JUNE 2025 - Fundamentals

"If I were still working, there are probably a few things I would buy. But I don’t need to have them…” Those words from a friend are still echoing in my mind a few days after we chatted together. He and his wife expressed that they were attempting to live off of their Social Security but when they went beyond those monthly amounts and “dipped into” their investment accounts, they felt a little guilty. “Will we outlive our money? I mean, I know we won’t but…”

Alternately, some people we talk to have the opposite mindset. “I want to die with $1 left in my bank account. I want to spend what I’ve earned, enjoy retirement life while I can, and work it out so that there is little left in my   accounts when I die. That will be success for me.”  That line of thought usually means that the person isn’t concerned about leaving a big inheritance for their children. They have made the emotional decision to spend and enjoy their money while they live. That’s not a bad mindset but it creates a question in the back of my mind “How will they know when they are going to die? When is a good time to get down to $1?”

The two mindsets mentioned above (and several other ways that people think about and use money in retirement) are not intrinsically right or wrong. However, these mindsets might be based in fear or greed or pride, which can be harmful to your spirit in the long-run.

Is your reason for living only on Social Security because you are afraid of the future (the economy, politics, your own health or financial need, etc.)?  Or are you simply desiring to live a frugal, uncomplicated life?

Is your reason for spending all of your assets before you die because you feel like you’ve delayed gratification for years (while working, raising a family, etc.) and now you want to get what you deserve? Or are you simply aware that your children lead independent lives and they don’t really need your resources?

Do you have all of the information and input you need to feel good about your financial decisions? Or is it possible that you’re making your current financial choices because you don’t know how else to accomplish your goals?

Sometimes talking with a trusted adviser can help! We focus on helping people understand what their options are and finding the best way to accomplish their goals. We start by listening to you. Once we know how you feel about money and what your goals are, we explain some of the rules that govern retirement accounts. We talk about how various parts of retirement work (such as Social Security, Medicare, retirement accounts like 401ks and IRAs, tax rules, etc.)  We discuss different ways to accomplish what you desire. It is still your money and you are still the decision-maker. Our role is to come alongside and help you see other possibilities, within the framework of tax code, IRS rules, and so forth.

We’ve found that when people don’t spend in retirement, it is often because they are afraid of running out of money. This fear wasn’t a concern for them when they had a regular paycheck—but ceasing to earn a paycheck has made them cautious or nervous. On the other hand, when you create an adequate, predictable income from your retirement accounts (to supplement Social Security or pensions, etc.) you can feel more at ease about making purchases, taking trips, spending discretionary money because you know there is more money coming next month. And if you want to aggressively spend while you are healthy and young enough to enjoy doing so, you can set things up in such a way that you’ll have adequate income until the day you die. If you’d like to talk with an adviser, please contact our office today. Our conversations come without cost or obligation.

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.

Ok—well, how do you decide which tools or strategies to suggest? How do you determine the best time to retire and/or start certain kinds of income? We’re glad you asked!

• We start by helping you determine what income you might need in retirement? Will you need as much as you are currently earning? Will you need more—or less? We factor in things like taxes, medical costs, plans for travel or downsizing, etc.
• You generally won’t pay payroll taxes in retirement (unless you continue to work in a paycheck capacity.) That is an immediate savings of 7.65% in payroll deductions.
• Depending on how you get your retirement paycheck, your state and Federal taxes could go down.
• Medical costs depend on your age, the availability of retiree medical plans, etc. Your health insurance premiums may go up or down and the out-of-pocket expenses like deductibles and copays may also trend up or down. It is important to research your healthcare choices prior to retirement.
• To decide what income sources to “tap” first, you may want to consider which of the income sources have the capacity to grow if you wait and by what extent. ALSO we can help you consider which ones provide a death benefit at the end of life. If there is no death benefit when you die (such as Social Security, pensions, etc.), that could be a factor for starting this income source sooner—so you get as much as you can before death.
• Retirement spending tends to revolve around the “go-go” years, the “slow-go” years, and the “no-go” years. The early years of retirement are when you feel best and want to do more, generally speaking. This is when you may want to travel, try new things, continue in outdoor activities, and so forth—the “go-go” years. This period of retirement may mandate more spending than later on. The “slow-go” years are when you might be less mobile or simply not desire as much activity that requires spending. Each phase has different budgetary needs.

WE WOULD BE HONORED TO HELP YOU CONSIDER YOUR INCOME OPTIONS. Whether you are near retirement or 10 years away, NOW is a good time to talk.