DO IT YOURSELF PATHWAY: RETIREMENT

We often define retirement as the period where you no longer earn income based on your labor. In reality, some people may not retire, either due to not wanting to stop working or not having the finances allowing them to stop working. In this period of your life

We often define retirement as the period where you no longer earn income based on your labor. In reality, some people may not retire, either due to not wanting to stop working or not having the finances allowing them to stop working. In this period of your life

We often define retirement as the period where you no longer earn income based on your labor. In reality, some people may not retire, either due to not wanting to stop working or not having the finances allowing them to stop working. In this period of your life

  • You are no longer working
  • You need to transition from the accumulation phase to the distribution phase to replace your income
  • You may have to create a budget…..for the first time
  • You often need to make big financial decisions around Long Term Care, paying off debt, and re-positioning assets
  • You may downsize
  • You are no longer working
  • You need to transition from the accumulation phase to the distribution phase to replace your income
  • You may have to create a budget…..for the first time
  • You often need to make big financial decisions around Long Term Care, paying off debt, and re-positioning assets
  • You may downsize
  • You are no longer working
  • You need to transition from the accumulation phase to the distribution phase to replace your income
  • You may have to create a budget…..for the first time
  • You often need to make big financial decisions around Long Term Care, paying off debt, and re-positioning assets
  • You may downsize

    Initial Planning Concerns to address:

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  • Do you have the assets to retire comfortably?
  • What age will you take Social Security?
  • Pension Maximization
  • Healthcare
  • Wholesale changes to your investment strategy
  • Long Term Care
  • Tax Efficiency
  • Do you have the assets to retire comfortably?
  • What age will you take Social Security?
  • Pension Maximization
  • Healthcare
  • Wholesale changes to your investment strategy
  • Long Term Care
  • Tax Efficiency
  • Do you have the assets to retire comfortably?
  • What age will you take Social Security?
  • Pension Maximization
  • Healthcare
  • Wholesale changes to your investment strategy
  • Long Term Care
  • Tax Efficiency
  • What are you going to live on, how are you going to replace your paycheck?
  • We generally suggest you:
    • Add up your assets and multiply by 4% (article on 4% rules)
    • Add in Social Security and pensions
    • This is your reasonable annual income that you have to monitor annually
    • Do you have a budget, is this enough to fulfill your dreams?
  • When to take Social Security is more complex than people think. There is more than one good answer. 
    • Think of Social Security as insurance against living a long time. Your risk is that you could die early and get less out of the system.
    • We usually suggest savers delay Social Security and draw down savings.
    • We usually suggest investors take Social Security as opposed to spending down investments.
    • We do not suggest taking Social Security and investing those payments yourself.
    • We suggest Married couples or divorcees plan for survivors’ benefits.
  • If you are lucky enough to have a pension, analyzing and maximizing its capabilities is important. Does your pension have a buy up provision? Government pensions can be advantageous
    in this scenario.
    • We recommend maximizing your pension because income in retirement is important and this can represent a non-correlating asset.
    • We recommend if you are married, you include spouse in your pension calculation. With at least at a 2/3 survivor’s benefit and a full 100% survivor benefit if you can afford it.
    • When you buy up your pension, any dollars you allocate for pension maximization are no longer available as a lump sum to yourself nor to your heirs typically.
  • Before 65 and after 65, that is the question. At 65 and older we are often talking Medicare. Before 65 we are often talking state-based Health Care exchanges.
    • It is hard to generalize the right plan for someone. We usually recommend someone talk to an experienced agent. Other considerations:
      • Do you prefer a managed care style health care such as Medicare Advantage?
      • Do you prefer a PPO style health care such as Medicare Supplement policies?
      • Can you afford more choice?
      • Don’t forget to sign up by age 65 or understand the deferral rules of Medicare. Form CMS L564 – Request for Employment Information
      • Does your work offer health insurance outside of COBRA as a retiree benefit?
    • Have you learned about MAGI (modified adjusted gross income) yet? The fun part about MAGI is the state definitions can be different than federal. Controlling your MAGI can affect your healthcare insurance costs.
      • What about Medicare IRMAA, a special tax based on your income from 2 years ago?
      • Your tax situation may be wildly different for a period of time with no earned income and potentially very little passive income
      • Can you look at Qualified Capital Gains, Roth Conversions, or health care subsidies for low income?

Wholesale changes to your investment strategy:

Wholesale changes to your investment strategy:

Wholesale changes to your investment strategy:

Retirement often necessitates adjusting your overall investment strategy. You should inventory your assets as you approach and enter retirement and then re-allocate them. We suggest defining your investments into 3 categories: Income, Growth, and Protection. These categories should be tracked and benchmarked.

