SECURE ACT 2.0 Made Important Changes to Retirement and ROTH Accounts

https://youtu.be/5U67l2yXH2o

Changes to the Secure Act 2.0 were signed into law at the end of 2022, and there’s a lot of changes to existing retirement savings and withdrawal rules. However, since so many people in their 50s and 60s, and even their 70s, wish that they had more money in their Roth accounts, I’m going to focus on what those changes to this new bill mean to Roth IRAs in a few ways that you might be able to actually get more into those accounts moving forward.

In my opinion, this is really good news – especially if you’re thinking about your retirement more, but really only if you know about it, know what the rules are, and then take advantage of it.

We’re going to go over six different changes here, and the first one has to do with Roth RMDs. So this first one applies to you if you’re keeping any money in your work retirement plans, like a Roth 401(k) or a Roth 403(b).

Change #1: Roth RMDs

Right now, RMDs (required minimum distributions) are the amounts that we have to take out of these accounts. Those RMDs apply to your Roth 401(k)s and 403(b)s, which means you’re most likely forced to withdraw money from those accounts even if you don’t want to when you get into your 70s. After 2023, there will no longer be RMDs for those types of Roth accounts, meaning no Roth RMDs for those accounts while you’re living.

After you pass away, the people who inherit your Roths will have to start doing these RMDs. While you’re living, those should be removed or those should be going away. As you might know right now, if you’ve got just a regular Roth IRA, you aren’t forced to take out and you aren’t forced to do RMDs from those accounts. However, if you liked your custodian or if you liked the 401(k) or 403(b) where your money is now, and you’re going to have that in retirement, usually in the past you would then have to take money out of there.

Previously, a lot of people would roll over accounts to Roth IRAs, but now it’s just one less thing that you have to think about. And again, after the account owner dies for these accounts, the same rules apply to Roth IRAs and Roth accounts as they did before the Secure Act 2.0.

Change #2: 529 Education Account

The next change will come into play if you’re helping pay or want to help pay for your grandkids’ college, or maybe paying for your kids’ college through the use of a 529 education account; or if you already have a 529 and everyone’s already out of college. Currently, money from a 529 that’s taken out for things other than education costs can be taxed and penalized, but moving forward, under certain conditions, this Secure Act 2.0 adds a new way to move money from a 529 to a Roth IRA without paying those taxes or penalties.

That means that beneficiaries would be able to move up to $35,000 from a 529 into a Roth IRA in their name. Now, the rollovers would be limited to the Roth IRA’s annual contribution limit so each year you’d have to do rollovers. Then the 529 would have to be opened for at least 15 years.

Let’s say that you’re contributing to your grandkids’ future college. You’ve got a five-year-old grandchild right now, and they turn out to be a genius just like you thought and get a full ride to college. That money that you put into the 529 isn’t going to be used for college expenses.

This rule then could apply and you’ve got that $35,000 rollover potential to a Roth IRA. The thing that we don’t want to have happen is contributing to a 529, and then nobody using it for college costs, and then taking it out and having to pay the tax or penalty. This is a nice little added bonus for the Secure Act 2.0.

A few rules around that one – earnings and contributions would be treated like any other Roth account or rollover. However, the income limitations to be able to contribute to a Roth IRA is removed for the 529 to Roth rollover, but the annual contribution limit remains the same. Talk to a financial professional or CPA if you’re thinking about how this could work for you.

Change #3: Self Employed

Now, this next rule or change is a good one for someone who’s self-employed or works for a small company that doesn’t offer a 401(k), but offers either a SIMPLE IRA or a SEP IRA. This could also be good for someone who has a regular job and a side hustle that’s earning some income, or maybe is thinking about having some sort of side hustle in retirement.

Right now, you cannot put money into a Roth with a SIMPLE or a SEP IRA. Those are two types of accounts you could open up if you’re self-employed. That’s going to change though under this bill, which would make it possible for a SIMPLE plan or SEPs to accept Roth contributions, which is nice because when we’re thinking about small businesses or earning extra income in retirement, typically it’s not big money we’re talking about.

