Are Retirees Ready for These 5 Retirement Shifts Coming in 2026?

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The rules on retirement are changing.  Rising living costs, shifting tax rules, longer lifespans and widening gaps in affordability are quietly rewriting what it takes to retire comfortably. Many people are relying on assumptions that no longer hold. 

Here’s a look at the big retirement shifts taking shape, so you understand how to make your retirement the reality that you want:

• Location will impact your retirement income.
• You will need to pay attention to healthcare costs.
• Longer lifespans mean you need to account for more savings.
• You may not be able to keep relying on Social Security alone for income post-retirement.
• Understanding your purpose in retirement is a priority that deserves your attention.

The 5 Big Retirement Shifts Taking Shape in 2026

As a retirement expert, I’ve observed that more retirees are focused on creating an ideal financial portfolio without giving any thought to long-term healthcare or what they plan to do in retirement.

Most are also not looking at where they live as a factor. Paying attention to the cost-of-living is paramount since housing and living costs can eat up retirement savings.

It may feel uncomfortable to think about these factors, especially if you’re not technically retired, but folks should have these items on their radar as they plan their retirement.  

Location Will Determine How Far Your Retirement Funds Will Last

It’s clear that where you retire matters more than when you decide to retire. Cost-of-living is a key determinant of how far your money will go.

According to a recent GOBankingRates study, it costs more than $1 million a year to live in certain cities in the U.S. For example, it costs significantly more to live in California, Hawaii and Massachusetts than in Oklahoma.

Healthcare Costs Are More Important Than Your Portfolio’s Performance

Many of us are trained to keep track of our financial portfolios — how our stocks, individual retirement accounts (IRAs) and 401(k)s are doing. And although it’s important to be proactive and mindful of this, you should be aware of long-term healthcare arrangements.

An Employee Benefit Research Institute study estimates:

• Up to $428,000 in healthcare savings may be needed for some couples in retirement.
• Couples enrolled in a Medigap plan with average premiums need about $243,000 for a 50% chance of covering medical expenses.
• Those same couples need about $366,000 for a 90% chance of covering medical expenses.

Increasing Longevity Means You May Need To Work Longer

Lifespans are on the rise. The current numbers from the National Health Center of Statistics show the following averages:

• Males: Living until 75.8 years
• Females: Living until 81.1 years

This means that most people will have to plan for their finances to last much longer than people in previous decades. 

Increased longevity may also mean taking proactive measures to try to age well. Exercising, eating well and getting preventive healthcare tests will help in living well so that you can work for as long as you desire. 

Social Security Cannot Be Your Only Safety Net

Retirees cannot rely on Social Security as their only source of income. Funds received from Social Security will cover only 30% to 40% of retirement expenses. 

When Social Security was started in 1935, the program was based on life expectancies at the time, but now the funds aren’t equipped to keep up with people who are living longer and spending 25 to 35 years in retirement.  

The Committee for a Responsible Federal Budget predicts that Social Security will be insolvent in 2032. As a result, couples will face an $18,400 cut in annual benefits.

Keep In Mind

The average Social Security benefit is roughly $2,000 per month, while retirees in most states will need $27,000 to $90,000 per year to live comfortably.

As a result, most retirees will need additional income beyond Social Security for retirement living.  

Thinking About Purpose in Retirement

Retirement planning is very much centered on finances and physical health. A sense of purpose, however, is also a key factor in living longer. 

A National Institute of Health study found that having purpose in life reduced the risk of mortality and chronic illnesses. 

Retirees should start thinking about how they want to spend their retirement prior to their last day of work.

Where Retirees Are Likely To Be Surprised

• Location: Retirement in a low-cost vs. high-cost state can severely impact finances. In some cities, the cost of living is more than $1 million annually. 
• Social Security COLA: A 2.8% increase may not keep pace with inflation or rising Medicare Part B premiums.
• The “retirement number” myth: There is no universal savings target — the right number depends on your lifestyle, housing costs, location and healthcare needs. 

Common Retirement Myths That No Longer Hold Up

There are some assumptions about retirement that no longer hold true:

• Myth: You can put off estimating future healthcare costs.
• Reality: Healthcare planning needs to start early, even if you’re currently healthy.

