3 Essentials to Find Fulfillment in Retirement

https://youtu.be/WvGAUgn74nE

Planning for your Best Retirement

Approaching retirement, many couples meet with a financial advisor to map out all of the “what-if” scenarios, their tax efficient withdrawal strategies, income plan and investment strategies. They often are feeling the pressure to make sure they do retirement “right”. 

The problem many couples don’t solve before making the final decision to stop working is not financially related. Even if you feel good about the financial side of retirement, have you processed how you will experience fulfillment and joy in retirement?

The sad thing is when you stop working, if we don’t pursue these three things, they’ll disappear in retirement. You actively have to do these or look for them and pursue them or otherwise they won’t happen. 

  1. Creativity

When your career is done, the first thing is to make sure that you’re doing the things that are keeping you or allowing you to be creative. As humans, we’re all naturally creative. Think about children, for example. Without any prompting or ideas they’ll create drawings, games, and stories. And really, they’re creating them out of nothing.

During our career lives, we can be creative in different ways. You’re being creative when achieving certain outcomes for a company goal or finishing a project that you’ve been working on.

There are creative aspects to our team of Retirement Planners at Streamline. Like when we’re studying these investment strategies and these changes to tax code and then applying them to individual plans that we’re helping.

However, work can take up so much time that you forget what your creative passions are. Even when you’re being creative at work, there’s also outside creative passions that you may not have pursued in the last 30 years. 

Whether it’s writing or painting or woodworking –  the big thing to remember is finding something that sparks your creativity. Stay curious and look for these things that are fascinating and motivating to you. 

Ask yourself these questions to stay creative::

  • How can I express creativity in retirement years? 
  • What are those topics or things that I find fascinating?
  • What is interesting that I want to learn more about? 
  1. Connection

Connection is essential. We know that as humans, we’re meant to be in connection with each other. If faith is an important part of your life, then we’re meant to be in connection with God as well as others. 

In retirement it becomes more important to focus on staying connected.  You get to have some sort of connection at work with workmates, clients, or supervisors. But once that’s all gone, it’s a  big shift 

Connection is something you have to pursue in retirement. 

Ask yourself these questions to stay connected: 

  • Who do I desire to build stronger connections with in retirement? 
  • How can I do that?
  1. Contribution

The last way to find fulfillment in retirement is finding ways to contribute. During work, you get to contribute to others’ lives by helping people, or contributing to a larger team. Bu, when work is done, we need to make sure that we can continue to contribute to others.

The person that you’re best equipped and most qualified to help is the person you used to be. Maybe someone who is a few years behind where you are. 

Another way to contribute to others is considering if your strengths, skills, or abilities can be used to help others. This brings fulfillment to a lot of people in retirement. 

Ask yourself these questions: 

  • How are you serving others? The people you’re connected with?
  • How can you contribute to their life?
  • Do I have any skills or abilities to contribute?

Embrace Your Child-like Self

If you think back to the example of children being naturally creative, they also have an inner desire to contribute. Even as adults, there is an innate desire to contribute to something larger than ourselves.

As you prepare for retirement, be sure to spend some time building these things into your life. Creativity, connection, and contribution are huge contributors to experiencing retirement to the full. 

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.

How to Minimize Capital Gains Taxes in Retirement

https://youtu.be/G0HHLdjLQyQ

Plan Ahead to Pay Less Capital Gains Tax

If you have a high income in retirement, it’s possible to pay 0% capital gains tax on your investments. With a little bit of planning, you can pay less in tax and also potentially pay less in health insurance costs If you’re retiring before age 65.

The difficulty with taxes sometimes is that a lot of people think, well, everybody’s gotta pay ’em.  But what many people don’t realize is that there is a lot of pages of the tax code that are there specifically to help you pay less tax. You don’t have to be a billionaire to get preferential tax treatment.

Here are three things to pay less estate tax – income planning, investment planning, and tax reduction strategies. 

The Income Sweet Spot

What’s the income sweet spot where you can get a 0% tax on long-term capital gains on your investments? And just remember, there are people living on $10 to $20K per month or more from their accounts each year in retirement and still able to use a strategy to get 0% tax on long-term capital gains. 