  • Around 20% to 40% of your assets in retirement should be driving an income. Think of this as an engine, put in $100,000 and be able to calculate how many dollars you could get back on a monthly or annual basis. An example could be buying an immediate annuity versus a CD ladder or examining a Rental Property. In these examples you should be able to define how much income you expect on an annual basis versus the value or cost. Then you can compare the options using secondary factors like liquidity, guarantees, etc.
  • We suggest a standard withdrawal rate for this category is 5% or more.
  • The Growth category is a long-term investment that helps protect you from inflation. The Growth category often has volatility and should be managed appropriately. You should be able to assess what your potential rates of returns are on the growth category versus the risks you are taking.
  • We suggest using diversified equity portfolios as a core holding for retirees.
  • This is your safety net. It is a blend of low volatility and guarantees to protect you when funds from the income or growth categories shouldn’t be used. This means you compare 3 components, rate of return, liquidity and how the protection is defined. For example, a basic bank FDIC insured CD has a fixed rate, the ability to surrender for a interest penalty and has a bank guarantee as to the principle. This is an example of a protection category.
  • We suggest the protection and growth categories should potentially average at least 5% net of fees.
    • Your risks around early death and health issues are changing because you are getting older and potentially have enough savings that an early death may not be a major financial concern
    • Do you have end of life documents set up, Wills, POAs, Trusts
    • Have you updated who your Trustee or other relevant parties in your documents
    • What about Long Term Care, we recommend you make a decision on what you intend to do
    • Self Insure, Purchase Insurance, or take the risk

Retirement often necessitates adjusting your overall investment strategy. You should inventory your assets as you approach and enter retirement and then re-allocate them. We suggest defining your investments into 3 categories: Income, Growth, and Protection. These categories should be tracked and benchmarked.

 


Income – Around 20% to 40% of your assets in retirement should be driving an income. Think of this as an engine, put in $100,000 and be able to calculate how many dollars you could get back on a monthly or annual basis. An example could be buying an immediate annuity versus a CD ladder or examining a Rental Property. In these examples you should be able to define how much income you expect on an annual basis versus the value or cost. Then you can compare the options using secondary factors like liquidity, guarantees, etc.

 

We suggest a standard withdrawal rate for this category is 5% or more.

 

Growth – The Growth category is a long-term investment that helps protect you from inflation. The Growth category often has volatility and should be managed appropriately. You should be able to assess what your potential rates of returns are on the growth category versus the risks you are taking.

 


We suggest using diversified equity portfolios as a core holding for retirees.

 

Protection – This is your safety net. It is a blend of low volatility and guarantees to protect you when funds from the income or growth categories shouldn’t be used. This means you compare 3 components, rate of return, liquidity and how the protection is defined. For example, a basic bank FDIC insured CD has a fixed rate, the ability to surrender for a interest penalty and has a bank guarantee as to the principle. This is an example of a protection category.

 

We suggest the protection and growth categories should potentially average at least 5% net of fees.

Retirement often necessitates adjusting your overall investment strategy. You should inventory your assets as you approach and enter retirement and then re-allocate them. We suggest defining your investments into 3 categories: Income, Growth, and Protection. These categories should be tracked and benchmarked.

 

Income – Around 20% to 40% of your assets in retirement should be driving an income. Think of this as an engine, put in $100,000 and be able to calculate how many dollars you could get back on a monthly or annual basis. An example could be buying an immediate annuity versus a CD ladder or examining a Rental Property. In these examples you should be able to define how much income you expect on an annual basis versus the value or cost. Then you can compare the options using secondary factors like liquidity, guarantees, etc.

 

We suggest a standard withdrawal rate for this category is 5% or more.

 

Growth – The Growth category is a long-term investment that helps protect you from inflation. The Growth category often has volatility and should be managed appropriately. You should be able to assess what your potential rates of returns are on the growth category versus the risks you are taking.

 

We suggest using diversified equity portfolios as a core holding for retirees.

 

Protection – This is your safety net. It is a blend of low volatility and guarantees to protect you when funds from the income or growth categories shouldn’t be used. This means you compare 3 components, rate of return, liquidity and how the protection is defined. For example, a basic bank FDIC insured CD has a fixed rate, the ability to surrender for a interest penalty and has a bank guarantee as to the principle. This is an example of a protection category.

 

We suggest the protection and growth categories should potentially average at least 5% net of fees.

 

 

Retirement often necessitates adjusting your overall investment strategy. You should inventory your assets as you approach and enter retirement and then re-allocate them. We suggest defining your investments into 3 categories: Income, Growth, and Protection. These categories should be tracked and benchmarked.

 

Income – Around 20% to 40% of your assets in retirement should be driving an income. Think of this as an engine, put in $100,000 and be able to calculate how many dollars you could get back on a monthly or annual basis. An example could be buying an immediate annuity versus a CD ladder or examining a Rental Property. In these examples you should be able to define how much income you expect on an annual basis versus the value or cost. Then you can compare the options using secondary factors like liquidity, guarantees, etc.

 

We suggest a standard withdrawal rate for this category is 5% or more.

 

Growth – The Growth category is a long-term investment that helps protect you from inflation. The Growth category often has volatility and should be managed appropriately. You should be able to assess what your potential rates of returns are on the growth category versus the risks you are taking.

 

We suggest using diversified equity portfolios as a core holding for retirees.

 

Protection – This is your safety net. It is a blend of low volatility and guarantees to protect you when funds from the income or growth categories shouldn’t be used. This means you compare 3 components, rate of return, liquidity and how the protection is defined. For example, a basic bank FDIC insured CD has a fixed rate, the ability to surrender for a interest penalty and has a bank guarantee as to the principle. This is an example of a protection category.

