The concept of “unretirement” is gaining momentum as an increasing number of retirees are choosing to reenter the workforce. In this blog post, we’ll explore the reasons behind this trend, delve into both financial and nonfinancial factors contributing to unretirement, and highlight a common mistake retirees make when planning their retirement. We’ll also provide practical tips on how retirees can achieve fulfillment and purpose during their post-career years.
The Financial Motivation for Unretirement
Recent statistics reveal a surprising trend in retirement. According to T. Rowe Price, approximately 20% of retirees are currently working full-time or part-time jobs. Even more intriguing, a study from Paychex found that one in six retired individuals is contemplating returning to work, and the primary motivator for this group is financial need. Nearly 50% of those considering reemployment cited the necessity for additional income as their primary driver.
The Nonfinancial Aspects of Unretirement
While financial concerns play a significant role in the decision to unretire, there is another critical dimension to this phenomenon: the nonfinancial aspects. Many financially stable retirees, who do not necessarily need extra income, are still opting to return to work. Their motivations revolve around the emotional and social benefits of work.
A remarkable 45% of respondents in a survey mentioned that they return to work to fulfill social and emotional needs that retirement doesn’t satisfy. Loneliness, a lack of purpose, and a diminished sense of community are common challenges retirees face. These issues align with the three Cs of retirement fulfillment: connection, contribution, and creativity.
Fulfilling the Three Cs in Retirement
To combat the challenges of unretirement, retirees can focus on the three Cs:
Contribution: Retirees can donate their time and skills to causes or charities they are passionate about. Using their unique abilities to assist organizations can be incredibly fulfilling. Identifying your strengths is essential, and tools like StrengthsFinder can help pinpoint your skills.
Connection: Maintaining strong social relationships after retirement is crucial. Retirees should make a concerted effort to stay connected with friends and colleagues. Additionally, exploring hobbies and interests can lead to new social connections.
Creativity: Engaging in creative pursuits can provide a sense of purpose. Whether it’s pursuing a long-lost hobby, starting a new artistic endeavor, or exploring a passion, creativity can bring joy and fulfillment to retirement.
The Big Retirement Mistake: Starting Social Security Early
One common mistake retirees make is rushing to start Social Security benefits immediately upon retirement. This decision can backfire when retirees experience unretirement. If retirees exceed an earnings limit (around $21,000 per year), they may have to repay Social Security benefits at a rate of $1 for every $2 they earn.
To avoid this pitfall, retirees should consider waiting a few months before starting Social Security. During this time, they can rely on other savings and investments to cover their expenses while they gauge their interest in returning to work. This approach allows retirees to test the waters of retirement and ensures they don’t inadvertently incur financial penalties.
TL;DR
The rise of unretirement is a multifaceted phenomenon driven by both financial necessity and nonfinancial factors. As retirees consider returning to work, it’s crucial to balance their financial needs with the emotional and social aspects of retirement. By focusing on the three Cs—connection, contribution, and creativity—retirees can find fulfillment and purpose in their post-career years. Additionally, avoiding the common mistake of starting Social Security too early can help retirees navigate the transition to unretirement more smoothly, ensuring their financial security and overall well-being.
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 planning can seem daunting, but breaking it down into manageable steps can make all the difference. In this blog post, we’ll explore the seven crucial accounts you need to organize for your retirement. We’ll also delve into common mistakes people make with these accounts and some strategies to help you maximize their benefits.
1. Checking Account: Your Financial Hub
Your checking account serves as your financial hub in retirement. It’s where your various income streams converge to cover your monthly expenses. The key strategy here is to establish a comfortable floor balance to ensure you can manage your day-to-day costs without stress.
High-yield savings accounts offer substantially higher interest rates than traditional savings accounts, yet many retirees keep excess cash in low-yield accounts. Consider moving your funds to an online-only bank with FDIC insurance for better returns and security. Be mindful of withdrawal limits and transfer times.
3. Health Savings Account (HSA): Triple Tax Advantages
The HSA offers triple tax benefits: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. It can also be invested, making it a valuable tool to cover healthcare costs in retirement. Be cautious about inheriting an HSA, as it becomes taxable to the beneficiary.