• Myth: Social Security is a sufficient safety net. 
• Reality: Even with COLA increases, Social Security alone rarely covers all retirement expenses.

• Myth: Your spending will drop during retirement.
• Reality: Housing and healthcare costs may keep spending level, or higher.

• Myth: You won’t need to work past 65.
• Reality: Longer lifespans mean many retirees work part-time well into retirement.  

What Risks Are Being Underestimated

These are the risks retirees most often underestimate. If you ignore them, it may mean that you will face future struggles.

• Income: Taking too much of your retirement funds too early can quickly deplete a lifetime of savings, especially if your savings decrease because of market volatility.  
• Healthcare: Putting off a healthcare plan is not only detrimental to your health, but also to your finances. Assess healthcare needs now so that you’re not depleting all your retirement savings because of a healthcare crisis.  
• Longevity: Living longer means that you may not be able to use the 4% withdrawal rule or assume your savings will last 20 to 30 years of post-retirement.
• Taxes: Changes in taxes at the state and federal levels could make your income take a hit during retirement.  

The Mistakes Retirees Are Most Likely To Make in 2026

Many retirees don’t realize they’ve made these mistakes until they’re difficult or costly to reverse.

Overestimating Social Security Increases

In 2026, the Social Security Administration (SSA) plans to increase monthly payment amounts by 2.8% to reflect cost-of-living-adjustments. This means retirees will receive an additional $56 per month.

Although monthly payments will go up, this nominal increase is not likely to have a huge impact, and retirees shouldn’t make the mistake of overspending.

In addition, the boost may end up not keeping up with inflation.  

Underplanning for Healthcare Costs

According to the National Council on Aging, most couples plan on $75,000 for healthcare costs, but this is a grave underestimation. Recent retiree data from Fidelity shows that folks who retired in 2024 may pay up to $165,000 each on healthcare. For a couple, the total cost is $330,000.

Healthcare expenses are also expected to increase over time. 

Delaying Decisions that Require Lead Time

Planning for retirement means that you can’t wing it or make decisions that are last-minute. Careful attention needs to be given to the following areas:  

• Plan for long-term healthcare and Medicare: Be careful of what choices you make during the enrollment period. If you enroll in a rush, your choices may be locked and result in a costly mistake early in your retirement.  
• Map out tax strategies: Do not wait until the last minute to do Roth conversions or take your required minimum distributions (RMDs), as well as do capital gains planning. This could create a huge tax burden that may undermine your retirement savings.  
• Be proactive with estate and will and trust planning: Many people fail to consider updating wills and beneficiaries and planning charitable contributions. When the proper updates are not made, this can lead to family conflict and funds held up in the probate process.  

Not Meeting With a Financial Advisor To Reassess Strategy

The “set it and forget it” retirement plan is not the best recommendation to follow if you’re trying to maximize funds in your later years. It’s always a good idea to talk to a financial advisor to see how you can further optimize your funds. They can help with:

• Fund withdrawal sequencing
• Tax exposure
• Longevity stress-tests
• Identify healthcare risks
• Align investments with goals

It’s ideally best to do this every year or when a life event happens.

Final Take on Retirement 2026

Being proactive about retirement now is the key to staying on top of your finances and limiting headaches in your golden years. 

• Assess where you’re living: Price out Social Security income plus any additional wages you will receive. Decide if that amount will be enough for you to live comfortably — if not, it may be time to think about changing locations now to fit your future budget.  
• Factor in longevity: Plan for a longer retirement, instead of just a mere 10 to 15 years. Shift your focus so that you reassess numbers that reflect living longer, possibly 30 to 35 years.  
• Make a healthcare plan now: Consider putting funds in your health savings account (HSA), compare cost differences between Medicare plans and line up options regarding long-term healthcare. This could include private insurance plans and self-funded plans.  
• Visit a financial advisor regularly: You want to reassess periodically to see if your retirement goals align with your plan. You should revisit plans with a financial advisor twice a year or if a major life change occurs.  

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