Hence, not a lot of it is going to be taxed if that’s the case, and this will just allow you to get more money into a Roth as a result, which is a nice bonus. 

Change #4: Contributions to 401(k)

This change is related to you if you’re over the age of 50 because it has to do with catch-up contributions to your 401(k)s or 403(b). And this is a negative change in my opinion.

Say you have $145,000 in your Roth 401(k) already and you make a catch-up contribution of $7,500. The new rule says that it has to be Roth. The reason why I think this is a negative is because it gives us a little bit less control. For example, if you’re 55 and you have over 145K in your Roth 401(k) right now and you make a catch-up contribution, you might also have a higher income right now than you will in retirement. Therefore it could make sense to do a pre-tax catch-up contribution instead of a Roth. It’s not a huge deal, but it’s just a little optimization.

Change #5: Employer Matching

The next one is a change to employer matching. Employers will be able to match contributions now to 401(k)s and 403(b)s and government 457 plans on a Roth basis, whereas before it was always pre-tax basis. This change doesn’t force plans to offer this, but it does make it possible for them to do so, whereas before that was not the case. If you’re employed and they offer this, it could make sense if you want to get more into Roth.

Change #6: Roth IRA

This next one is one where you might think, “How does this impact my Roth IRA or getting more into it?” But it’s around this Roth conversion strategy.

Last year, the RMD (required minimum distribution) age that you had to start taking out of your pre-tax monies was 72. Now with the Secure Act 2.0, the minimum age for distributions to start would go up to 73. That’s for people who reach that age in the year 2023 and beyond. What does this have to do with Roth money?

You might have seen another video that I did on the Roth conversion sweet spot, which talks about the best ages to convert from your IRA to Roth with the main goal of paying the least amount of tax over your lifetime. That’s what we’re trying to do for many of our clients. By pushing back the RMD age to 73, that gives you a little more control over when and how much you decide to convert; spreading out conversions could really mean thousands of dollars in tax savings to you in some cases.
As you’re thinking about Roth conversions, check out the DIY retirement planner. Part of the planner is really focused on Roth conversions and setting up a potential plan for you. As always, be sure to talk to your financial team before making any big decisions like this because there’s so many different moving parts and components to do something that fits you just right. If you’d like to reach out to us, you can do so by clicking here. We sometimes get inundated with a lot of requests and calls, but we can get back to you either way just to share what’s happening over here.

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 Retirement Income Can Increase Healthcare Costs – Retirement Planning Strategy

IRMAA

Have you ever heard of healthcare costs spiking for retirees or pre-retirees because of a thing called IRMAA? Whether you have or you have not, it’s worth knowing about so that you can make the best financial decisions for your situation. We’ve seen it happen quite a bit where people are surprised by the cost of their Medicare Part B premiums because of a financial decision that they’ve made years ago.

In this video I want to give you a look into this idea of IRMAA so that it doesn’t happen to you. If you’re older than 60, this is worth knowing right now, and if you’re younger than 60, watch this video and just store it in the back of your brain for a few years from now.

Health Insurance Premiums

First, let’s do a quick intro of health insurance premiums. If you’re under age 65, then the cost of health insurance is influenced by your age and where you live, deductible, and your income. Those are a few things that really impact health insurance costs. Then when you get to age 65, you start paying Medicare Part B (most likely), and the only factor that impacts that cost is income. Depending on your withdrawal strategy you use, this can really impact how much you pay for your health insurance premiums.

First off, what is IRMAA? It stands for Income-Related Monthly Adjustment Amount, and that’s the amount that you may pay in addition to your Part B or Part D premium if your income is above a certain level. It’s determined based on your MAGI, (Modified Adjusted Gross Income), which is on your tax return. So that MAGI number, the one that’s reported on your taxes from two years prior, is the number that is used when factoring in this IRMAA calculation.