 

We suggest the protection and growth categories should potentially average at least 5% net of fees.

 

 

  • Your risks around early death and health issues are changing because you are getting older and potentially have enough savings that an early death may not be a major financial concern
  • Your risks around early death and health issues are changing because you are getting older and potentially have enough savings that an early death may not be a major financial concern
  • Your risks around early death and health issues are changing because you are getting older and potentially have enough savings that an early death may not be a major financial concern
  • Do you have end of life documents set up, Wills, POAs, Trusts
  • Have you updated who your Trustee or other relevant parties in your documents
  • Do you have end of life documents set up, Wills, POAs, Trusts
  • Have you updated who your Trustee or other relevant parties in your documents
  • Do you have end of life documents set up, Wills, POAs, Trusts
  • Have you updated who your Trustee or other relevant parties in your documents
  • What about Long Term Care, we recommend you make a decision on what you intend to do
  • What about Long Term Care, we recommend you make a decision on what you intend to do
  • What about Long Term Care, we recommend you make a decision on what you intend to do
  • Self Insure, Purchase Insurance, or take the risk
  • Self Insure, Purchase Insurance, or take the risk
  • Self Insure, Purchase Insurance, or take the risk

Long-Term Care

Long-Term Care

Long-Term Care

You need to educate yourself on Long-Term Care. This government website is one of the first places to look. How Much Care Will You Need? | ACL Administration for Community Living Having a plan is a critical component in retirement and needs to be addressed early in the planning process. It is educating yourself around 3 options and choosing the right path for you.

  • Self Insuring
  • Medicaid
  • Purchasing Insurance

We suggest you create a Gap Plan for Long Term Care. A nursing home could cost of $12k/month and people assume they need to plan for that. You need to plan for the difference between $12k/month and the fixed income you can devote to Long-Term care. As an example, if you make $4000/month from Social Security and investments you may need to cover a gap of $8k/month.

You need to educate yourself on Long-Term Care. This government website is one of the first places to look. How Much Care Will You Need? | ACL Administration for Community Living Having a plan is a critical component in retirement and needs to be addressed early in the planning process. It is educating yourself around 3 options and choosing the right path for you.

  • Self Insuring
  • Medicaid
  • Purchasing Insurance

We suggest you create a Gap Plan for Long Term Care. A nursing home could cost of $12k/month and people assume they need to plan for that. You need to plan for the difference between $12k/month and the fixed income you can devote to Long-Term care. As an example, if you make $4000/month from Social Security and investments you may need to cover a gap of $8k/month.

You need to educate yourself on Long-Term Care. This government website is one of the first places to look. How Much Care Will You Need? | ACL Administration for Community Living Having a plan is a critical component in retirement and needs to be addressed early in the planning process. It is educating yourself around 3 options and choosing the right path for you.

  • Self Insuring
  • Medicaid
  • Purchasing Insurance

We suggest you create a Gap Plan for Long Term Care. A nursing home could cost of $12k/month and people assume they need to plan for that. You need to plan for the difference between $12k/month and the fixed income you can devote to Long-Term care. As an example, if you make $4000/month from Social Security and investments you may need to cover a gap of $8k/month.

Download our gap planning worksheet

Tax Efficiency

Tax Efficiency

Tax Efficiency

Retirement often involves repositing assets and spending assets and this can cause different levels of taxation. A lot of retirees have qualified funds that are taxable dollar for dollar as you pull them out. Tax bracket planning around your income sources is an important component to retirement.

We suggest looking at your sources of income and have a strategy if applicable to you:

  • Qualified Capital Gains and Qualified Dividends
  • Required Minimum Distributions
  • 1031 Exchanges
  • Net Investment Tax
  • Controlling your MAGI
  • Roth Conversions
  • Trust utilization such as charitable remainder trusts
  • Estate tax planning
  • Gifting

Retirement often involves repositing assets and spending assets and this can cause different levels of taxation. A lot of retirees have qualified funds that are taxable dollar for dollar as you pull them out. Tax bracket planning around your income sources is an important component to retirement.

We suggest looking at your sources of income and have a strategy if applicable to you:

  • Qualified Capital Gains and Qualified Dividends
  • Required Minimum Distributions
  • 1031 Exchanges
  • Net Investment Tax
  • Controlling your MAGI
  • Roth Conversions
  • Trust utilization such as charitable remainder trusts
  • Estate tax planning
  • Gifting

Retirement often involves repositing assets and spending assets and this can cause different levels of taxation. A lot of retirees have qualified funds that are taxable dollar for dollar as you pull them out. Tax bracket planning around your income sources is an important component to retirement.

 

We suggest looking at your sources of income and have a strategy if applicable to you:

  • Qualified Capital Gains and Qualified Dividends
  • Required Minimum Distributions
  • 1031 Exchanges
  • Net Investment Tax
  • Controlling your MAGI
  • Roth Conversions
  • Trust utilization such as charitable remainder trusts
  • Estate tax planning
  • Gifting

DISCLAIMER:

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