I got advice from a client recently that, in my 14 years of helping people retire, I hadn’t heard before, so I want to share it with you. This client’s been retired for about seven years, and he told me he had a group meetup with his buddies – some of them retired and some of them not – but the topic of discussion was retirement, and they were asking him for advice on how he did it because (according to them) it seems like he’s got it all figured out. He’s a humble guy and he obviously knows no one’s got it all figured out, but he did have some really good ideas, so to share them with you.
The Three Essentials of Retirement
As we were at lunch, I was asking him, “Why do you think they thought that you had it all figured out?” And what makes his retirement experience seem so much better than everybody else’s, compared to people who are not having that same experience? Some of the discussion that we had was on those three essentials, but he also did something a few years before he retired that set him up for success.
Those three essentials are the three Cs. The first one being creativity; we’re creative beings. You got to be creative when you were working, but you also have to make sure that you can continue to create and be curious after work. Some of the happiest retirees that I know are the most curious and creative ones, too.
The second C is connection. Your closest friends might be the people you’ve been with between ages 25 and 55 during your working years, and it could be quite an adjustment all of a sudden when you’re not seeing them anymore. It takes effort to keep those friendships going, but you can also deepen relationships with family, with God, or maybe new grandchildren along the way.
C number three is contribution. When we’re not able to help others, there’s something missing in our lives. In some way, your work helped others, but you have to continue that after work ends. It could end up being a contribution to a cause or a charity, a person, or a group of people where you can use your knowledge, skills, or your money to help.
Those are the three Cs, but there’s something else that this client who has given this advice said that I didn’t think about before, and he brought it up in this discussion.
Advice from a Retiree
While we were talking about contribution, he mentioned that he’d started purposefully finding the time and using it for contribution well before he retired. He actively found ways to serve and help others with a small percentage of his working time. As retirement came, it was almost like a natural progression that that percentage of time grew a little bit, and it didn’t feel like a brand-new life he didn’t recognize. Sometimes retirement can feel like a complete transition, but he made it more of a steady transition into this retirement life that was filled with those three Cs of contribution, connection, and creativity.
The piece of advice that he had was to take time before you stop working to just explore these three Cs more, especially the contribution one. Don’t wait until you have free time in retirement and invest it now. Take quiet time to think about life in retirement before you get there. I have a video on prompts to help you think about retirement before you get there. Take some time in the morning, or whenever you have your best thinking time, and start exploring those three Cs. Whether you’re already retired or not just yet, it’s worth the investment.
Disclaimer: Since we don’t know your specific situation, none of this information should be construed as tax, legal, financial, insurance, financial advice, or other advice and may be outdated or inaccurate. It is your responsibility to verify all information yourself. This content is prepared for entertainment purposes only. If you need advice, please contact a qualified CPA, attorney, insurance agent, financial advisor, or the appropriate professional for the subject you would like help with. Streamline Financial Services, LLC or its members cannot be held liable for any use or misuse of this content.
Affiliate Disclaimer: This post may include affiliate links where we may earn a payment when you click on the links at no additional cost to you.
Disclosures: Securities offered through LaSalle St. Securities LLC (LSS), member FINRA/SIPC. Advisory services offered through LaSalle St. Investment Advisors LLC (LSIA), a Registered Investment Advisor. Streamline Financial Services is not affiliated with LSS or LSIA. LSS is affiliated with LSIA.
As you’re planning your retirement, there’s a shift that we should think about as we map out our finances and our life after our career. There are two important things that I want to share with you. The first one’s for everybody, and then the second one is for business owners or entrepreneurs who might have the option to design their day and their week while they’re working.
How Do You Envision Your Retirement?
The first example is a reframing of the way that we’re thinking about retirement. When done right, it can confirm that you’re making the best decision possible about when to retire. Additionally, it can also keep you motivated to actually accomplish the future financial and retirement goals that you want. Last but possibly the most rewarding of all, is that it can also help you to make your future bigger than your past. This is an important concept in positive psychology because if we don’t have hope, or if we don’t have things to look forward to, that can greatly reduce our present life satisfaction.