If you’re 63 or older, this will most likely apply to you now. For our clients, we start thinking about this at age 60, especially if there’s a future transaction that’s going to cause a change in your income or you might be thinking about Roth conversions, or switching locations in the future. 

If income is less than 194K per year, then no need to worry about IRMAA. What happens is a lot of people will have taxable income or MAGI less than that each year, but sometimes there’s something that could increase their income in one year and we’re going to go over those to just make sure that you’re aware of it. Then I want to show a few what-if scenarios to give you some more examples of what this could mean for you.

Social Security

Now what’s the first thing that can really impact MAGI? Social Security. What you take from Social Security will increase MAGI, so for many, the Social Security that you get is going to be 85% of what you receive is taxable and is what gets added. Something that could increase MAGI is a home sale. Let’s pretend that you’re in retirement, and you’re receiving income from Social Security, and maybe some investments from your nest egg, and you’re ready to move to your retirement destination. If you’ve been in your home for a while, there’s a chance that you may have bought it at a much lesser value and now it’s a lot higher, so there’s a potential gain from what you bought it at to what the value is now. If that gain is greater than 500K, then you may have to pay tax on whatever the excess is. Let’s pretend the gain was $600,000. You may have to pay capital gains tax on 100K, which means you’re increasing your MAGI and could increase Medicare Part B premium. Now this has happened for a lot of clients who are in real estate and now in retirement, and they may start to sell some of the different assets because they want to simplify things and they just have to be prepared that the costs are going to go up when it comes to Medicare premiums.

When you think about it, is it a smart move to tell the buyer of your home, “Hey, could you buy the house for 100,000 less so that I can avoid an increase in Medicare costs?” Probably never. The cost increase might be a very small percent to what you’re actually getting from the gain. Just remember most of the time the increase in our income outweighs the cost of increasing Medicare costs, but there is an instance where you might not get immediate income or you might not get immediate benefit and still have a higher Medicare cost. If you want to apply this to your own finances or your own retirement plan, use the DIY retirement planner because it’s our favorite consumer-facing retirement planner that can factor in IRMAA as well.

Roth Conversions

Onto the one thing that could impact IRMAA and Medicare costs without any immediate benefit to you, and that is Roth conversions. Roth conversions can increase MAGI and Medicare Part B premiums two years following the year of the conversion. If you’re 63 and older, any conversion you do could start impacting that Medicare cost, so there are many things to factor in when you’re doing conversions. The main goal for Roth conversions is just to pay the least amount of tax possible over your lifetime, but I will say that a properly designed Roth IRA conversion strategy will include tax strategy and the impact on Medicare costs as well.

The big takeaway here when planning out healthcare premiums is don’t let IRMAA be the main driver of your decisions. Yes, it’s good to be aware of the impact of your financial decision so you’re not surprised, but don’t make a decision not to do something because of IRMAA. It’s a factor in the decision, not the deciding factor. And as always, talk to your financial team before doing anything. Look at all the options and pick the one that’s best for you.
If you don’t have a CFP who’s been doing this for a long time, reach out to us. If we’ve got space then we’d be happy to have a call. We don’t always, but I’ll get back to you either way.

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.

3 Retirement Purchases People Regret

https://youtu.be/JOsfs31Kzh0

3 Purchases Retirees Often Regret

Buying these things in retirement could lead to big regrets. Some couples and people we’ve helped at Streamline who have retired and then made these purchases, and then they’ve shared some of the negatives with us. This isn’t a blanket statement about these things you never should buy. You could very well make these purchases and it ends up being one of the best decisions that you’ve ever made.

The Expensive Car

The most common expensive thing that sometimes people buy in retirement is an expensive car. It may be mainly for men, but there are women that have done the same thing in retirement. Here’s the good news with those people that could all afford it: it didn’t impact their retirement plan. However, when they looked at the cost of the car and then the value of the actual result, there was a bit of a difference there.

