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7 Steps for Successful Retirement

Achieving your financial goals doesn’t just happen by itself. It takes a plan, implementing the plan, adhering to the plan, and when necessary, adjusting the plan. The best plan starts with a solid foundation based on our 4 V's; Your Values, Visions,

Velocity and Versatility.

Simply put, failing to plan is planning to fail. Don’t plan to fail!

According to the [[ Department of Labor]], Only 40% of Americans have calculated how much they need to save for retirement. In 2018, almost 30% of private industry workers with access to a 401(k) plan or something similar did not participate.

The average American spends roughly 20 - 30 years in retirement. Nearly everyone will receive Social Security, but Social Security won’t pay all the bills.

1. Regularly saving is critical. Once you begin an automatic payroll deduction into a retirement account, you won’t miss it. I promise. When I first started saving my initial goal was to put 10% of pretax income in my plan.

But that seemed like a mighty big chunk of cash, at least in the beginning. So, I started with 4%, raised it to 7% after three months, and bumped it up to 10% three months later. Taking baby steps was much easier than attempting to summit the peak in one leap.

Todays retirement plans have the option to automatically increase contributions, check with your employer to determine if this is offered.

If you have access to a qualified retirement plan, I can’t overly emphasize the importance of capturing your entire company’s (institution’s) match. It’s free money.

Don’t leave free cash with your employer.

2. Start as early as you can. It won’t be long before your daughter or son graduates from college. In their mind, retirement is another planet, if not another universe. That’s the case for many young people. And I've seen many adults too who think its far away. But we all know the magic of compounding. The savings we socked away when we were younger has paid big dividends.

3. What plan best fits my need? That question will depend on your personal circumstances. For many, your company’s 401(k) is tailor-made to save for retirement. This is especially true if your firm has a matching contribution.

Whether to fund a traditional IRA or a Roth IRA depends on many factors, including your marginal tax rate today and expected rate in retirement.

A Roth offers tax advantages if you qualify. Generally speaking, withdrawals from a Roth IRA are tax-free in retirement if you are age 59½ or older and have held the account for five years. But you won’t capture a tax deduction on contributions. But those contributions will earn money which will grow tax free if you do the aforementioned.

Current tax law does not require minimum distributions on Roth IRA’s, which can be a big advantage as you travel through retirement. If you are subject to the tax torpedo of social security, this could be a big benefit down the road of retirement.

A Roth may also be advantageous if you do not believe your marginal tax rate will fall much in retirement or if you have outside assets that limit your need to withdraw on your retirement savings.

4. How much will I need at retirement? Ah, the $1,000,000 question, or is it? Again, much will depend on your individual circumstances. Your retirement expenses and lifestyle will dictate your portfolio needs.

An old rule of thumb that you’ll need 70% - 80% of pre-retirement income may not suffice for many. For example, will you still be paying on a mortgage after you retire? You certainly won't be contributing to a retirement plan. Or, do you plan to downsize, which may reduce or eliminate monthly mortgage outlays?

One approach some folks consider is the 4% rule. It’s relatively simple. Withdraw 4% of your total investments in the first year and adjust each year for inflation. Keep in mind, however, that this is a rigid rule. It assumes a 30-year time horizon and minimizes the risk of running out of money. There are other withdrawal rules which may be more applicable to your specific circumstances. Beware of this rule in times of market downturns.

Depending on Social Security and any pension you may have, a more generous “allowance” from your savings may be in order. Remember, there is No One-Size-Fits All in Financial Planning, especially in the Decumulation phase of Retirement.

Your financial DNA is as unique as your physical DNA. No two people are the same in either.

5. How do I find the right mix of investments? What worked when you were 30 years old probably isn’t appropriate today.

While our advice will vary from investor to investor, we can offer broad guidelines. Furthermore, retirement may be broken into three different stages, which may require adjustments to the plan.

Some investors decide its best to take a very conservative approach. You know, “I can’t lose what I’ve accumulated because I don’t have time to recoup losses.” But that has its drawbacks. For starters, you don’t want to outlast your money. Equities, which have historically offered more robust returns, may still be an important part of an investment strategy, which should include other strategies as well.

The allocation mix of assets is critical to a successful and lasting retirement. Other circumstances of your total picture comes into focus when determining your asset allocation in the decumulation phase of retirement.

Others may be swept up by what might be called “the current of the day.” Stocks have surged, which may encourage investors to load up on risk. However, a Holistic Financial Plan and an Investment Policy Statement helps remove the emotional component that can creep into your decision making.

6. I’ve saved all my life. How do I begin withdrawing from my savings to create cash flow? It’s a complete shift in the paradigm. No longer are you socking away a percentage of each paycheck. Instead, you are living off your retirement nest egg and savings.

First, if you are required to take a minimum distribution from a tax deferred account, take it. (RMD’s begin at age 72 and must be taken to avoid a 50% penalty. If you do not take out the Required Minimum Distribution, that amount let's say $10,000 will then incur a 50% penalty of $5,000.) Call us to determine if the distribution is correct to avoid IRS penalties.

Next, consider interest, dividends and capital gains distributions from taxable investments, which continues to tax shelter assets in retirement accounts. If additional funds are needed, consider withdrawals from your IRA or other tax-deferred accounts. If you are in high tax bracket, you may consider pulling from your Roth. Those in a lower tax bracket could leave the Roth alone and take funds from their traditional IRA.

7. How do I decide the best time to file for Social Security benefits? - This is the most critical decision in retirment.

The answer is different for everyone, but it’s important to know your benefit amount will change depending on when you file.

You may begin receiving reduced benefits as early as age 62. Full benefits at FRA (Full Retirement Age depending on year of birth, for those born after 1964 the FRA is 67). And a higher benefit amount will accrue if you delay receiving benefits beyond FRA, up to age 70.

Bottom Line

Let me reiterate that many of these principles are simply guidelines. One size does not fit all. Your Financial DNA is as unique as your physical DNA. Holistic Plans we suggest are tailored to one’s specific needs and Values - Based goals with a tax-centric focus.

If you have any questions and would like an Un-Biased Opinion we would be happy to share our recommendations. We’re simply a phone call, email or Zoom away!





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