To do that, you need a taxable income of $41,675 if you are single, $83,350 if you’re married (these are the 2022 numbers). For example, let’s pretend that there was a couple getting an income from three sources in retirement. They just retired in their early 60s (or any time before required minimum distributions). They are getting an income from social security and from their savings. This is not from IRAs,  but from either bank or investments they have that are non-retirement. They get dividend interest of 10K per year that just come naturally from the investment account. So for this example, the only taxable income they have is from social security and then dividends, so $40K taxable income.

Depending on different income levels, Social Security is not 100% taxed. But for this case, we’re just pretending like that’s their taxable income. In this example, they might be able to sell investments that have a long-term capital gain of about 40K or so, and still pay a 0% tax rate. If they had higher income – if they were taking out of IRAs or  had higher social security they might be paying 7k to 10K in taxes. 

In this example, by thinking ahead of time about their income plan, they can save possibly 7k to 10K per year. 

When to Take Advantage of the Income Sweet Spot

One period of time that people can use this strategy is if they are unemployed for 1-3 years. Sometimes retirees plan working in the future, maybe part-time work or some sort of income in retirement, but they might take a few years off. This could be a period of time to look at this strategy, where taxable income is much lower. 

Another way that you might be able to take advantage of this is if you’re self-employed and you have a little bit more control over your income versus someone who is a W-2 employee.

But the most common time that we see people take advantage of this is retirees between age 60 and 72. After work is done and before they’re starting social security (sometime in the period  before starting required minimum distributions). 

Do I Have to Lower My Income?

If you’re thinking, “I don’t wanna really lower my income just to pay 0% capital gains tax. It doesn’t seem worth it.”  You don’t necessarily have to lower your income. Many retirees actually pay 0% capital gains and still get a large income from their savings and investments. You have to do a little planning the years before retirement.

Typically, retirees will build up their non-retirement funds, their non IRA pre-tax monies, or  non-Roth monies, in an account before they actually retire. In doing so, they’re building up a nest egg of money that doesn’t have to take a big tax hit when withdrawn.Whereas, if you’re using your pre-tax (IRA or 401k monies), every dollar that you take out is counted towards taxable income. 

So planning ahead and building this nest egg may have the least tax impact for withdrawals if used for the first few years of withdrawals. 

Avoid Estate Tax Through Charitable Giving

If you have investments that do have large capital gains in them, think about giving a portion or all of those investments that have the biggest gain straight to the charity versus selling the asset, and then giving to charity. 

One way to do that is with a donor advised fund. With a donor advises fund, you don’t  have to give everything to the charity in one year. You can spread it out over a few years and get the tax benefit this year. 

Mistakes of Implementing this Strategy

Now, let’s get into some of those traps that some people fall into if they’re thinking about this strategy or if they implement it. 

The first one is getting surprised in December by tax inefficient funds. Those tax inefficient funds are the ones that might recognize gains within the funds themselves. You may not even realize it, or you don’t have control over what the funds are doing. 

You may have seen this before on your tax return. You may have wondered, “Why are these big gains here? I didn’t take anything out, I didn’t use it, I didn’t sell anything. Why am I recognizing and having to pay tax on these gains?”  Many funds will do this and you really have no control over it. Two of the things you can control in investing are fees and taxes.

For example, this 0% capital gains tax plan is implemented, and gains are recognized, but they’re  doing it all and they’re under the 83K taxable income. Then they see in December, another 30K of capital gains gets recognized. What would happen is that this gain increases the taxable income, it increases the social security, and ultimately how much is taxable. It’s just a big surprise. 

Tax-efficient funds are really important in retirement. Those who don’t plan this way, it causes them to pay a lot more tax than they should. 

Avoid High Taxes on Social Security Income

If you’re thinking about the 0% capital gains tac, watch out for being in a period of low income. When you’re not recognizing these gains on purpose, your social security may not be taxed or it might be taxed at a lower rate.

Some retirees don’t realize this and their social security income gets taxed at a higher level and then increases their taxable income. 