What ends up happening is about three months in, they’d say something like, “It’s nice. The car’s nice, but it’s…” The thrill wears off after a few weeks. But again, we’ve also had car enthusiasts who have a completely different feeling when they get into their car and when they drive it even a year or two years down the road.

A Bigger House

The next one that some people regretted was a big retirement house. Once they retire or move to a new state, they might go for a much bigger upgrade. We see it a lot very soon after retirement, sometimes they end up selling their place and getting something more suited to their needs. We’ve seen some of the happiest retirees rent the home or apartment first to make sure the new location is the absolute best place for them, and that gives them a little bit more flexibility. Sometimes renting and staying a little flexible could be a good move. 

Large Gifts to Family

This one may shock you, and that is big gifts to your family. We are big believers in generosity and contributing to others’ lives in retirement, but the regret that we’ve seen or heard from 80-year-olds or older is they started to give to kids on a regular basis. In the beginning it was quite special, but after a little while it became an expectation. The kids started to expect the financial gift.

Let’s say mom and dad gave a $10,000 gift on Christmas to their kids, what a surprise! The next year: oh, that’s special! They gave another $10,000 gift. Then the next year they might be thinking, “I hope we get another $10,000 gift from mom and dad this year.” The next year it might be, “Mom and dad are going to give that $10,000 gift so let’s go ahead and make that purchase.” Or it starts to get worked into their regular monthly spending needs.

Legacy Planning

The main thing to think about here is what’s the expectation of your kids? If you have the funds to provide that 10K gift and it doesn’t impact you at all, by all means that’s a great thing to do. However, if that’s not the case you’ll want to make that expectation known. The same thing happens when you pass away. The most important thing isn’t the money that you’re going to pass along, but the fact that you have a conversation with the kids so they know what to expect. You don’t want them to have too much sudden wealth impacting them in a negative way. You also don’t want them to squabble over wealth because it wasn’t clearly laid out.

What Some Financial Advisors Aren’t Telling You

https://youtu.be/PgEBpwfmZfE

What Advisors Don’t Tell You

I recently spoke with someone about a year from retirement who had a big problem that wasn’t being addressed, so I wanted to share it with you in case you find yourself in the same situation as them.

During this free retirement planning session, this couple said, “We’ve had an advisor for years and they do a great job, we really like them, but we’re a year or two from retirement. We started doing some research on retirement planning, which led us to your YouTube videos. After watching a few, we wondered: Why isn’t our guy bringing this stuff up? I shouldn’t be discovering this on my own.” 

How can you really know if your advisor, or someone who’s going to do a quick checkup for you, is bringing up all the important things that can improve your retirement? I wanted to share two things to use as a filter when you’re talking to an advisor.

Do I Need a Specialist or a Generalist 

Number one is getting clear on what you need. If you’re close to retirement you might realize it’s not just about maximizing returns anymore or building up the nest egg to get as big as you can but rather how to create tax-efficient withdrawal plans, and then how to take the least amount of risk possible when it comes to investments with the highest chance of success. Make sure you’re talking to a specialist versus a generalist.

Specialists typically work with one type of client instead of anyone and everyone. The problem for you is that specialists may cost more. The way I think about it is if you absolutely needed a very important surgery, and you found a general surgeon five minutes from your home who’s done the surgery you need one other time, and then you found a specialist surgeon who only does this one type of surgery and has done over 2,000 of them, but he’s located on the other side of the country.

The chance of success in the surgery is so much higher for the person who’s done it over and over again, so the value is so much higher too. That’s why knowing what you need and then finding that specialist can be really important. The second important thing to find out is how many clients they help.

How Many Clients?

