Taxes
One of retiree's most common mistakes is not having a tax plan in place. Many assume their taxes will be lower in retirement, but this isn't always true. Social Security benefits can be taxed up to 85%, and retirees often overlook the impact of required minimum distributions from tax-deferred retirement accounts. When you add in other sources of income, like pensions, dividends, interest, or rental income, you could be facing a significant tax burden.
With tax-deferred retirement accounts, like 401ks and Traditional IRAs, likely being one of your largest assets, you could encounter costly tax traps, changes in tax law, and a complex set of rules when it’s time to access those savings. Developing a tax strategy to navigate these challenges, including Roth conversion analysis, can help you retain more of your hard-earned money.
Paying too much in taxes is one of those slow leaks that do a lot of damage over time.
Social Security Benefits Claiming Strategy
Neglecting or failing to understand claiming options and coordinating spousal benefits can be costly when planning for retirement. Social Security offers spousal benefits to support non-working spouses and even ex-spouses married for 10 years or more may qualify for these benefits if they haven't remarried. The objective is that those who supported someone who paid into the system can also receive benefits, regardless of their contributions.
Optimizing Social Security income and coordinating benefits with a spouse may help you increase your Social Security income over a lifetime, plan for survivor's benefits, understand delayed credits, and create tax-efficiencies.
Claiming Social Security benefits at the wrong time may cause more than a leak. We offer a complementary Social Security analysis so you can better understand your options.
Inflation
Inflation is a major concern in retirement planning. Many retirees underestimate expenses and fail to account for inflation, which can create significant issues. We dedicate substantial time to reviewing and adjusting expenses with clients to address this.
Additionally, Social Security benefits have not kept pace with inflation. According to a 2018 study by the Senior Citizens League, your Social Security benefits have lost about 34% of their purchasing power since 2000, meaning you're now getting only 66 cents on the dollar compared to less than 20 years ago.
With the recent inflationary pressures as a result of Covid, many retirees faced challenges previous generations had not seen since the 1970s. Having a plan to address potential future inflation hikes may go a long way to creating confidence in your financial future.
Healthcare Expenses & Medicare
Many retirees believe that once enrolled in Medicare they will have minimal healthcare costs. While Medicare provides significant benefits, premiums increase each year, and costs can vary greatly depending on your plan. Additionally, fluctuations are different depending on if you are covered by Original Medicare or Medicare Advantage - and many don't understand the complicated differences between the two, or how agents are compensated for Medicare Supplement and Medicare Advantage policies.
According to the Kaiser Foundation, medical care costs have surged by 121.3%, compared to a 86.1% increase in overall consumer goods and services over the same period.
Planning for rising healthcare expenses in retirement is critical and can help effectively address this leak.
Risk Tolerance & Downside Protection
Is your portfolio protected against downturns? This is crucial—just like in 2008, when the market dropped 38%.
If you had $2 million saved, it could have quickly dropped to $1.24 million, disrupting your plans.
Achieving balance is key. Your investment strategy should match your risk tolerance and life stage. While downturns may still impact you, proper downside protection can significantly help.
If you’ve saved enough for retirement and prefer a conservative approach, we start by assessing your risk comfort, current progress toward goals, and long-term financial objectives.