Tax Reduction Strategies Play a Big Part in Retirement

As you already know, taxes play a big part in retirement planning. At Streamline Financial, when we’re evaluating the value we can provide for clients, we look at the investment alpha or return and the the tax alpha.This can really reduce how much tax you pay and can add to returns.

Remember, there’s a lot that goes into the 0% capital gains tax strategy. Make sure to talk to a financial professional before implementing these strategies just to make sure you’re not making any mistakes and you’re thinking through all the steps. Feel free to reach out to us!

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.

What to Pay Off Before you Retire

https://youtu.be/nfo_h_i9kt0

Determining Needs vs Wants in Retirement

Before you retire, there are a few expenses you should consider paying off before you say goodbye to your wage or work income. We’ve seen that the retirees that can get rid of these expenses before retiring have more breathing room and feel more confident about their retirement plan. When you’re planning for retirement, you usually think about two types of expenses – those that are needed, and those that are wanted. 

The needs are the essentials, the absolute must haves to just live. 

The wants are the things that are nice to have, but you don’t necessarily need to survive.. 

However,  there are other types of expenses that really don’t fit into that category of needs or wants. These are the things that should be paid off before retirement. 

First, Pay Off High Interest Debt

The first expense to pay off is high interest debt. This is usually credit card debt, and sometimes it’s student loan debt. It’s fairly common for people to still have a large monthly payment towards credit card payments or student loan debt in their first year of retirement. 

This should be the number one thing you should pay off before saying goodbye to your job income or wage. If you retire with credit card debt and then get serious about paying it off in retirement, you’ll be taking a bigger amount from investments. This could dramatically alter your retirement plans. 

Recently, we helped a woman who had about $20k of credit card debt. She also had over a million dollars in her regular expenses. Adding on this $20k of a lump sum expense really had an impact on her retirement plan. When she realizied the impact it would have, it  gave her the motivation to work extra hard to get this debt payment down to zero before retiring. It gave her greater peace of mind and increased her confidence as she was going into retirement.

Plan for Travel Expenses

There are other expenses that you can either pay early or ‘earmark’ these in your retirement plan. Earmarking an expense means setting aside funds for specific purposes and either not including those funds in your retirement plan, or including them, but at least showing the specifics within the plan. 

The number one thing to earmark are big travel expenses. In the first few years of retirement, many people will plan a big trip that they’ve always wanted to take. These vacations may cost more than the typical vacation. 

Knowing that this is a bigger than normal expense (or a lump sum expense) thats coming early in retirement, you can either pay that ahead of time or at least earmark it in your plan.

Earmarking these large and irregular expenses in your retirement plan allows you to see the impact they have. Ultimately, planning ahead can give you peace of mind in making these larger purchases. 

Helping Adult Children

A few other large,l one-time expenses we’ve seen are related to your adult kids. These could be: 

  • Final college expenses 
  • Weddings 
  • Future gifts (like a home purchase or business venture)

For expenses like this, you don’t know when they’re going to happen, so you’re not able to pay them before you retire. Earmarking them is the next best step. Setting funds aside ensures thes potential expenses are ready and available if needed. 

One mistake that we’ve seen some retirees make getting close to retirement is not factoring in these one time expenses. They tend to get caught off guard when it’s time to pay for them, especially if the market is down.

Should You Pay Off Your Mortgage?

Paying off your mortgage before you retire is a big goal for many people. As you’ve heard before, behind every financial decision, there’s also an emotional one as well. And many people, they feel very strongly, or maybe adamant, on being debt free in retirement.

This works for many people. But for others, depending on their financial decisions, a mortgage could actually make sense in retirement. Some people see it as a fixed expense which doesn’t go up with inflation. It actually gets cheaper as everything else increases with inflation. As $1 can buy less and less over time, which is basically what inflation is.

This also may be really attractive depending on interest rates. Some people want to have a more flexibility in their retirement accounts by keeping some funds available in their non-retirement accounts. Rather than using that money to pay off the mortgage. 

There are two steps to determine if paying your house off makes sense to you.