We’ve seen a lot of people come over from some of the big firms that you see on TV because they realized after six months or a year that their advisor wasn’t being proactive. Don’t get me wrong, these massive firms are really needed for the majority of people in this country because most people don’t have or need custom planning to really optimize their retirement. However, specialty firms are necessary for those people who aren’t too worried about running out of money but know that there are things that they can do to optimize their plan and reduce the amount of tax that they pay, etc.

When you’re thinking about big firms, it’s hard to be proactive when you have more than 100 clients. It’s hard to think about and plan for them all. We just know that through how many relationships we can have in our life. Everyone wants something different, but going deeper with fewer people allows your advisor to be thinking about you when they’re looking at or reading about wealth transfer strategies – it’s more likely that you’ll pop into their head if they have fewer people to think about because it’s so custom.

For us at least, it’s more about relationships than revenue because when you work with a select few people, it allows us to go to the funeral of a client who passed away or to go visit a client who has recently been admitted to a long-term care facility. 

TL;DR

To recap, if you’re doing research and getting knowledge about retirement and looking at your retirement more closely, and if you’re going to think about talking to an advisor, find out if they specialize in retirement planning and then make sure they’ve been doing it for a long time, 10 years at least. It doesn’t have to be, but it’s always nicer that they’ve had experience. Then, find out how many clients they have helped do what you are looking to do.

Investment Advisory Services offered through LaSalle St. Investment Advisors, LLC, a SEC Registered Investment Advisor (LSIA). Securities offered through LaSalle St. Securities, LLC (LSS), a Broker/Dealer and Member FINRA/SIPC. LSS is a Subsidiary of LSIA.  Streamline Financial Services is not affiliated with LSS or affiliates.  Investing involves risk, including loss of principal. This video content is not a recommendation to buy or sell specific securities or investment company products.  Any third party software future performance and/or projection services are neither provided nor endorsed by LaSalle St. Securities, LLC LSS affiliates, or Streamline Financial Services.

The information by Advisor (“we”, “us”, or “our”) is for general information purposes only.  None of this information should be construed as tax, legal, financial, insurance, financial advisor, 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.   It is solely at your own risk. 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. All information is provided in good faith. However, we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of any information on the Site. Under no circumstance shall we have any liability to you for any loss or damage of any kind as a result of the use of the site and reliance on the information provided.

This site may contain testimonials by clients who are users of our products and/or services. These are non-paid either directly or indirectly testimonies that reflect their real-life experiences and opinions. These experiences are personal to those particular individuals and may not necessarily be representative of all clients who use our products and/or services. Your individual results may vary.

This site may contain endorsements by non-clients who are not users of our products and/or services. These endorsements reflect their own opinions or views and may not be representative of our own. We are not affiliated with users who provide endorsements and they are not paid or otherwise compensated directly or indirectly for them.

2023 Social Security Changes

2023 Social Security Changes You Should Know

There are some changes coming to social security in 2023 that will affect both those approaching retirement and those already in retirement and receiving social security. See below our quick breakdown of those changes, what you should know, and what you should do in light of this information.  

Cost-of-Living Adjustment

If you’re already receiving social security, you already know about the Cost of Living Adjustment (COLA). This adjustment will increase the social security benefit you’re currently receiving by 8.7%. For example, if you were receiving the average social security benefit of $1,850 per month, this adjustment will make your new social security payment close to $2,000.  

Taxable Income Adjustment

There’s also an adjustment for those who are not retired yet and are still earning an income and paying into social security. The amount of your income that’s subject to social security tax was previously $147,000 per year. Any income above $147,000 than was not subject to social security tax. In 2023 that number is going to change to $160,200 per year. So, going forward, up to $160,200 of your annual income will be subject to social security tax at a rate of 7.65%. There is not anything you can do strategically to avoid this change, but it is something to be aware of. That said, if you’re in your 60s and starting to develop a game plan for social security, you should pay attention to this next change.