4. Work Retirement Accounts: 401(k), 403(b), and More
Your employer-sponsored retirement accounts are likely a significant part of your retirement savings. Understand the pitfalls associated with holding a large portion of your net worth in these accounts. Evaluate your options carefully as you approach retirement.
5. Individual Retirement Account (IRA): A Personal Savings Option
IRAs offer similar advantages to 401(k)s but are not employer-sponsored. Consider whether contributing to a Roth IRA or a traditional IRA makes more sense based on your current and expected future tax rates.
6. Roth IRA: Tax-Free Growth and Withdrawals
Roth IRAs provide tax-free growth and withdrawals, making them an attractive retirement savings option. Learn about income limits and consider a backdoor Roth IRA if you exceed these limits.
7. Brokerage Account: Flexibility for Tax-Efficient Withdrawals
Brokerage accounts offer flexibility for designing a tax-efficient withdrawal plan. Investments held for more than one year enjoy favorable long-term capital gains tax rates. However, dividends, interest, and capital gains are realized annually, so choose tax-efficient investments.
Strategies for Retirement Success
Retirement success hinges on more than just investments; it’s about nailing the investment plan, income plan, and tax plan. Here are some strategies to consider:
Checking Account Strategy: Maintain a Comfortable Floor
Consider raising your checking account’s floor to cover one to two months of expenses in retirement. This provides a financial buffer for unexpected expenses, reducing the need to move money between accounts constantly.
High-Yield Account Strategy: Secure Cash for Market Downturns
In retirement, it’s vital to have cash or cash-like funds available for several months or even years of income. This safeguards you against selling investments during market downturns. High-yield accounts can serve as a safe harbor for these funds.
HSA Strategy: Bridge the Gap to Medicare
HSAs can help bridge the gap to Medicare by covering certain healthcare expenses. Explore options like paying for healthcare coverage under COBRA or covering Medicare premiums and out-of-pocket costs.
401(k), IRA, and Roth Strategies: Optimize Contributions and Conversions
Determine whether to continue contributing to pre-tax 401(k)s or switch to Roth contributions. Evaluate the ideal time for Roth conversions to manage future required minimum distributions (RMDs) efficiently.
Use your brokerage account to supplement your income while minimizing tax implications. Avoid investments that generate significant taxable gains, and consider tax loss harvesting to lower your tax liability.
Asset Location: Optimize Tax Efficiency
Carefully place your investments in the most tax-efficient accounts. Consider the tax implications of each asset and choose account types accordingly.
Retirement planning requires careful consideration of these seven accounts and the strategic use of each. Remember that individual circumstances vary, so consult with a certified financial planner specializing in retirement to tailor these strategies to your specific needs!
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 planning can be a complex journey, filled with uncertainties and important financial decisions. As you contemplate your future and strive for a successful retirement, it’s crucial to be armed with the right information. In this blog, we’ll explore five key aspects of retirement planning that can significantly impact your golden years. From healthcare costs to retirement savings, social security benefits, and how you spend your time, each section will shed light on essential considerations for a fulfilling retirement.
1. Average Healthcare Costs in Retirement
As you envision your retirement, healthcare costs should be a prominent factor in your planning. While various expenses may decrease as you age, healthcare tends to increase. The Bureau of Labor Statistics reports that individuals aged 65 and older face an average healthcare cost of approximately $7,000 per year. These costs are distributed as follows:
Health Insurance and Medicare Supplements: Just under $5,000
Medical Services (Eye Care, Dental Care, etc.): Over $1,000
Prescription Drugs: $726
Non-Prescription Drugs (Vitamins, etc.): Around $250
With healthcare expenses representing a significant portion of your retirement budget, it’s essential to account for them when crafting your financial plan.
2. Average Retirement Savings by Age
Retirement savings play a crucial role in ensuring financial security during your post-work years. While the financial industry often emphasizes the “nest egg” or account balance, it’s essential to remember that a successful retirement hinges on managing expenses and cash flow effectively.
