Joe Lucey

Forbes: Why You Might Not Be as Prepared for Retirement as You Think Click Here

Are you worried about retirement? If so, you’re not alone. According to our research, only 22% of employees reported being on track last year and the actual state of retirement preparedness may even be worse. That’s because many people use retirement calculators to estimate whether they’re on track, but even the best calculator is subject to the universal rule of computer programs – garbage in, garbage out.

Here are some of the most common mistakes I see people make when it comes to calculating whether they’re on track …

1. Not personalizing retirement spending needs
2. Trusting your Social Security statement
3. Counting on a pension that might not be there
4. Relying on working in retirement
5. Assuming an average life expectancy
6. Planning to retire at 65.
7. Overestimating investment returns
8. Confusing investment returns with income

The Motley Fool: 3 Signs You’re Not Ready for Retirement Click Here

You may be mentally and emotionally ready to retire, but if you’re not financially ready, your retirement may not be the relaxing time you’d hoped for. Being truly ready to retire means having a thorough grasp of how much money you need and the savings to back it up. Here are three signs that you’re not quite there yet.

1.      You don’t have a retirement plan

2.      You have a lot of debt

3.      You don’t know when you should take Social Security

Medium: Why 78% of Americans Are Not Prepared for Retirement Click Here

Many Americans have very little saved for the retirement. The 2018 Planning & Progress Study gathered data in an online survey from over 2000 Americans over the age of 18. In that survey, 78 percent of respondents said they were “extremely” or “somewhat” concerned about affording a comfortable retirement and nearly 66 percent said there was some likelihood of outliving retirement savings.

Additionally, the report found that, * 21 percent of Americans have no retirement savings at all, * 33 percent of baby boomers have between $0 and $25,000 of retirement savings, * 75 percent of Americans reported a lack of confidence in receiving Social Security benefits, and * 46 percent admitted to taking no steps to prepare for the likelihood they could outlive their retirement.

There are a number of reasons that Americans are not prioritizing retirement planning. From not having finances organized to daily budgetary constraints, there is always a reason to put off retirement planning. A recent phenomenon known as “The Sandwich Generation”, where adults age 40 through 50 are caring for children and aging parents, has caused an immense financial strain. In fact, 15 percent of people between the ages of 40 and 50 are financially supporting aging parents and their children, making retirement planning extremely difficult.

However, retirement planning is essential for a financially secure future and not being financially prepared can have dire consequences. Aside from being living comfortably in retirement, not planning for retirement puts a strain on government resources.

The Balance: Tips to Prepare for Retirement Success Click Here

The retirement planning process takes time and effort. At times it may seem like an overwhelming task. But what you do today can help you achieve your retirement goals and allow you to maintain the lifestyle you want in your later years.

Here are some tips to make reaching those retirement goals feel a little more manageable.

Tip 1: Focus on the things you can do and decide to take action today

• Create a plan and put it in writing
• Implement your plan
• Track your progress

Tip 2: Protect yourself and your loved ones

• Your life
• Your health
• Your assets

Tip 3: Take a look at all of your retirement saving options

• Employer-sponsored retirement plans (401k, 403b, etc).
• Check out IRAs
• Consider HSAs.

Tip 4: Focus on your overall financial well-being

• Increase your knowledge
• Increase your income
• Find ways to reduce your spending
• Refinance and consolidate debts
• Eliminate extra fees and charges.
• Search for ways to reduce your taxes

MarketWatch: The 7 Elements of a Successful Retirement Click Here

1. Start with well-defined goals, and revisit them at least annually.
2. Many people get great satisfaction from work
3. Another aspect of retirement is lifetime learning
4. Budgeting is more than setting a top-line spending number based on a pre-arranged percentage
5. Let’s consider income
6. Take the time to go through your employment history and discover what benefits you may have forgotten
7. Invest for your whole life

Kiplinger: If You Want to Retire Comfortably, It Isn’t all About Investing Click Here

A lot of people — maybe even most people — can be successful DIYers through the early years of their investing life. Unless you’re a high earner, have a high net worth or have some other special planning needs, you probably can figure out how much you want to contribute and how to allocate your assets. (If you can’t or don’t want to, you should, by all means, seek professional guidance — even if it’s only on specific occasions, or to tap into some good investing advice.) 