Beware of Starting Social Security Early

If you’re under your “full retirement age” by social security standards and you are still earning some level of income from something like consulting or a part-time role, then you need to think twice before choosing to start social security early. Here’s why: if you were making more than $19,560 per year in 2022, you might actually be subjecting to a withholding that is the equivalent of $1 for every $2 you make, which often makes taking social security early a poor decision mathematically. In 2023, that earning limit will actually increase to $21,240. 

This consideration can get a little complex but it’s very important to understand, so we recorded a separate video explaining it in more detail and even walking through a real-life example from one of our clients. You can review that video here to see if this consideration would apply to you.  

Meeting With an Advisor Consultant

It’s important to note that like many financial-related issues, there are quite a few factors that impact your financial plan, whether it’s Social Security planning, maintaining your lifestyle, or income in retirement. Like many of our clients, you might not be too worried about running out of money in retirement, but there might still be tax planning opportunities to optimize your financial situation even further. related to tax planning.

If you’re not sure how to model out different scenarios related to social security decisions, retirement income planning, or tax planning, see if you can reach out to a Certified Financial Planner™. Our recommendation would be to try to find someone who has been working specifically with retirees or who has at least 10+ years of experience. Many of them have a free consulting session that you could take advantage of to get a better idea of your situation and your options. Obviously, our team at Streamline would also love to serve you. We don’t always have the capacity to serve everyone that contacts our team, but we’d be happy to point you in the right direction no matter what. 

Investment Advisory Services offered through LaSalle St. Investment Advisors, LLC, a SEC Registered Investment Advisor (LSIA). Securities offered through LaSalle St. Securities, LLC (LSS), a Broker/Dealer and Member FINRA/SIPC. LSS is a Subsidiary of LSIA.  Streamline Financial Services is not affiliated with LSS or affiliates.  Investing involves risk, including loss of principal. This video content is not a recommendation to buy or sell specific securities or investment company products.  Any third party software future performance and/or projection services are neither provided nor endorsed by LaSalle St. Securities, LLC LSS affiliates, or Streamline Financial Services.

The information by Advisor (“we”, “us”, or “our”) is for general information purposes only.  None of this information should be construed as tax, legal, financial, insurance, financial advisor, 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.   It is solely at your own risk. 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. All information is provided in good faith. However, we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of any information on the Site. Under no circumstance shall we have any liability to you for any loss or damage of any kind as a result of the use of the site and reliance on the information provided.

This site may contain testimonials by clients who are users of our products and/or services. These are non-paid either directly or indirectly testimonies that reflect their real-life experiences and opinions. These experiences are personal to those particular individuals and may not necessarily be representative of all clients who use our products and/or services. Your individual results may vary.

This site may contain endorsements by non-clients who are not users of our products and/or services. These endorsements reflect their own opinions or views and may not be representative of our own. We are not affiliated with users who provide endorsements and they are not paid or otherwise compensated directly or indirectly for them.

Best Advice for Retirees

https://youtu.be/8PVfEx2SCJg

The Best Retirement Advice: Five Truths Every Retiree Faces

I want to share one of the most valuable pieces of retirement advice that I’ve ever heard. If you’re thinking about your retirement and wondering if you’re doing the right thing, or think that you should be doing something different, or if you’re just worried about all the things going on right now – whether it’s the economy, the markets, or the value of your accounts – I’m going to share the retirement truths that every retiree goes through.

The negative of these retirement truths that we’re going to look at is that many of them lead to increased uncertainty or worry about your retirement. One of our goals is really the opposite of uncertainty or worry in retirement. It really should be more about confidence, right? The next years, really all the way up until you pass away, are the magic years. These could be the best years of your life, and I know that because there’s an actual study proving this. People were asked to score their life satisfaction from 0 to 10, where 10 is the best possible life and then 0 is the worst possible life. I thought it was encouraging to see that life satisfaction tends to increase as we get older.

Truth #1 – Should I Be Doing Something Different?

