Retirement Archives

Don’t Let Market Volatility Ruin Your Retirement

Written on March 19, 2019.

Now that you’re nearing retirement, the term “market volatility” might stir up different feelings than it 30 years ago. Older workers and retirees understand that they have less time to make up for losses in their investments and to ride out future market crashes than they did when they were younger. And with life expectancies increasing, leaving your financial wellbeing up to the whims of the market seems like less and less of a good idea. We know that there will always be crashes, even if no one knows exactly when they will come, so why not develop a plan ahead of time?

After a crash, people may be tempted to sell their stocks if they panic, or need immediate funds. But in doing so, they ensure that they won’t see the stock appreciate when the market recovers. In order to keep this panic at bay, you can think of creating your portfolio around the idea of retirement income.

Creating reliable retirement income can be a good retirement strategy for high-income earners. The first step would be to create guaranteed retirement income with “safe” investments. The value of bonds and savings account are not seriously affected by the ups and downs of the market, and reliable paychecks include Social Security, annuities, and bond ladders. Certain annuities will also protect against outliving your retirement savings.

After covering your basic needs with safe investments, you can look to grow the rest of your savings more aggressively. You can think of the funds generated as “retirement bonuses.” These “bonuses” can be used for non-necessities like travel, spending of grandchildren, and the activities you want to enjoy with your free time in retirement. You can develop a withdrawal plan based on market performance, meaning decreased withdrawal amounts when the market drops, and increased amounts when it experiences gains.

It’s also important to create an emergency fund for events like unexpected medical expenses and home and car repairs. This fund will be separate from your first two funds, so if there is an emergency you will not have to disrupt the overall structure of your retirement plan by dripping into them.

The term “market volatility” probably doesn’t create good feelings if you’re nearing retirement or already retired. Developing a plan for periods of market volatility before they happen can help you weather storms.

You don’t know when the next crash is, but you can plan for it. Click here to schedule your complimentary review today, and let the professionals at Peak Financial Freedom Group help you create reliable retirement income, sources of growth, and an emergency fund for a rainy day.

Have a Retirement Account? Be Prepared for Your RMDs!

Written on March 5, 2019.

If you’ve contributed to a 401(k) or IRA, you should prepare a strategy for your RMDs (Required Minimum Distributions). After many years of enjoying tax free growth, your retirement savings from non-Roth (i.e. traditional) accounts will eventually be subject to tax. Rather than be caught off guard, take control and learn the ins and outs of your RMDs so you can avoid penalties, and determine the best strategy for re-distributing your RMDs.

Required minimum distributions from your IRA, Simple IRA, SEP IRA, or retirement plan must begin at age 70 ½. You have to take an RMD from your traditional IRA by December 31^st, except for your first one, which you can delay until April 1^st of the following year. However, this means that you’ll have to take two distributions in one year, which could push you into a higher tax bracket, contributing to your tax burden in retirement. You can either withdraw the entire amount from one IRA, or spread it out over multiple accounts. The rules regarding RMDs for traditional 401(k)s are similar, except that you must take an RMD from each 401(k) you own, and you don’t have to take an RMD if you’re still working in your 70’s.

One reason why it’s so important to know the rules regarding RMDs is that the penalty for failing to take them is equal to 50% of the amount not withdrawn. So, the question becomes, what do you do with your RMDs? You can take an RMD in cash, but you can also transfer the funds to a stock or mutual find. You can’t roll over the RMD into another IRA, although you can reinvest it using a taxable account. You must take an RMD before rolling over funds from a traditional IRA or converting to a Roth. You can also donate up to $100,000 from an IRA directly to charity. This way, the donation doesn’t count towards your adjusted gross income.

It’s not necessarily true that all of your RMDs will be taxed. If you made a non-deductible contribution to your IRA, then part of every withdrawal will not be taxable. However, you must know and indicate which portion of the withdrawal was nondeductible. If you look at a Form 8606 you can see what percentage of your IRA is made up of nondeductible contributions. That is the percentage of each withdrawal that will not be taxed.

Your IRA and 401(k) are important components of your retirement plan, so make sure you have a strategy in place for withdrawing from them. Rolling over an RMD into a Roth, reinvesting it in stocks or mutual funds, and donating directly to charity are some options. There are many ins and outs of RMDs and high penalties for failing to take them, so don’t be taken by surprise.

The rules surrounding RMDs can be complicated, so contact the professionals at Peak Financial Freedom Group before you’re 70 ½. There are ways to minimize your tax burden, and put your RMDs to good use. Click here to schedule your no cost, no obligation review today.

Travel in Retirement Without Overspending

Written on March 1, 2019.