For individuals aged 65 and older, the average household balance in retirement accounts is around $407,000. Notably, only about 11% have balances exceeding $1 million, while approximately 5.7% have balances between $700,000 and $1 million. Interestingly, those aged 55 to 64 tend to have slightly higher savings, reflecting the peak retirement age.
3. Understanding Social Security Benefits
Social security benefits are a significant income source for many retirees. According to the Social Security Administration, nearly 90% of Americans aged 65 and older receive social security benefits. As of 2022, the average monthly benefit is $1,825. However, the range varies based on factors such as when you start claiming benefits.
It’s worth exploring strategies to optimize your social security benefits, as clever planning can lead to thousands of dollars in additional income over your retirement years.
4. How Retirees Spend Their Time
Transitioning into retirement involves more than financial adjustments—it’s a chance to reshape how you spend your time. Research indicates that retirees are spending an average of four and a half hours per day watching TV, which is notably higher than a decade ago. However, socializing, volunteering, and engaging in religious activities have seen declines.
To truly thrive in retirement, focus on activities that foster creativity, connection, and contribution. Building a balanced and fulfilling routine can significantly enhance your retirement experience.
5. Average Net Worth by Age: Setting Realistic Expectations
Net worth is a critical gauge of your overall financial health. However, it’s crucial to interpret these figures accurately. Averages can be skewed by a few individuals with substantial wealth. For a more representative view, consider the median net worth.
For those aged 65 to 74, the average net worth is around $1.2 million, but the median is $266,400. As individuals move into their 75s and beyond, average net worth decreases to $977,000, while the median is around $254,000. Recognize that these figures are just averages, and there are various paths to a fulfilling retirement, regardless of your net worth.
TL;DR: The Intersection of Finances and Fulfillment
Retirement planning isn’t solely about financial numbers; it’s about crafting a meaningful and satisfying life after work. While healthcare costs, savings, social security benefits, and net worth all contribute to your financial security, don’t underestimate the importance of how you spend your time and the mindset you cultivate.
Approach retirement as an opportunity to live with purpose, engage in activities that bring joy, and create connections with others. By striking a balance between financial responsibility and emotional fulfillment, you can pave the way for a rewarding retirement journey. Remember, it’s your unique path that matters most.
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.
In this blog, we’ll explore the often-overlooked strategies for saving thousands of dollars in retirement. We’ll share an eye-opening example of a couple who benefited greatly from these techniques, proving that proper withdrawal planning is just as critical as saving and investing.
Stage One: Proper Saving and Investing
The traditional approach to retirement planning focuses on saving enough, choosing the right investment accounts, and building a strong investment portfolio. These factors are undoubtedly essential for a financially secure retirement. However, as we move into stage two of retirement, a new game begins: strategic withdrawals from various accounts become key to financial security.
The Game-Changing Stage: Strategic Withdrawals
To achieve financial security in retirement, it’s crucial to understand how to make the most of your funds during this phase. There are three critical strategies to accomplish this:
1. Money Pools
Most people are familiar with the primary three money pools: taxable brokerage accounts, traditional IRAs, and Roth IRAs. However, there’s a fantastic fourth option that many overlook: the reserve fund. This fund comprises low-risk, tax-efficient assets like savings accounts, money market accounts, and laddered CDs. Using the reserve fund effectively can lead to opportunistic withdrawals and significant tax savings.
2. Required Minimum Distributions (RMD)
RMD refers to the minimum amount you must withdraw from your traditional IRA or employer-sponsored retirement plan after reaching a certain age (usually 72). The goal is to reduce the forced withdrawals and potentially lower your tax liability.
3. 0% Tax Rate for Capital Gains
By paying close attention to your taxable income, you may qualify for a 0% tax rate on capital gains. In 2023, for singles, taxable income up to $44,625 qualifies for 0% tax, and for married couples, it’s up to $89,250. Utilizing this tax-efficient strategy can lead to significant tax savings.
The Key Mistake: Traditional Withdrawal Order
Conventional retirement planning typically advocates withdrawing from taxable income accounts first, followed by tax-deferred accounts, and then Roth accounts. The idea is to maximize the growth of your nest egg. However, this may not always be the most tax-efficient approach in the long run.
