy can compound over time, making regular adjustments essential.
• Reviewing healthcare, estate details, and beneficiary designations each year helps prevent costly and often irreversible mistakes.

Retirement planning doesn't stop the day your paychecks do. If anything, the decisions you make in retirement matter more than ever, including decisions about how much to spend, which accounts to draw from, how to manage taxes, and whether your investments still fit your life. The margin for error shrinks when you're drawing down instead of building up.

Your income sources, tax picture, spending habits, healthcare costs, and long-term goals can all shift from one year to the next. An annual review is one of the most practical ways to make sure your plan still reflects your actual life and to catch small issues before they become larger ones. What follows is a framework for thinking through the key areas worth revisiting each year.

Revisit Your Income and Spending for the Year Ahead

A retirement plan is built on assumptions such as how much you'll spend, where income will come from, and how long it all needs to last. Revisiting those assumptions once a year is how you keep the plan grounded in reality rather than the projections you made years ago.

Take Stock of Every Income Source

Start by listing every income source you expect to rely on in the coming year: portfolio withdrawals, Social Security, a pension, annuity payments, rental income, part-time work, and whatever cash reserves you're maintaining for near-term expenses. Make sure the total picture is clear before making any decisions about how much to draw from investments. 

Compare Actual Spending to What the Plan Assumed

This is where most plans drift quietly off track. Look at what you actually spent last year and not just the big categories, but recurring living costs, travel, gifts, home expenses, and one-time surprises. Compare that to what the plan assumed you'd spend. The gap between projected and actual spending is often where the most actionable information lives.

It also helps to separate essential expenses from optional spending. Knowing which costs are fixed and which are flexible gives you much more room to navigate market downturns, higher-than-expected healthcare costs, or other surprises without disrupting the core plan.

Revisit Your Withdrawal Rate

Review whether your current withdrawal rate still looks sustainable given your portfolio balance, spending needs, and investment performance over the past year. A rate that looked comfortable when markets were favorable may warrant a closer look after a difficult stretch. Conversely, a strong run of returns can be an opportunity to revisit whether your plan still serves your goals without taking on unnecessary risk. The goal isn't to hit a specific number — it's to confirm that your cash flow plan continues to support your lifestyle without putting avoidable stress on the portfolio over the long run.

Check for Tax Planning Opportunities Before the Year Gets Away

One of the genuine advantages of retirement is the ability to manage your taxable income intentionally. Unlike when you were working, and taxes largely came out of a paycheck beyond your control, retirement gives you real flexibility over which accounts you draw from and when. That flexibility is valuable, but only if you're using it thoughtfully.

Income Timing and Withdrawal Strategy

Review where this year's income is expected to come from and whether you're drawing from the right accounts in the right order. Withdrawals from traditional IRAs and 401(k)s are taxed as ordinary income. Withdrawals from Roth accounts are generally tax-free. Gains from taxable brokerage accounts may qualify for lower long-term capital gains rates. The mix you choose each year affects your tax bill today and your options in future years.

Consider whether this is a year to:

• Realize capital gains at a lower rate if your income is in a favorable bracket
• Harvest losses in a taxable account to offset gains taken elsewhere
• Complete a Roth conversion to move money from taxable to tax-free treatment while your income is lower
• Limit distributions to stay within a preferred tax bracket or avoid a higher one

The early years of retirement, typically after a paycheck stops but before Social Security and Required Minimum Distributions begin, are often the best window for Roth conversions and other income-smoothing strategies. This window doesn't last forever.

Age-Based Rules and Medicare-Related Triggers

Review whether any age-based rules affect your decisions this year. Required Minimum Distributions begin at age 73 for most retirement account owners, and missing one carries a stiff penalty. If you're 70½ or older and charitably inclined, Qualified Charitable Distributions can satisfy part or all of your RMD without adding to taxable income. Read more about how to handle your RMDs in our prior post. 

Medicare premiums are worth watching as well. The Income-Related Monthly Adjustment Amount (IRMAA) adds surcharges to Part B and Part D premiums based on your income from two years prior — meaning the tax decisions you make today can affect your healthcare costs down the road. Higher-than-expected income in a single year, such as from a large Roth conversion or a one-time asset sale, can push you into a higher IRMAA bracket two years later. Read more about how IRMAA works in our prior post. 

Make sure your estimated tax payments, withholding elections, and distribution plans still reflect what the current year is actually expected to look like. An outdated withholding instruction or a missed estimated payment can result in an unexpected tax bill or penalty come April.

Make Sure the Investment Strategy Still Fits the Job It Needs to Do

The purpose of your retirement portfolio is different from what it was during your working years. It's no longer just about growth but rather the need to generate income, preserve purchasing power, provide stability when markets are volatile, and stay liquid enough to meet near-term needs. Reviewing the investment strategy through that lens, rather than simply tracking performance against a benchmark, tends to produce better decisions.

• Evaluate the Portfolio by Role, Not Just Returns: Ask whether your current asset mix still supports what you're actually asking the portfolio to do: provide reliable income, absorb some volatility without forcing sales at bad times, maintain enough liquidity for planned withdrawals, and support longer-term goals. A portfolio that looked right three years ago may need updating as spending needs, health circumstances, or family priorities have shifted.
• Rebalance Where Market Movement Drifted the Mix: Markets move, and that movement gradually shifts a portfolio away from its intended allocation. A strong run in equities, for example, can leave a portfolio more heavily weighted toward stocks than you intended and more exposed to a downturn than your income needs can absorb. Rebalancing brings the portfolio back toward its target and is generally easier to do inside tax-deferred accounts, where selling doesn't trigger a taxable event.
• Match Account Purpose to Time Horizon: Review whether the accounts earmarked for withdrawals in the next one to three years are positioned conservatively enough to weather market swings without forcing a sale at a loss. Longer-term assets — those you won't need for five years or more — can generally stay more growth-oriented. Keeping these buckets aligned with their purpose is one of the more practical ways to manage the emotional and financial pressure of drawing down a portfolio in volatile markets.