You know that quote, “Where there is no vision, the people perish”? For some, as they’re planning their future, they don’t like the term “retirement” because it conjures up ideas or images of the opposite of what they want their life to become. It could be the image of an old fogey rocking in a rocking chair on the porch or being unproductive, or maybe a memory of their elderly grandparents just watching TV all day in retirement.
There’s nothing wrong with either of those things, but it’s probably not what we’re looking for, thus causing us to put off retiring or delaying retirement planning out of fear of facing the question: what am I going to do all day? So they keep working because they don’t know how good life can be after we’re done with work.
Finding Fulfillment in Retirement
If you’re anything like our clients, life after work is really about time freedom; it’s about enjoying life while continuing to find fulfillment. I mention the three Cs often: creativity, connection, and contribution. Ask yourself: is there something that might be stopping me from mapping out or getting clarity about what’s possible in this next stage of my life? If it’s a negative feeling about the word “retirement”, what if you just replace that word in your head?
Use “freedom” or “independence” instead because if you’ve achieved financial freedom, you have the option to continue work if you want to, or to stop work. You have the option to explore other pursuits if they interest you if you want to do so. And you have the freedom to decide how you are going to express your creativity, or maybe your curiosity, and who you’re going to connect with more, and what you are going to do to contribute to other people’s lives.
A Different Path for Entrepreneurs or Business Owners
This second part is for business owners or entrepreneurs. As a business owner, your retirement could look quite different. You might have more freedom in your career to decide how you want to spend your time. It might feel like the opposite of that when you look at all the day-to-day things it takes to run the business – you might feel more like an overworked employee than the owner. However, as the decision maker, you’ve got some options.
The concept that I want to share with you is the idea of retiring in your business. Think about it like this – in your business, there are all these things that you need to do right so that the business can run. There’s sales, marketing, product, distribution, operations of people, management – all these things that you need to do. Some of these things you enjoy, and some you don’t, right? You may really enjoy the marketing side or the sales, or talking to new clients or customers if you have them. As you think about your financial freedom and your time freedom, are there things in your business that you do better than anybody else?
Secondly, are there things that you do right now that you could actually spend money on so you wouldn’t have to do them anymore? You’d essentially be lowering your income with the goal of freeing up your time. The idea is to spend your time on the things that are most engaging to you – the things you love doing and bring the greatest return to your business or your life – and everything else is getting handled by somebody else.
The people that can do that are essentially retiring in their business. It’s not for everyone, but it’s an idea to at least think about.
Disclaimer: Since we don’t know your specific situation, none of this information should be construed as tax, legal, financial, insurance, financial advice, or other advice and may be outdated or inaccurate. It is your responsibility to verify all information yourself. This content is prepared for entertainment purposes only. If you need advice, please contact a qualified CPA, attorney, insurance agent, financial advisor, or the appropriate professional for the subject you would like help with. Streamline Financial Services, LLC or its members cannot be held liable for any use or misuse of this content.
Affiliate Disclaimer: This post may include affiliate links where we may earn a payment when you click on the links at no additional cost to you.
Disclosures: Securities offered through LaSalle St. Securities LLC (LSS), member FINRA/SIPC. Advisory services offered through LaSalle St. Investment Advisors LLC (LSIA), a Registered Investment Advisor. Streamline Financial Services is not affiliated with LSS or LSIA. LSS is affiliated with LSIA.
The beginning of retirement can be a pretty strange period of life. You’ve spent the last 20 to 40 years in working mode, and then all of a sudden it stops. It’s quite the adjustment, and a lot of retirees that we hear from can get unpleasantly surprised when they get to this stage of their life. It’s actually the best stage of life, but only if you prepare for it the right way. It’s more than just money – that’s obviously a very crucial part of retirement planning – but there are people who have all the money they need, but they’re still not happy.
So let’s use this time to just think ahead and not get caught off guard as we move forward in life. I’m going to share just two things with you.
Spending Your Savings in Retirement
The number one thing is, it may be hard to spend your retirement savings. When I tell people this they think: maybe for that person, but not for me. I’m going to have no problem spending my money in retirement. Then they retire, and they realize it’s harder than it seems – especially in the beginning.