In retirement, it will be common to think: should I be doing something different? It’s normal to feel this way in retirement especially when you see the news, or listening to friends talk about their finances. There’s this feeling of doubt about our current plan, which causes some people to make more emotional decisions instead of making smart financial decisions. A good way to avoid this feeling is by having an understanding of your plan, which leads to more confidence with what you’re doing. Specifically, having a plan for both the good and bad market times so that you know you’re prepared for either one.

Truth #2 – Expect Bear Markets

Now onto the second thing that comes up in retirement – we need to expect bear markets. You’ve most likely lived through a lot of them already, but in retirement they feel a little bit different. Creating a plan with bear markets in mind and really big corrections built into the plan is a smart thing to do. That way you don’t have to worry when they eventually come. Now, if you’re not sure how to model these various what-if scenarios or bad market scenarios for your plan, then you may want to talk to a CFP or check out my favorite retirement income planner here.

Truth #3 – Should I Keep Working?

The next thing to bring up is for pre-retirees who are close to stopping their wage, especially if that’s during bad markets. We had a client who was five months into her retirement call us and say, “It seems like so much bad news is out there, and with what’s going on with the markets I’m wondering if it would’ve been better if I had just kept working.” We reviewed her plan, and because we built this expectation of bad markets into her plan, everything looked great. Really, the only reason to keep working would be if she really enjoyed this sort of work that she was doing and it brought her some purpose, but she didn’t. It was great confirmation that she was still on the right track. If this sounds like you, take a look at this video with a few real examples of what working an extra year might look like in a financial plan.

Truth #4 – Spoiler Alert: No One Knows

The next thing to know is that no one really knows what’s going to happen next. It seems like everybody has a prediction on TV, YouTube, or at the dinner table with family, but no one knows what is definitely going to happen. It’s important to prepare your investment plan for the four economic seasons that we may go through in the future since we don’t know which one we’re going to go through next.

The four economic seasons are higher than expected economic growth, lower than expected economic growth, higher than expected inflation, and lower than expected inflation.

Truth #5 – Comparison Is a Thief

In retirement we may have a tendency to compare ourselves to others. The grass is always greener on the other side of the fence. If we mention a dollar amount in a video as an example, we don’t want that to make you feel better or feel worse about your current situation. Because we help high net worth families at Streamline Financial, we sometimes mention big numbers, but we don’t want it to be about the numbers. We really want to communicate the principles and the strategies that can be applied to anybody’s finances.

There are always going to be people with more than us, and then there are always going to be people with less. Comparing ourselves to someone else can hurt our retirement plans because that leads back to that first point that we talked about – feeling like we should be doing something different. One of the most helpful pieces of advice that I’ve heard that we can apply to retirement planning is really the difference between fear and anxiety. When we think about fear and anxiety, we might think of them as being the same thing, but actually, they’re completely different things. Fear is a caution over a real and present danger, while anxiety is a worry over an imagined future danger.

We can’t control the markets or inflation, or what’s happening in the news or the world, or tax laws, or the elections, but a lot of these things actually do relate to things that we can control. You can control when to pay taxes when it’s related to investing. With the news, all we can control is how we consume it.
Either find a great certified financial planner who can show you the what-if scenarios, or check out the DIY planner. Anxiety can be the thief of dreams. It takes you away from enjoying the present moment, and it stops you from even taking the right action to make things better in the future because you only focus on the negative as you’re moving through life.

Investment Advisory Services offered through LaSalle St. Investment Advisors, LLC, a SEC Registered Investment Advisor (LSIA). Securities offered through LaSalle St. Securities, LLC (LSS), a Broker/Dealer and Member FINRA/SIPC. LSS is a Subsidiary of LSIA.  Streamline Financial Services is not affiliated with LSS or affiliates.  Investing involves risk, including loss of principal. This video content is not a recommendation to buy or sell specific securities or investment company products.  Any third party software future performance and/or projection services are neither provided nor endorsed by LaSalle St. Securities, LLC LSS affiliates, or Streamline Financial Services.

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