So you want to become a world traveler in retirement, but you’re also a responsible person who knows they need to support themselves for the next 30 years. You can take advantage of your newfound free time in retirement and rethink your destinations to maximize value. With careful planning and some creativity, you could fulfill your dreams of travel in retirement without overspending.

Setting a travel budget is one thing you can do to start your retirement off on the right foot, especially if you want to take advantage of your abundance of free time and make multiple, or extended trips. You can look at your retirement income, subtract essential expenses, then decide how much of the left over funds you want to put towards travel.

Consider the cost of vacations, as well as visits to family, and travel to special events like graduations and reunions you want to attend. If you look beyond Western Europe for a vacation, you’ll find that travel is much less expensive. Museums, food, and hotels in major cities in Western Europe can break the budget, while the cost of living, amenities, and entertainment in Southeast Asia and South America is much lower.

Just as important as choosing where to travel is choosing when to travel. You might want to push your ultimate dream vacation back a year or two in order to budget for it properly, or wait until you’ve sold your house. Alternatively, you can reduce the cost of a trip by scheduling it for the offseason. Airlines may offer deals, hotel rates tend to be lower, and as an added bonus, destinations tend to be less crowded.

Once you’re retired, your schedule will be more flexible. You can use this to your advantage by traveling on Tuesdays and Wednesdays, which tend to be the best days for saving money. Stretching out your vacation and living more like a local by renting a room instead of staying in a hotel, and making your own food instead of eating out can also help you get the most for your money. You don’t have to schedule vacation days in advance, so consider remaining on the lookout for sudden flight price drops. Make a list of places you would like to visit, and then look out for deals.

Enjoying your retirement doesn’t have to mean overspending. Planning and creativity can go a long way towards maximizing the value of your travel budget. Traveling in the offseason or in the middle of the week, and considering new destinations can help you fulfill your travel goals without overspending.

Before your plan your dream vacation, you have to plan for your retirement. At Peak Financial Freedom Group, we can help you create a retirement plan that accounts for your individual retirement goals. Click here to schedule your no cost, no obligation review today.

Your Tax Burden in Retirement

Written on February 26, 2019.

Even in retirement, taxes are a guarantee. Your Social Security benefit, capital gains, and retirement account distributions can all be taxed, leaving you with less retirement income than you planned on receiving. Your tax burden is important to consider when planning for retirement, and can be your most significant expense. Here is how common retirement income sources are taxed.

While you will gain a new source of income in retirement through Social Security, it could also add to your tax burden. There are many reasons why you can’t rely solely on Social Security in retirement, so you will probably have other sources of income. Half of your Social Security benefit is taxable if your adjusted gross income, nontaxable interest and half of your Social Security benefit equals over $25,000 for individuals and $32,000 for couples. If these equal over $34,000 for individuals or $44,000 for couples, up to 85% of your benefit can be taxed.

You may sell an investment to add to your nest egg. Investment dividends, as well as investment sales can be taxed. Investments held for less than a year are taxed at ordinary incomes tax rates. Investments held for over a year are taxed at the long-term capital gains rate, which is 15% for individuals with an income of over $39,375 and couples with an income of over $78,750, and 20% for individuals with an income of over $434,550 and couples with an income of over $488,850.

Distributions from retirement accounts count as income, and are required after age 70 ½. If you turned 70 ½ in 2018, you must take your first required minimum distribution (RMD) by April 1^st of this year and going forward, you must take RMDs by December 31^st. If you delay your first RMD, you might need to take two withdrawals in the same year, resulting in a larger tax burden. At 70 ½ you also lose the ability to defer tax on new IRA contributions, unless you are still working or have a Roth IRA.

Keep in mind that your Social Security benefit, capital gains, and retirement account distributions can be taxed in retirement. Factoring in taxes as an expense in retirement will help you create a better plan with fewer surprises. Rather than wait until retirement to deal with new tax burdens, start strategizing now to avoid them when possible.

Don’t let your tax burden derail your retirement goals. Let the professionals at Peak Financial Freedom Group help you create a retirement plan that minimizes your taxes. Click here to schedule your no cost, no obligation review today so you can start strategizing as soon as possible.

Transitioning Into Retirement Is No Small Task

Written on February 8, 2019.

Even though most people look forward to retirement, some forget that losing the structured routines, sense of purpose, and social interactions that work brings can lead to a difficult transition from working to retirement. Recently, a professor at Harvard Business School conducted a study on the mental and emotional effects of retirement. The study found that people undergo “life restructuring” and “identity bridging” in retirement, and it gives examples of how people can successfully transition into retirement. But even though retirement changes your daily schedule, there are ways to help make your smooth transition into retirement a more manageable feat.