Well, why doesn’t anybody talk about this feeling then? Your retired friends might not be talking about it because a lot of us don’t talk much about money with friends. You might also have a feeling that, if you brought this up, you might be judged a little bit or thought of differently by a friend. You say to someone, “I’ve got this money, but I’m afraid to spend it.” If they’re still working they might be thinking, “Oh, big problem for you to not be able to spend your own money.”
Don’t feel bad if you are feeling this. It’s a habit you’ve developed over the last 40 years. Every time we think about retirement, it has always been equivalent to savings. Retirement is accumulation, retirement is building the nest egg, and now it’s not that any more – it’s spending. It’s hard to break habits, especially one that’s been cemented into our normal everyday life, and really for the last 40 years. It takes conscious effort.
One of the things that help with this is just regular reviews of your plan. If you can look at these what-if scenarios like what if I spent an extra 20K on vacations each year, how does that impact the plan? Or what if we gave a bigger-than-normal gift to charity, how does that impact the plan? How does the decision that we make today impact the long-term plan? That’s a really important thing for our clients at Streamline, having that 10 out of 10 confidence in their financial decisions so that they can feel good about taking the whole family on a trip and spending that amount of money instead of feeling anxious or worried if they made the right decision.
Spending Your Time in Retirement
The obvious part of retirement is that you’re going to have a lot more time available than you’ve been having, and we know that time is more valuable than money, but only if the time is spent on things that we truly want to be doing.
You may have heard about the five stages of retirement – the first one is the honeymoon phase, and during that phase, you could pretty much do anything. You could sit on the porch and drink lemonade. You could golf 180 days straight the day after you retire and you’d be loving it.
However, what I’ve heard from people who have done this before is that there comes a point where all of a sudden, that golf starts to feel less exciting. So what’s the solution to spending time in the best possible way for you? I’ll give you two resources and then I’ll give you a way to filter what you do in a week so that you can increase your happiness with how you’re spending your time.
As for the filter to run through all these possible things that you can do in retirement and how are you going to live your retirement and what are you going to do with your time? Try to find these three things each week: creativity, connection, and contribution.
Creativity could also mean curiosity. We want to be able to have ideas, read new things that are interesting, spark new pathways in our brains, and create. As for connection, we were also meant to have connection with people and some kind of spirituality – whatever that means for you. Lastly, contribution; you’ve contributed your whole career. You were helping others, whether it was patients or clients or customers, or your team members. If that goes away all of a sudden when you’re done working, there’s going to be a void at some point in the future that you’re going to feel.
Disclaimer: Since we don’t know your specific situation, none of this information should be construed as tax, legal, financial, insurance, financial advice, or other advice and may be outdated or inaccurate. It is your responsibility to verify all information yourself. This content is prepared for entertainment purposes only. If you need advice, please contact a qualified CPA, attorney, insurance agent, financial advisor, or the appropriate professional for the subject you would like help with. Streamline Financial Services, LLC or its members cannot be held liable for any use or misuse of this content.
Affiliate Disclaimer: This post may include affiliate links where we may earn a payment when you click on the links at no additional cost to you.
Disclosures: Securities offered through LaSalle St. Securities LLC (LSS), member FINRA/SIPC. Advisory services offered through LaSalle St. Investment Advisors LLC (LSIA), a Registered Investment Advisor. Streamline Financial Services is not affiliated with LSS or LSIA. LSS is affiliated with LSIA.
It’s not too late to boost the value of your Roth IRA without impacting your taxes too much. If you’ve ever asked yourself if you should have more money in your Roth IRA, then this video is for you.
We help a lot of people in their 50s and 60s create their ideal retirement plan, and a common thing that we hear is, “Oh, I wish I just had more money in my Roth IRA,” or, “I wish I just started contributing to it earlier.” And we usually just remind them of that old Chinese proverb: “The best time to fund a Roth was 20 years ago, but the second best time is today.” (I think it went something like that, right?)
You might be thinking to yourself, “Well, I can’t fund a Roth because my income is too high so I can’t contribute.” Or, “I’m already in such a high tax bracket already, it doesn’t make sense for me to do that right now, or it doesn’t make sense for me to even convert from my IRA to my Roth IRA because of that high tax bracket.”