A Better Strategy: Diversified Withdrawals
Instead of following the traditional withdrawal order, consider starting with taxable brokerage accounts and the reserve fund. Doing so allows you to recognize gains at a potential 0% tax rate. By thoughtfully diversifying withdrawals, you can lower your tax burden significantly and extend the life of your retirement savings!
An Illustrative Example
Let’s consider a couple who retired in their late 60’s with social security, a pension, and three money pools: taxable brokerage accounts, traditional IRAs, and the reserve fund. They faced the problem of being forced to withdraw more from their IRAs than they needed to cover their expenses. This situation led them to unnecessary tax liabilities.
The Solution: Optimized Withdrawals
To optimize their withdrawals, the couple decided to start using the taxable brokerage accounts and the reserve fund to supplement their income. By doing so, they could take advantage of the 0% tax rate on capital gains in their brokerage accounts. They also considered converting some of their traditional IRAs to Roth IRAs to reduce future RMDs.
Charitable Giving Strategy
Additionally, the couple decided to implement a charitable giving strategy. Rather than donating cash, they used their RMDs to go directly to the charity of their choice. This approach allowed them to fulfill their charitable goals while avoiding tax on the RMDs.
Conclusion
The key to saving thousands of dollars in retirement lies in strategic withdrawals and optimized tax planning. By considering money pools, RMDs, and the 0% tax rate for capital gains, you can create a tax-efficient retirement plan that not only benefits you during your lifetime but also your heirs in the future.
To ensure you implement these strategies effectively, consult a trusted financial and tax planning team to tailor the approach to your specific circumstances. By adopting these withdrawal tactics, you can secure a prosperous and tax-optimized 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.
Retirement is a significant life event that requires careful planning and consideration. It’s not just about financial preparedness but also about the psychological, physical, and social aspects of transitioning into this new phase of life. In this blog, we will explore some new retirement insights and expert advice to help you not only survive but thrive during and after retirement.
Phase 1: The Long Goodbye
Many individuals experience what is known as the “long goodbye” stage, where they hesitate to retire due to financial concerns or fears about losing their sense of purpose and significance. To overcome this stage, it’s essential to not only address financial worries but also focus on running toward exciting opportunities in retirement. Consider discovering activities that fulfill the three Cs: creativity, connection, and contribution.
Phase 2: The Messy Middle
After the initial excitement of retirement wears off, some individuals find themselves in the “messy middle” phase, where they wonder if there is more to retirement than they initially thought. This phase can be overcome by taking the time to reflect, pray, and gain clarity about what activities and pursuits will bring fulfillment in this new stage of life.
Phase 3: The New Beginning
The “new beginning” phase is where retirees feel fulfilled, purposeful, and excited about their future. However, it’s important to recognize that retirement will have a mix of emotions, including anxiety and worry. Journaling can be a helpful tool to acknowledge and address these feelings and facilitate positive change.
Practical Tips for Your Ideal Retirement
Celebrate the Transition: Mark the beginning of your retirement with a celebration, big or small, to acknowledge the end of one chapter and the start of another. Share this moment with family and friends to make it even more special.
Embrace Creativity: Explore your creative side by engaging in activities like art, writing, starting a business, or helping non-profit organizations. Cultivating creativity will keep your mind active and bring joy to your retirement.
Stay Curious: Continue learning and staying curious about the world around you. Lifelong learning has been linked to improved brain health and overall well-being.
Replace Old Habits: Identify and replace habits that no longer serve you in retirement. Be mindful of potential shifts in habits, such as early alcohol consumption, and make choices that promote a healthy and fulfilling lifestyle.
TL;DR
Retirement is a major life transition that requires thorough planning and preparation for both the financial and non-financial aspects. By understanding the different phases of retirement and implementing the practical tips shared here, you can set yourself on a path to achieve your ideal retirement filled with purpose, fulfillment, and financial security. Embrace this new chapter of life with curiosity and enthusiasm, and you’ll be well-prepared to make the most of your retirement journey.
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.
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