If your risk tolerance has changed from watching your balance fluctuate, changes in health, or a shift in what you're spending your retirement on, the annual review is the right time to revisit whether the investment approach still fits how you're actually living. Read more about asset allocation in retirement in our prior post. 

Update the Parts of the Plan That Are Easy to Ignore

Income, taxes, and investments tend to get attention because the numbers are visible. The details below are easier to overlook, but they carry real consequences when they're outdated or inconsistent with the rest of the plan.

Protection and Healthcare Decisions

Review your Medicare elections, supplemental coverage, and any long-term care planning each year. Healthcare tends to be one of the largest and most variable expenses in retirement, and coverage needs can change in ways that aren't always obvious until a situation arises. Review your assumptions about out-of-pocket costs and confirm that what you have in place still reflects where you are in retirement.

Also, take a look at property, liability, and umbrella insurance coverage. As assets, homes, and lifestyles change over time, insurance that was sized appropriately a few years ago may no longer provide adequate protection or may be covering more than you need.

Estate and Household Planning Details

This area is most often neglected, and it carries the most irreversible consequences when something is wrong. Beneficiary designations on retirement accounts and life insurance policies override your will — meaning a form you filled out decades ago controls who receives those assets, regardless of what your estate documents say.

Failing to update beneficiary designations after marriage, divorce, the birth of a grandchild, or the death of a named beneficiary is one of the most common and costly estate planning errors. Review these annually and update them after any significant family change.

Check account titling as well. How accounts are titled affects how they transfer at death, how they're treated in probate, and, in some cases, how they're taxed. If your estate planning documents include a trust or other structure, confirm that account titling is still consistent with that plan.

Review your will, powers of attorney, healthcare directives, and any trust documents for anything outdated or inconsistent with your current wishes or family situation. These documents don't need to be rewritten every year, but a quick review to confirm they still reflect your intentions — and that they'd hold up in the event something happened tomorrow — is time well spent.

Consider whether a spouse, adult child, or other trusted person knows where your key financial documents, account information, and passwords are kept. This is the kind of detail that feels premature to address until it suddenly isn't — and having it organized in advance makes a genuinely difficult situation meaningfully easier for the people you care about.

Annual Retirement Plan Review FAQs

1. Has my spending changed in a way that should affect my withdrawal strategy?

Compare actual spending from the past year to what the plan assumed. If you spent significantly more or less than projected, especially across multiple years, that's worth building into your withdrawal rate and future projections. A plan that hasn't been recalibrated for real spending patterns is working with outdated information.

2. Am I taking income from the right accounts this year from a tax standpoint?

The answer depends on your current bracket, projected income from other sources, RMD obligations, and whether you have opportunities for Roth conversions, capital gains harvesting, or other strategies. The right answer changes from year to year, which is why reviewing it annually matters.

3. Does my current investment allocation still match my retirement goals and risk tolerance?

Market performance and life changes can both shift the answer. Review the portfolio based on what you need it to do, such as provide income, manage risk, and stay liquid. If your circumstances, health, or priorities have changed, the investment strategy may need to change with them.

4. Have any tax rules, Medicare costs, or distribution requirements changed for me this year?

Tax law continues to evolve, and age-based rules kick in at specific milestones. The years around ages 63, 70½, 73, and 75 each carry their own planning considerations. Your advisor and CPA should be reviewing these alongside you each year, not just in the year they first apply.

5. Are my beneficiaries, estate documents, and account registrations still up to date?

Review beneficiary designations across all retirement accounts and insurance policies. Confirm that account titling and estate documents are consistent with each other and with your current intentions. If there has been a family change of any kind in the past year, treat this as a priority, not a secondary item.

6. What parts of my plan would create the biggest problem if I ignored them for another year?

This is worth sitting with honestly. For some people, it's tax planning; for others, it's an outdated beneficiary form or a healthcare coverage gap. An annual review is most useful when it surfaces the thing most likely to cause a real problem and not just the things that are easiest to check off.

How Ongoing Planning Can Help Keep Retirement on Track

A strong annual review is about more than checking boxes. It's a chance to bring income, taxes, investments, healthcare planning, and estate details back into alignment.  This ensures that the decisions you're making this year continue to support the life you want in retirement, not just the life you planned for years ago.

Working with a financial advisor makes that review more useful. It's easier to see blind spots when someone else is looking alongside you. Coordinating across income, taxes, and investments is much harder to do in isolation than it appears. Even small issues across these areas, such as a withdrawal strategy that doesn't account for IRMAA or an investment mix that hasn't been updated since early retirement, tend to compound quietly until they lead to a big consequence. 

If you're a retiree in the Twin Cities area who would like a review of your current retirement plan, we’d be happy to discuss on a complimentary call.  

Sources: 

https://www.aarp.org/money/retirement/year-end-financial-checklist/

https://www.morningstar.com/retirement/retirement-withdrawal-sequencing-rules-road

https://www.fidelity.com/viewpoints/retirement/tax-savvy-withdrawals

https://www.waepa.org/resources/5-common-life-insurance-beneficiary-mistakes-and-how-to-avoid-them/