If you’re thinking any of those things, or if you’re looking at the value of your IRA and your 401k and you’re starting to think you might have a “tax time bomb” when you get to your seventies and then you’re forced to take out of those pre-tax accounts, I’m going to share some ways to think about your tax-efficient withdrawal strategy so that you can maximize the amount that you get into your Roth and then also pay less tax over your lifetime. So let’s zoom out for just a minute and do a quick refresher on some of these concepts before getting into the ideas.
We’ve got three main accounts that we’re talking about: your 401k, traditional IRA, and Roth IRA. As you likely already know, the traditional IRA and traditional contributions to your 401k are pre-tax accounts, meaning that the money you put in, you usually get a deduction for on your taxes, but then when it’s coming out to you, then you’re paying tax on those dollars. The Roth IRA, on the other hand, your money goes in after taxes so you don’t get a tax deduction, but when you take distributions in retirement the dollars come to you “tax-free” because you already paid the taxes.
So for many of our clients, the idea of having “tax-free” money in retirement is extremely attractive. One way to get more funds into the “tax-free” bucket is through something that is called a “Roth conversion.” When you execute one of these conversions, you end up basically paying taxes on some of your pre-tax dollars that are in your traditional IRA. Paying those taxes today might not feel great, but if we’re thinking long-term, it could make sense. It reminds us of the phrase: “Disruption always follows intention.” Like that law of the world where you decide to go exercise and you’re going to go all in and you exercise, you do it and then the next day you feel a lot worse than the day before. Or if there’s an addict that makes a positive decision to stop doing whatever he is doing, he’s going to feel a lot worse the next day. Just be aware of that feeling as you’re thinking about this Roth conversion. Know that there is going to be tax to pay, but if we can map it out and actually look at the facts and look over the long term, that’s when we can feel confident about doing it and actually you’ll feel better about doing it when you can map it out. We’re playing the long game here – it’s not how little you can pay in taxes this year. Instead, we’re focused on how to reduce the total taxes paid over your entire lifetime.
Here is how we go about evaluating if and when a Roth Conversion makes sense:
The first step is to take the current balance of your pre-tax dollars and estimate its future value. Since your Required Minimum Distributions (RMDs) will kick in at 72, we usually evaluate the value at age 73. We’re taking an educated guess here by assigning a growth rate of 6% or 7%. Next, we’re going to figure out what the RMD is at that time based on the value you just calculated. Then, add in any other income, like pensions or social security income, dividend income, or capital gains.
Finally, we need to find your current tax rate and your estimated future tax rate of 73. This will allow us to get a real idea of what you’d pay in taxes if you did a conversion today and compare that against what you’ll pay in taxes in retirement if you don’t convert the pre-tax dollars to Roth.
When you boil it all down, there are really only a few things we can control in retirement:
How much we spend,
How we are invested,
How much we pay in taxes.
It might seem like we don’t control our taxes just because the government is setting the rates, but the truth is that we still have options around when and how we pay.
For a great example of how to model this out, watch the video above and then use the DIY Retirement Planner to see if this makes sense for you. Or, if you’re not much of a DIY-er and want a little help, just click Get Started to explore how our team might be able to help you build your dream retirement.
Disclaimer: Since we don’t know your specific situation, none of this information should be construed as tax, legal, financial, insurance, financial advice, or other advice and may be outdated or inaccurate. It is your responsibility to verify all information yourself. This content is prepared for entertainment purposes only. If you need advice, please contact a qualified CPA, attorney, insurance agent, financial advisor, or the appropriate professional for the subject you would like help with. Streamline Financial Services, LLC or its members cannot be held liable for any use or misuse of this content.
Affiliate Disclaimer: This post may include affiliate links where we may earn a payment when you click on the links at no additional cost to you.
Disclosures: Securities offered through LaSalle St. Securities LLC (LSS), member FINRA/SIPC. Advisory services offered through LaSalle St. Investment Advisors LLC (LSIA), a Registered Investment Advisor. Streamline Financial Services is not affiliated with LSS or LSIA. LSS is affiliated with LSIA.
If you could answer a yes to these four questions, then you might have everything aligned for you to retire right now. Not in a year or two years from now – right now.
