By David Brooks, Founder & President of Retire SMART

Cracks. In the walls. In the ceiling. In the driveway or sidewalk. No matter how perfectly we plan and build, cracks sometimes appear. Maybe there was a design flaw, but even when the design and execution are flawless, cracks can develop. The house or pavement settles in an unexpected way. Maybe the weather is more severe than expected and takes its toll.

The same can be true with a retirement plan. An account or strategy that made sense 20 or 30 years ago might not make sense now. It might require adjustment.

Whether it’s the plaster and walls of your home or your retirement portfolio, don’t panic. When you see trouble develop, take action. If the foundation of the house needs to be leveled, do it before the windows and other features of the house are affected. If the driveway is buckling, address the problem before you have a sinkhole between your garage and the street.

Of course, the earlier you catch the trouble, the easier the fix and the more you limit the potential damage. That’s why you need a financial advisor who is constantly monitoring your portfolio and, when necessary, making adjustments to optimize performance.

At Retire SMART, we serve each client with a team of advisors and client service specialists. We use software programs and analytical tools that monitor your portfolio 24/7 and alert us to stresses that might produce cracks in your portfolio. If cracks do appear, we have dozens of strategies to restore and solidify your portfolio. Sometimes we utilize several strategies in concert to achieve the maximum benefit.

Another analogy involving cracks that applies to retirement is driving. Our headquarters is in Omaha, Nebraska. We enjoy four seasons of weather, but it creates challenges in the spring when rain and fluctuating freeze-thaw temperatures produce potholes in the streets that can rattle teeth and ruin automobile alignments. Occasionally we have to swerve and change course to avert such threats.

The same thing can happen in retirement. You did nothing wrong. You worked hard, saved, and followed your plan for retirement. But something beyond your control appeared and forced you off-center, off-course.

We often see this happen in health care. A critical area we want to make sure clients are aware of is health care costs. Health care inflation runs about three times normal inflation. You need to be prepared to spend more money out-of-pocket as you get older. That’s just reality. Unintended medical expenses can make you drain an account quicker than you want. That won’t happen if you plan for it.

Speaking of inflation, look how it erupted in recent years. Cracks? It produced chasms in people’s retirement plans if those plans did not account for the impact of inflation.

We factor inflation into every plan we produce. We have to. If the dollar in your pocket and in your retirement account may be worth only 80 cents in a few years, you need to plan for that. It doesn’t have to ruin your retirement, but you need a written plan that accounts for the bite inflation can take out of your wealth.

Stock market volatility is another generator of cracks in a retirement plan. Again, you didn’t do anything wrong. The political and economic factors that affect the markets change over the decades, and even from year to year. Your retirement plan must be flexible enough to adjust to these changes and keep you on track – and out of the ditch. Part of that process is reducing the risk level of your portfolio when you are near or in retirement. That way your nest egg is better protected, and the inevitable course corrections are less dramatic.

Then there’s the #1 unexpected expense in retirement: taxation. Tax planning is where we save clients the most money, and yet it’s something too often ignored by financial advisors. Advisors typically focus on accumulating wealth, which is good, but they neglect planning for optimal management of that wealth in retirement.

Bracket creep is the main tax-related crack that develops in retirement plans that lack adequate planning for tax consequences. Most retirees, often to their surprise, have more income in retirement than they did in their working lives, which may bump them into a higher tax bracket. Then there’s the so-called “widow’s dilemma,” when a surviving spouse suddenly finds herself in a higher tax bracket because her taxpayer status has changed from married to single.

These cracks can be prevented with proper planning.

A good retirement plan is like the GPS device in your phone. It is flexible. It can adapt. It can immediately recalculate and course-correct from the new point of reference and still get you where you want to go in the optimal way.

It’s doable, but you must be proactive. You must plan for various scenarios ahead of time and be alert to changing circumstances so you can implement the right strategy at the right time. That way you can enjoy the retirement you deserve, secure in the knowledge that your plan can address any cracks that might develop.