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- advisors@staterawealth.com
Bringing it all together
While you deserve to live the retirement you want, it’s vitally important to account for every expense that could potentially deplete your retirement savings. We will work with you to develop an income plan that will compare your projected retirement income to your projected retirement expenses. By creating a comprehensive income plan, you are creating confidence in the retirement and financial freedom you’ve worked so hard to achieve.
To estimate what your retirement expenses will be, we will start by calculating your current monthly expenses. This should include all household, daily living, entertainment, transportation, health, debts, and charity expenses. After your retirement expenses are calculated, the next step to planning your retirement is to organize your retirement assets and determine the income you will need to cover your expenses.
Why? Because strategically liquidating assets according to tax status can ensure you are putting the most money directly in your pocket. For example, liquidating or restructuring assets with reportable and taxable interest, such as CDs or certain brokerage accounts, can reduce the taxes you will pay on your Social Security benefits.
When it comes to Social Security for retirees, one of the biggest questions is “When should I start taking my benefits?” This is a strategy that has to be optimized to your retirement plan. It’s important to understand how your benefits are calculated, how they are taxed, and what happens if you continue to work after beginning to receive benefits.
Example: The amount of the social security benefit reduction varies with the year of birth. For example, an individual born in 1937 (FRA= age 65) who began receiving benefits at age 62 had his or her retirement benefit reduced to 80% of what it would have been had they chosen to wait until FRA. However, for a worker born in 1962, for whom FRA is age 67, choosing to receive retirement benefits at age 62 results in an initial benefit reduced to 70% of what it would have been had the individual waited to age 67.
Every retirement plan will be different, so each Social Security optimization strategy will be different as well. This is why we make sure your Social Security benefits are very much a part of our retirement strategy conversation.
The amount of income needed in retirement depends on your lifestyle, housing costs, healthcare expenses, travel plans, taxes, and other financial goals. Some retirees spend less than they did while working, while others spend more during their early retirement years. A retirement income plan can estimate future expenses, account for inflation, and compare those needs with Social Security, pensions, investments, and other income sources.
Retirement income can come from several sources, including Social Security, pensions, retirement accounts, investment portfolios, cash reserves, and certain insurance products. Rather than relying on a single source, many retirement income strategies coordinate multiple sources to provide both near-term stability and long-term growth potential. The appropriate mix depends on factors such as spending needs, risk tolerance, taxes, longevity, and available assets.
Retirement income planning can begin years before retirement. Starting early provides more time to evaluate savings, investment allocation, Social Security timing, tax strategies, healthcare costs, and potential income gaps. The five to 7 years before retirement can be particularly important because decisions made during this period may affect taxes and retirement income for many years.
Determining whether you have enough money to retire involves more than reaching a specific account balance. A retirement plan typically compares expected expenses with Social Security, pensions, investments, and other income sources while considering inflation, taxes, market fluctuations, healthcare costs, and longevity. Retirement projections can also test different scenarios to estimate how a financial plan might perform under changing market and economic conditions.
There is no single retirement withdrawal strategy that works for everyone. Withdrawals may come from taxable investment accounts, traditional IRAs and 401(k)s, Roth accounts, cash reserves, or other assets. The order and timing of withdrawals can affect taxes, required minimum distributions, investment risk, and the longevity of a portfolio. A coordinated withdrawal strategy considers both current income needs and potential long-term tax consequences.
Tax-efficient retirement income planning may involve coordinating withdrawals among taxable, tax-deferred, and Roth accounts. Depending on the circumstances, strategies can include managing taxable income, evaluating Roth conversions, planning for required minimum distributions, coordinating Social Security benefits, and considering charitable giving strategies. Tax laws and individual circumstances vary, so retirement tax planning is often coordinated with a qualified tax professional.
Inflation reduces purchasing power over time, while market downturns can create additional challenges when retirees are simultaneously withdrawing money from investment accounts. Retirement planning can address these risks by maintaining appropriate liquidity, diversifying investments, planning for future growth, and establishing a withdrawal strategy designed to avoid unnecessary selling during unfavorable market conditions.
A financial advisor can help organize the different pieces of retirement into a coordinated strategy, including investments, Social Security, taxes, retirement account withdrawals, insurance, and legacy goals. For individuals seeking retirement planning in St. George, Utah, working with a local advisor can also provide an opportunity for ongoing, face-to-face planning as circumstances and financial goals change.