Question 1: Financial Preparedness
The first one is the question of, “Do I have enough?” This is the most obvious one, but not everyone’s a hundred percent sure that their financial assets are going to last the rest of their lifetime. There’s a way to get to this level 10 out of 10 confidence with the question, “Do I have enough?”, and it starts by doing something that looks like this. It’s the creation of your perfect retirement plan focused on three core parts.
Number one is the investment plan, and that’s realizing that your investment strategy may start to look a little bit different now as you get closer to it, into retirement. It’s looking different than what it did maybe 10 or 20 years ago. The second part is the income plan, which really just means identifying the right tax-efficient withdrawal strategy and then what accounts to take from and when. Most likely you’ll have three types of accounts in retirement that are going to be treated differently, at least tax-wise. Designing the withdrawal strategy can actually save a lot in taxes. Then finally, third is the tax plan and just knowing that every financial decision that you make also has a tax impact. But having all three of those plans working together and coordinating, the result looks like this, and that’s what we want to see.
Question 2: Know What You’re Giving Up
Now, onto the second question, “Have I had enough?” You may have or have had a successful career, but if the stresses of your work are starting to outweigh the joy of work, you might be ready to spend more time on things that are more fulfilling or maybe more joy-filled than what work is now.
A client we spoke with not long ago knew what he was good at in his career, and he actually enjoyed doing it. It brought him a lot of fulfillment, too. What is the problem here? That circle of his core competency and what he was really good at began to take less and less time, and the stuff he didn’t like was taking up a bigger piece of his day and his week; it was impacting his mood and stress levels as he got older. He realized there were other things he wanted to spend his time on while he was still at an age where those were available to him.
Question 3: Preparing for Stage Three of Retirement
The third question to think about is, “Do I have enough to do?” What you don’t want to have happen is to get into retirement and a few months later you think, “Is this all that there is?” Something to note is that there are actually five stages of retirement, and the third stage is sort of a letdown stage, or could even be a depression stage.
But if we can do something about it, it could be the best time of your life. Like many of our clients, they were able to avoid that third stage by making sure that they were both financially and emotionally prepared ahead of time. As I think about it, I’ve got a few more videos on this topic that have been helpful to others, so I’m going to put that below in the description below and look for the headline of “Fulfilling Retirement” and then look for some of the videos under that headline to hopefully watch after this.
Question 4: Coordinating With Your Spouse
The next question is if you have a significant other. The question is, “Does my partner want me home all day?” It might sound kind of funny, but I know couples where the wife had a harder time, or the husband had a harder time when their spouse came back home 24/7. It messes with the routine of the other spouse. It takes a readjustment or a redelegation period of figuring out the household duties and overall getting on the same page. This is another thing you can plan ahead for before retirement comes.
If you’re thinking about your retirement more now, be sure to subscribe to this channel because we’ll come out with new videos each week, really focused on making your retirement just a little bit better. Hopefully, these four questions were helpful and then I’ll see you in the next video.
Disclaimer: Since we don’t know your specific situation, none of this information should be construed as tax, legal, financial, insurance, financial advice, or other advice and may be outdated or inaccurate. It is your responsibility to verify all information yourself. This content is prepared for entertainment purposes only. If you need advice, please contact a qualified CPA, attorney, insurance agent, financial advisor, or the appropriate professional for the subject you would like help with. Streamline Financial Services, LLC or its members cannot be held liable for any use or misuse of this content.
Affiliate Disclaimer: This post may include affiliate links where we may earn a payment when you click on the links at no additional cost to you.
Disclosures: Securities offered through LaSalle St. Securities LLC (LSS), member FINRA/SIPC. Advisory services offered through LaSalle St. Investment Advisors LLC (LSIA), a Registered Investment Advisor. Streamline Financial Services is not affiliated with LSS or LSIA. LSS is affiliated with LSIA.
There are five steps to achieve a successful and secure retirement. It’s like climbing a mountain up to its peak – which is that retirement date – and there are five base camps to get to in order to reach that final peak. I know that’s a bit corny, but we don’t want to skip any of these. You may actually already be in between a couple of these, but you don’t want to skip any because each one is important.
Step One: Monthly Expenses
We’re starting at the bottom – you’re starting to think more about retirement and hopefully you’re feeling excited about your future. If you’re not, you should be. After helping a lot of people get to this point or get to retirement, we’ve seen that this could be the most fulfilling and life-giving part of your life.
