FEBRUARY 2025 - Your Retirement Paycheck

Do you remember the old TV commercial by VOYA that asked “What’s your number?” It implied that everyone had a magic number they should have saved so that they could retire. The question itself was misleading. Is there a static number that would allow you to retire? Do you know how to turn that saved amount into a sustainable income? Would you (and your spouse) be able to sleep at night, wondering if you would outlive your money? Would you live more frugally than necessary—just to be sure that your money lasts?

The question itself is really the problem. There is NOT a magic number. Instead there are a set of variables that a trusted financial adviser can help you understand and answer for yourself:

• Do you want guaranteed income that you can’t outlive? Or are you comfortable with taking the typical percentage each year, hoping that your portfolio will be sustainable? This doesn’t have a right or wrong answer! It is based on your personality, your upbringing, your “gut” and how you feel about money and risk.
• How many sources of income will you have in retirement? You may not have a paycheck from work anymore, but you may still have Social Security, STRS or other government pension, a private pension from work, your employer retirement plan, investment income of various sources, part-time work, rental income, etc. Looking at all of this comprehensively (up to 5 years or more before you actually retire) can help create a roadmap to follow!
• Do you live within your means now? Will you be able to live within your means when you retire? This again is often a personality or habit question—not a measure of how much money you have. Are there out-of-control spending habits you need to address? Or maybe you are stingy with yourself and rarely spend any discretionary money? There is beauty in balancing these two extremes. You cannot save enough money to satisfy the overspender, nor can you save enough to make a stingy/tight person feel truly secure.
• Do you know the rules for retirement? Which of your accounts are set up for retirement (and therefore must follow IRS rules for retirement accounts) and which are not? Are there penalties for using retirement money before age 59 1/2—and in what situations? What is the cost of starting Social Security early (at age 62) vs waiting until full retirement age? Can you retire with a full pension or does it make more sense to take a lump-sum payment from that entity and invest it for better returns?

The best investment you can make right now is an investment in yourself and your future. Schedule a no obligation conversation with us to start planning for retirement. Whether it is 2 years or fewer away or 20+ years away, having a roadmap to follow will put your mind at ease. We start each new client conversation by explaining some of the IRS rules that your money is governed by. Knowing the rules of the game helps you play better!

Instead of “what’s your number” it might be time to ask “what are you waiting for?” Invest some time and energy in your personal financial situation with a trusted financial adviser who can help you.

The guarantees associated with Annuities are subject to the financial strength of the issuing insurer and the specific terms and restrictions of the applicable policy or contract. The insurance features do not guarantee that the investment will not fluctuate in value.

If you were straddling tax brackets for tax year 2024 or simply want to reduce your overall taxes, there is still time to make an IRA or HSA contribution for 2024 (until you file your taxes.) You are eligible to do this if your income is below a certain threshold. If you are self-employed, there are some additional options you can consider to reduce your taxes (for 2024 or to plan ahead for future tax years.)

You may understand how taxes work and how various levels of income can affect your situation. But many people we talk to don’t understand how increases in income can change their tax planning opportunities—for good or bad.

Opportunities that change, based on income level, include:

* Whether you can contribute to an IRA or Roth IRA or make deductible contributions to your IRA

* Whether your Medicare premiums will go up based on earnings (two years after the increased income)

* Which tax credits you are eligible for

Perhaps you will find yourself straddling tax brackets at the end of the year. Or maybe you realize there is a “tax game” that other people are aware of—and you’ve never learned the rules.  Maybe you’d just like someone else to review your tax situation and give you some recommendations.

Unfortunately, waiting until you file 2024 taxes in early 2025 may be too late to make “course corrections.” There is still time now to have a conversation and make some adjustments or do some longer-range planning.

We believe it is moral, legal, and wise to pay Uncle Sam what he is due. But we don’t believe in paying more than what he is due!

We desire to have a long-term planning relationship with our clients.

What can we do today that will improve your situation at tax time, next year, or 10 years in the future?

When we meet with clients, we often explain the difference between qualified (retirement) accounts and non-qualified (non-retirement) accounts. The IRS rules governing qualified vs non-qualified assets are very different. Even if you don’t understand or WANT to understand all of the rules(!), we can help you use the tax planning rules to your best advantage.

We also help people think about how they want their assets to pass to heirs upon their death. We don’t give legal advice and we don’t draft legal documents. But we do explain the general rules about how assets pass to heirs. We listen to your particular situation to see if there are unique concerns that need to be addressed—estranged children, blended families, family farm or other complex entities, special needs       concerns, etc. Estate planning is vital and ongoing and we want to help you understand your options.

We help our clients streamline their various accounts and assign purpose and goals to their money. Is this retirement account going to     provide income in retirement? Is this account for long-term growth and leaving to children?   Is this account an emergency fund or a house fund or a college fund? Let us help you have a plan! 

Every day, we have an opportunity to meet people and encourage them to move from where they are now to go where they want to be. Each conversation is unique, as is each solution to getting there. ‘There’ has many different definitions and meanings for our clients. Sometimes it means:

• Officially retiring and having peace of mind of knowing where their income will from
• Purchasing their first house
• Adding to their family
• Buying a business
• Navigating the death of a loved one
• Donating to charity
• Saving for and funding their children’s future
• Leaving behind a legacy
• Having a portfolio aligned with their values
• Getting a better understanding of finances and estate planning
• Etc…

Over time, each person’s ‘there’ changes. We intend to be there beside you, to help you decide how best to get where you want to go. During our conversations, we will ask you questions to help define and prioritize what ‘there’ looks like to you. After talking, we will ask that you share some information to help us better understand where you are now. Details that we sometimes ask for include:

• Recent Statements of your accounts
• Recent Tax Returns
• In-Force Insurance Policy information
• Current Budget
• Current Debts
• Current Income

Once we collect and analyze these details, we help you build a path to get to there, there, and there!  As life changes and goes on, we’ll continue having these conversations to help you analyze and course correct if needed.