Life structure consists of the places you spend your time, the activities you engaged in, and the important relationships you’ve cultivated throughout your life. Many of these can change drastically after entering retirement, from work activities to relationships with coworkers. You might even move, and there are several things to consider before moving in retirement. Successful restructuring starts with deciding when and how to retire. Some study participants transitioned to part-time work, and others developed their social schedules or started volunteering. Introducing new activities and investing in relationships are also components of identity bridging.

Identity bridging can be important for people who identify strongly with their profession or organization. Some study participants coped by enhancing their pre-retirement identity. They spent more time on, and gave more attention to relationships and activities that were important to them before they retired. In one example, a man enhanced his relationship with his teenage daughter by spending more time with her and helping her improve her performance in school. Other participants activated a hidden identity that had fallen by the wayside during busy careers. One man had given up motorcycling years before, but once he was retired he bought a new motorcycle and connected with other motorcyclists.

Another interesting takeaway from the Harvard Business School study was that some retirees found purpose by using the skills and knowledge gained in their careers in retirement. One retired engineer volunteered to work on the new community center in his town. Others engaged in mentoring and consulting. This can help replace the social connections and positive feedback work provides. One woman mentored junior workers at her former workplace, and volunteered her coaching services at a community organization. Another man reinvented himself by starting a handyman business where he could work as much or as little as he wanted doing one of his favorite hobbies.

Ultimately, it’s important to prepare financially as well as mentally for retirement. Successful life restructuring and identity bridging can help lead to a happier and more fulfilling life in retirement. And, envisioning how retirement could be different in 2030 while considering the relationships and activities that really make you happy can help with the transition.

Consider what you want your retirement to look like. At Peak Financial Freedom Group, we’ll work with you to help better understand your goals, and we can help you create a comprehensive financial plan to that allows you to achieve them. Click here to schedule your no cost, no obligation financial review to take the first step because remember, transitioning into retirement is no small task.

Wrapping Up 2018

Written on December 17, 2018.

While it’s easy to get caught up in the holiday spirit, running out to grab last minute gifts, baking dozens of gingerbread men and trimming your tree, don’t forget about your retirement plan. The end of the year is an important time for retires, and there’s a few things you should wrap up before it ends.

One thing that comes with the end of a year is deadlines. An important deadline that can be costly to miss is your required minimum distribution. If you’re over the age of 70 ½ and have an IRA account, you have to withdraw a set amount by the end of the year. The tax penalty can be up to 50% of the amount you were supposed to take. Avoid this penalty by taking your RMD now, don’t put it off until after the holidays.

In the spirit of the holiday, and on the topic of RMDs, you might be thinking about giving to charity and a qualified charitable distribution can be a tax-friendly way to do so. The amount of your QCD can be used towards your RMD and will not count as income, making it a tax deduction in addition to the standard deduction. This is something to consider if you were looking to donate to charity anyways.

If you haven’t retired yet, spending down your flexible spending account or FSA could be a good way to end your year. You can make pre-tax contributions into an account that can be used to pay medical expenses. Basically, you can pay health expenses with tax-free dollars. The only issue is that you have to use it all before the year ends unless your plan allows you to carry any over. Don’t let this money disappear, figure out some way to use it in the last weeks of 2018.

Like an FSA, you could consider contributing to your health savings account. If you have a qualified high-deductible health insurance plan, you can utilize an HSA. You make pre-tax contributions into an account that you can then use to pay eligible medical costs. This differs from an FSA because you have unlimited time to pay yourself back. Until you’re retired it might be smart to pay these health costs out of pocket, but once you reach retirement, your account will have grown, and you can cover larger expenses that are bound to come up.

The best way to end the year is by sitting down with your financial advisor to wrap up your portfolio. We cover everything from investing and finances to lifestyle and estate planning. Click here to schedule your complimentary, no obligation financial review and start 2019 off right.

Thankful for Retirement

Written on November 20, 2018.

We spend a lot of time day dreaming about retirement, but once you finally get there, things might not be as you expected. The transition from full time work to retirement comes as a shock to some people which is why it’s increasingly important to have a lifestyle plan for retirement. Having these plans beforehand can make retirement something that you are truly thankful for this season.

There are leisure activities, and there are productive leisure activities. Once you retire, it’s important to not spend too much time in front of the TV, but instead focus on productive leisure activities like reading, travelling, volunteering or exercising. These can be more rewarding and give you even more to be thankful for. In retirement, you have much more free time in your day. Therefore, it’s increasingly important to set goals for yourself. This can help you prioritize and focus on the things that are most important to you. An example of something that might be a part of your retirement journey is returning to work. Some people take up a part time job or decide to open their own business. This could help you remain professionally active in a lower stress environment.

Some people might also enjoy going back to school after retiring. This leads to intellectual stimulation and new social connections. You could also try and learn something creative. Cultivating your creativity can have a powerful impact on mental, emotional and social wellness and can be a fun way to spend time in retirement.