  1. First, try to measuret the emotional feeling or comfort with debt. If you’re married, consider their comfort level as well. 
  2. Next,  map out both scenarios. What does it look like if you pay off debt early or don’t pay off the mortgage at all?

Lots of times it comes down to the strength of the emotional feeling around debt

Ask Your Financial Professional

When we’re thinking about paying off debt or earmarking expenses in retirement, get help from a financial professional. A CFP could be a great place to start. If you’d like to speak with an advisor at Streamline, feel free to contact us. 

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.

Unexpected Surprises in Retirement – How Retirees Use Their Time

https://youtu.be/fqM5Hi8yjXE

Who Will You Spend the Most Time with In Retirement?

Here’s a fact that doesn’t have to be a surprise to retirees – you’ll spend a lot of your time alone in retirement.  Most people know this, but not to the extent of being prepared for it.

You may get caught off guard in retirement if you’re not aware or prepared for the relationship changes. Preparing for this is a key to living an ideal retirement. 

Where You Spend Your Time Throughout Your Life

The chart below shows the results of how Americans spend their time by age. In your younger years of life, your time is spent with family. As a child that peaks at around 15 years old. 

Your time spent with your friends peaks around 18 years old. Time spent with coworkers peaks at around 30 years old. And then time spent with your kids as an adult with your own kids peaks at around 40 years old. Now here’s the two things that not everyone in their 50’s and 60’s thinks about.

Time Spent with Your Partner in Retirement

Time spent with your partner goes up and it peaks at around age 70. Logically, this makes sense, but most people don’t realize some of the challenges that come with this .Even the strongest couples go through this adjustment period. 

Typically,  both of them are done with work and they’re at home together. Or one has been home and has this routine, and then the person who retires comes in and disrupts the routine. 

Even if you may not have any worries around this, and you’re really looking forward to spending every waking hour together in retirement, it’s still worth listening to some of the other couples that have gone through this adjustment. 

Time Spent Alone in Retirement

Many people may know that your time spent alone dramatically increases when you enter retirement. It may help to process this fact and start preparing for it. 

In retirement, social relationships related to work fade away – like client relationships, coworkers or customers you interact with.  When you retire,  all other relationships (accept for your partner), decrease around 70 years old, and, and time by yourself continues to increase.

If you’re an introvert, this may sound exciting to you – but even in your seventies you still need to think about the value of having some social interactions. 

If you’re an extrovert, this may deeply worry you. You may be asking yourself – how do I prepare for this?

How to Prepare for Spending Time Alone in Retirement

Step 1: Being aware of the facts. Even watching the video above, or reading this blog is a big first step. 

Step 2: Think to yourself –  have you ever met someone who’s in retirement that seems to be doing it right? Or they  might just be loving life?  Reach out to them and see if you can meet with them to talk about how they handle this part of retirement. 

Step 3: Build in ways during retirement to grow and learn. You’ve heard that curiosity is the problem of youth. With curiosity, you learn. Learning gives you a sense of progress which will lead to growth. 

We all know that our bodies age as we get older. But there are ways to stay mentally sharp. We can still challenge ourselves and we can still make progress in life.

To make sure that you’re achieving progress mentally and physically ask yourself this question- what progress did I make today that made today better than yesterday? Then ask – what progress can I make tomorrow that can make tomorrow better than today? 

Find Purpose in Retirement

Those are a few ideas about how to use this increased time you’ll have with yourself in retirement. Start to think about it now, so that you’re prepared. This can help you find the purpose in retirement. Here’s a retirement journal that we put together. This can be a helpful tool to self reflecting and think about how you want this next stage of life to be.

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.

How Retirees Spend Their Time & Money in Retirement

https://youtu.be/aKObUsCNfBs

The Three Phases of Spending Money in Retirement

In retirement, there are three phases of how people spend their time and their money, and knowing them can help you better prepare yourself for retirement. 

Now, these three phases are different from the five stages of retirement that, because these three really span over all of your retirement years, 30 or 40 years.