Step one is to guess at your monthly expenses. What amount of money do you want coming into the bank after you’re done working? What about expenses? You don’t have to even look at mint.com or any of the other budgeting things, just take a guess.
Let’s pretend that the number is $10,000 a month coming into the bank for spending money. You might be thinking, “Who in the world needs $10,000 a month?” Or if you’re like some of our clients, you might be thinking, “I’m going to need more than that.” Don’t dwell on the amount – you’re different from everyone else, and comparison is the enemy of contentment.
Step Two: The 4% Rule
Step two on the mountain is the simple 4% rule. If you’ve seen other videos I’ve done, then you know that I don’t love that rule because if you only base your plan on that and don’t consider anything else, it could really put your plan or your retirement in danger. However, this is step two, so it’s just a quick pit stop. Let’s take that $10,000 a month x 12 months a year – that’s 120K a year. I’m not factoring in things like inflation. Then let’s take other income like social security, and this gives you the amount you’ll have to start taking from your investments. Divide it by 0.04 and that’s the 4% rule.
In this hypothetical, you’ll need about $2 million bucks just according to the 4% rule. Again, using your own numbers that’s how much you want multiplied by 12, minus your social security in the future or other income, divided by 0.04.
Step Three: Online Retirement Planner
The third step is where things get more interesting and secure. If one of your goals is to increase peace of mind around retirement, a great way to do that is to have a more specific plan and to look at a few what-if scenarios. I’d recommend finding an online retirement planner that allows you to explore these various what-if scenarios.
One piece of advice as you’re putting in numbers and looking at the result in the online planner is to write down the questions that are coming to mind or the things you don’t yet understand. This is very important, and you’ll see why in the next step.
Step Four: Meet With Specialists
Onto step four: take that plan that you got from the online retirement planner and then meet with two CFP professionals who specialize in retirement planning. You don’t need to hire that person to become your ongoing financial planner, but getting a second pair of eyes to get some validation for what you already found out could be a really good idea. Specialization is important when deciding with whom to seek counsel. If you had a really important surgery, would you go to the doctor who’s done eight of those surgeries before, or the doctor who’s done 3,000 of the exact surgery that you need?
Have them create a plan for you and then compare your findings with them. This is where you can ask those questions that were coming to mind as you were creating your own plan in step three.
At the end of those meetings with the retirement planners, you should have a pretty good game plan to follow that gets you to that successful and secure retirement you’re looking for. And hopefully they can help you think about the next steps you should be taking. If anything needs to be improved or changed, that’s when you hopefully get that good advice.
Step 5: Retirement Is Not an Event
Now, there’s one more step as we’re looking at this mountain, and it’s a really important one. If you continue to run your retirement plan by yourself, it’s important to recognize something. Retirement is a big thing you need to plan and prepare for, but when you get here with that level 10 confidence, remember that this is not an event, it’s a process. The practice of having regular monthly or quarterly check-ins is important.
What you wouldn’t want to have happen is to create the plan, you’re feeling good, and then you get into retirement and stop checking to make sure you’re still on course. I think it was Dwight Eisenhower who said, “Plans are worthless, but planning is essential.” To that, I would say, “Plans are actually good, but the continual process of planning is even better.”
Disclaimer: Since we don’t know your specific situation, none of this information should be construed as tax, legal, financial, insurance, financial advice, or other advice and may be outdated or inaccurate. It is your responsibility to verify all information yourself. This content is prepared for entertainment purposes only. If you need advice, please contact a qualified CPA, attorney, insurance agent, financial advisor, or the appropriate professional for the subject you would like help with. Streamline Financial Services, LLC or its members cannot be held liable for any use or misuse of this content.
Affiliate Disclaimer: This post may include affiliate links where we may earn a payment when you click on the links at no additional cost to you.
Disclosures: Securities offered through LaSalle St. Securities LLC (LSS), member FINRA/SIPC. Advisory services offered through LaSalle St. Investment Advisors LLC (LSIA), a Registered Investment Advisor. Streamline Financial Services is not affiliated with LSS or LSIA. LSS is affiliated with LSIA.
Recent Comments