To make the most out of your retirement, it’s important to spend time with your loved ones, especially this holiday season, which can sometimes feel lonely as we age. One of the most meaningful ways to accomplish this is by spending time with the younger generation. Consider including them in your holiday baking or teaching them your secret stuffing recipe. Maybe even just sit together and watch the parade or football game. This gives you a way to share your legacy and life lessons and form memories that will last a lifetime.

We’ll work with you to create a comprehensive retirement plan looking all aspects of your retirement. Regardless of what you want to do in your retirement, a plan that incorporates your personal goals and financial situation can increase your chances of getting there. Click here to schedule your complimentary, no obligation review today.

Expenses That Can Disappear During Retirement

Written on October 30, 2018.

There are plenty of expenses that you’ll have to worry about in retirement. With the cost of healthcare and entertainment, along with travel expenses generally rising in retirement, just to name a few, it can be reassuring to learn that there’s a few areas where you might save some money in retirement. In fact, here’s five expenses that can practically disappear altogether!

With the costs of commuting rising every year, it’s no surprise that when you stop commuting you also save money. From bus tickets to gas prices, when you’re no longer sitting in traffic every morning or cramped on public transportation, your costs should drop drastically. The money that you otherwise would have spent on your commute is now yours to keep.

Another cost that disappears in retirement is Payroll taxes. When you are no longer working, you don’t owe any payroll taxes. This means the 7.65 percent of your salary that used to be taken away each month is no longer an obligation.

Once you retire, another expense that you don’t have to worry about is saving for retirement! After spending so many of your working years saving for the future, you finally can enjoy your savings. Instead of paying into your retirement accounts, you will be withdrawing from them. Some people also decide that after they retire they no longer need life insurance and disability insurance. Disability insurance is designed to replace a worker’s income when they are injured and unable to work, and most don’t see it as necessary once they retire. Life insurance is generally for the event that the worker dies unexpectedly and leaves their family without income and the idea that you have enough money to retire usually means this is no longer applicable for some.

Another item that you might save money on after you retire is clothing. Work related attire can be pricey and there’s no need to buy new dress pants or blazers so frequently once you retire. You will no longer be dressing up for important meetings and presentations, and a more modest wardrobe is generally adopted. Once you trade those fancy suits for jeans, you could end up cutting costs dramatically.

We can look at your entire financial portfolio, your lifestyle needs and your retirement goals to create a plan that works for you. We want you to be prepared for the costs and savings that come with retirement so that you aren’t faced with surprises. Knowing the expenses that disappear during retirement is just one step in your full retirement plan. Click here to schedule your comprehensive, no cost, no obligation financial review today and continue the right path to retirement.

Things to Love About Retirement

Written on September 25, 2018.

There’s a lot of things to love about working. You can love your job, your coworkers, and even the daily routine that a standard 9-to-5 job offers. The feeling of work is safe for most people. After over 35 years, you most likely know what you’re doing and you’re probably very good at it. For these reasons, retirement can seem overwhelming to some people. The fear of the unknown is scary and there may still be challenges that await you, but there are also so many things to love about retirement!

First things first, you have more freedom once you retire. So, imagine never having to sit in rush hour traffic, racing to make it to your 9am meeting again or being able to jump on a cross country flight on a whim. You have no deadlines and no morning alarm to answer to. With this, you lose the competitive aspect of a full-time position. You are no longer vying for another promotion or bonus, you finally have time to relax.

There are plenty of other ways to fill your time in retirement. You can join a club or spend time with your children and grandchildren. Some retirees even decide to work part-time or do consulting work on the side. Whatever it may be, there are plenty of different ways to continue earning income during retirement.

But, if these things don’t interest you, retirement is also a great time to catch up on culture. You can sit back with Netflix or some old DVD’s, and catch up on the shows and videos you were too busy to watch while you were working. Retirement is also a great time to give back. You can coach a little league team or volunteer at a soup kitchen. Another idea is becoming a tutor at a local college or university. Giving back can be very rewarding knowing that you are sharing your knowledge and skills with others.

Whatever you decide to do, it’s important that you are living out your dreams, and focusing on your personal goals. This is your time to finally do the things that you always talked about, but never had time for. Write a book, learn to cook, or maybe even travel on a European river cruise. This is the time that you worked so hard for, and as scary as it can be, it can also be great.

If you’re feeling a bit overwhelmed by the idea of retirement, then it may be time to talk to a financial professional who can sit with you and make sure that your retirement plan is complete. CLICK HERE to contact us and schedule a complimentary, no obligation financial review! AtPeak Financial Freedom Group, we can help you update your plan so that you can feel more secure about heading off on your next great journey in discovering all the things to love about retirement.