Phase 1: The Go-Go Years

The first phase of retirement is called the go-go years. This is right after your retirement date and your first few years of retirement.  Usually, it’s in your 60s to your mid-70s.  You’re usually spending more,  traveling more, or maybe you’re taking up new hobbies that you always wanted to do, but didn’t have time for before. You may buy a second home or have improvements made to your current place. 

There’s a lot of activity happening in these early retirement years because you’re doing the things that you always wanted to do, but you couldn’t while you were working. So,  you’re probably spending more money at this time of your retirement than the other phases. 

Phase 2: The Slow-Go Years

The next phase is called the slow-go years – usually in your mid-70s. This is where you’ve done all the things you set out to do and accomplished the things you wanted to in the go-go years. 

Maybe you aren’t not traveling as much and you might be happier staying close to home and spending a little bit less money. 

This is the phase to really look forward to because this is where people tend to have a feeling of greater life satisfaction and contentment with life. It can be a really nice place to be. 

Phase 3: The No-Go-Years

The third phase is the no-go years –  usually in your 80s or upper 80s. This may be where health constraints start to limit the activity that you can do. In these slow-go years, the dollars are spent on more health and medical expenses than on travel or new experiences. 

So as you are building plans (or if you’re building your own retirement plan), you may want to take those phases into consideration as you’re modeling out expenses in your retirement plan. 

How to Plan for the Three Phases of Retirement

At Streamline Financial, we use a detailed planner for our clients who prefer to spend time doing other things than managing investments, taxes or their income plan. But for DIY’ers, a great planner is available to you. Click here to check it out. You can work out these different phases and changes in how expenses might look throughout your retirement years.

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.

Retirement’s Biggest Challenge: Losing Purpose

https://youtu.be/E4VY_C_RopM

The Biggest Non-Financial Challenge in Retirement

Knowing about the biggest non-financial challenge in retirement can help you prepare before you reach that phase. Understanding it can also be beneficial if you’re retired, as it catches many off guard.

Learning from Others’ Experience

In the video above, Dave references an article about a man who retired at 52 because of health issues. While he was able to resolve them, he found that there are some challenges to living in retirement. This retiree went on to poll over 15,000 other retirees, asking one simple question: what’s your biggest challenge in retirement? Among all of the answers, three stood out the most.

1. Regret

Those who enter retirement tend to miss the things they did in the past, especially if their job was their passion. They enter a phase where they regret not being able to keep doing what they are doing. As such, they have more time on their hands. With more time, it’s easy to feel like you have nothing to do, no purpose, and enter into a state where you feel lost.

2. Waning Health

The concept of age becomes much more a reality during the age of retirement. As one is not doing too much, it can become a thought that passes by the mind often. As such, you find one of the biggest concerns at this age is health. Everyone wants to live comfortably, without pain or discomfort in their body as they get older.

With the concept of mortality more apparent, many discover they still need time to add value to the world and the people they love. If they’re living with something chronic, they find that the opportunities to do things also lessen.

3. Losing Identity

Oftentimes, our identity can be conflated with the work we focused decades of our time and energy on. Stopping that work may lead to feeling they’ve lost a significant part of who they were.

The Biggest Regret: Losing Purpose

Ultimately, these three common answers are linked to a larger challenge: finding your purpose in retirement is extremely difficult.

A Japanese concept has helped many retirees from depression and restlessness. It’s communicated in a single Japanese word: ikigai. In essence, it means your reason for being.

After retirement, you don’t have to return to work, but you do need to find your ikigai. The concept itself is a combination of four things.

  1. What you love
  2. What you’re good at
  3. What the world needs
  4. What you can get paid for

Ideally, the last part isn’t an issue as much because you’ve already reached a point to live financially comfortably. People want to help the world and others and keep their passions burning. To find your ikigai, you need to find an activity that answers those four things. Since payment is no longer an issue, your job is easier as you only need to find an activity that hits the first three things.

Find Purpose in Retirement

Finding your ikigai essentially brings you back to doing something you love that helps others. It unretires you, as you’re still doing something meaningful even during your later years. You hear the stories of retirees finding their passions later in life, and everyone has the capability of doing that.

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.