Year-end is an excellent time for rebalancing a retirement portfolio, and this year, rebalancing is especially important due to the market movements inspired by the U.S. presidential election. As financial advisors prepare to assist their clients with this task, there are a few areas that should be carefully considered to help retirees avoid mistakes that could cost them.

Addressing Debt To Optimize Post-Retirement Peace Of Mind
It’s easy for retirees to fixate on their account balance as they develop strategies. The most vocal advice investors typically hear is focused on how much needs to be amassed in order to enjoy a happy retirement. However, ignoring other key financial metrics while pursuing a magic number can cause problems.

Debt is one factor that, if not addressed as part of the investing strategy, can derail a retiree’s financial dreams. The more debt retirees must manage once they enter retirement, the less flexibility and security they will have. Even if paying down debt means entering retirement with less money in investments, the overall result can be better for the retiree.

To illustrate the problem debt can cause, consider an investor who has saved $2 million but enters retirement with a mortgage, car loan and credit card debt. Not only does debt repayment require a significant amount of their retirement income, but some of the debt also involves interest rates that can outpace the average return rate of their investment. And market dips have the potential to affect finances in a way that leaves the retiree without the resources needed to meet debt obligations.

On the other hand, a retiree with only $500,000 saved but zero debt will be in a better position to live comfortably with Social Security and a small pension. In addition, the debt-free retiree will have more flexibility to adjust their spending as market fluctuations demand.

A secondary benefit for retirees who prioritize paying off debt is greater peace of mind. Less debt translates to less stress and more control over finances. It also makes it easier to adjust spending, especially when health issues or other unexpected events result in unanticipated financial needs.

Considering The Costs Associated With The ‘Go-Go Years’
One factor to consider when rebalancing is the retiree’s plans for the early days of retirement. Sometimes referred to as the “go-go years,” the first phase of retirement often involves a lot of activity that tapers off over time. This trend is fueled by the fact that retirees are often still in good health when they retire and are excited about travel, hobbies and other activities that can involve elevated spending.

To help fund those activities in a way that won’t eat into spending potential farther down the road, financial advisors can help their clients think through what their “go-go years” will involve and the steps that should be taken to fund them. The closer retirees get to their retirement, the easier it can be to nail down their plans and determine what they will cost.

Preparing for the “go-go years” will generally involve developing a plan that is flexible enough to accommodate spending in those early years. Ensuring adequate funds are liquid immediately following retirement is also important. The overall goal should be helping clients understand the steps they will need to follow to have fun early on without running out of money later.

Ensuring Plans Don’t Ignore Inflation
Evaluating fluctuations in inflation and their potential impact on the retiree’s spending power can be very helpful when rebalancing. Ideally, retirees will be able to draw an income from their retirement that keeps up with the rate of inflation. If inflation rates increase beyond what is anticipated, however, retirees can face the threat of running out of funds too early.

While many voters expect the re-election of former U.S. President Donald Trump to drive down inflation, the actual impact remains to be seen. Some experts have suggested inflation will climb, despite Trump’s promises, due to the impact of new policies on taxes, trade, tariffs and immigration. The insights advisors provide on ways in which inflation is trending, and its potential impact can help retirees to adjust their strategy in beneficial ways.

Encouraging Lifestyle Changes That Avoid Retirement Pitfalls
Steering clear of these mistakes can require significant adjustments. Sometimes, it may require lifestyle changes, such as downsizing or reducing spending in other ways to pay down debt.

As advisors guide clients through this process, they may need to recommend retirement coaches who can map out a new lifestyle plan. Retirement coaching goes beyond addressing the financial side of retirement to help with the emotional and psychological preparation needed for a fulfilling retirement. Retirement coaches can provide the motivation needed to make tough decisions in the pre-retirement years that will allow for better financial preparations.

Orchestrating a dream retirement requires addressing several issues, with savings being just the start. By encouraging clients to consider debt, inflation and the expectations of the “go-go years,” financial advisors can help them avoid the mistakes that might ultimately derail their plans.

Aaron Cirksena is founder and CEO of MDRN Capital.