However, I’m going to warn you: When you’re ready to wrap up the accumulation phase and move on to preservation and distribution, things could get a little trickier. OK, a lot trickier. Using a DIY approach may not be the best choice as the focus shifts from making and saving as much money as you can to living off that money for decades in retirement. 

You need a comprehensive financial plan that includes …

1. A solid income plan
2. An investment plan
3. A tax-efficient plan
4. A healthcare plan
5. A legacy plan

Most people are focused on their investment returns, but they’re ignoring the one thing that could have an even bigger impact on their nest egg.

Taxes.

Taxes will likely be your biggest expense in retirement. Below are 4 retirement tax traps you should get in front of before you start planning that retirement party.

Retirement Tax Trap #1: Claiming Social Security could trigger higher taxes.

Claiming your Social Security benefits could be one of the most important financial decisions of your life. How and when you claim Social Security could impact far more than just the amount of your benefits check. It could also trigger paying taxes on as much as 85% of your benefits.

Don’t make your decision solely based on maximizing your benefits. Instead, consider how it could impact your taxes, Medicare premiums and spousal benefits.

Retirement Tax Trap #2: Taxes on your IRA, 401K (and other retirement accounts)

Contributing money to your IRA and 401K is easy. But withdrawing this money in retirement is complicated and confusing.

Remember, you must pay taxes when you withdraw this money in retirement. And Required Minimum Distributions will further complicate matters. When you turn 70 ½, “RMD’s” force you to start withdrawing money from these accounts, whether you want to or not. And this could result in paying more and more taxes every year

The key is to create a strategy for RMD’s in your late 50’s or early 60’s.

Retirement Tax Trap #3: Not having tax diversification

According to Kiplinger Magazine, “For the average individual, diversification has always focused on equities, and equities alone. And that’s a problem.”

Your money should be invested in different categories to diversify your tax risk.

Most financial accounts fall into 3 categories: taxed always, taxed later and taxed rarely. If you have too many eggs in one basket, it could spell serious financial trouble in retirement.

Retirement Tax Trap #4: Not switching to a ROTH IRA or 401K

An IRA or 401K allow tax-free contributions. But you must pay taxes when you withdraw this money in retirement unless you convert some, or all your traditional IRA or 401K to a ROTH.

A ROTH IRA or 401K doesn’t allow tax-free contributions (that’s the catch), but you pay zero taxes when you withdraw money in retirement. ROTH accounts are not subject to RMDs either. That means you get tax-free growth, which could add up to tens of thousands of dollars in retirement (possibly more).

Meet with a qualified financial advisor to see if you should convert your IRA or 401 to a ROTH.

Summary

The good news is you have more control over how much you pay in taxes in retirement, than any other time of your life. But this doesn’t automatically happen. It requires a forward-looking tax plan.

What’s standing between you and retirement?

And what do you need to do to make this dream a reality?

For many people, the answer is not that you need to save more money.

It’s that you need to be doing more with the money you’ve already saved.

Below are 4 specific steps that could help you retire much sooner than you ever thought possible…

1. Turn your investments into an income workhorse

Successful retirements are not built on assets, or by achieving some “magic number.” They’re built on your ability to generate income in retirement. But with record low interest rates on CD’s and savings accounts, anemic bond yields, and a fully valued stock market, many of the traditional, “go-to” options for generating income in retirement are no longer viable.

The good news is there are some surprisingly attractive options to generate income today that you may not even know exist. Speak with a qualified financial advisor to learn about all your options.

2. Have a strategy to get more out of your Social Security benefits

It’s hard to believe, but two different people with nearly identical scenarios (age, retirement date; income, etc.) could receive dramatically different amounts in Social Security benefits. I’m not talking about a few bucks here. I’m talking about tens of thousands, if not hundreds of thousands of dollars in lifetime benefits.

So, don’t take your benefits at face value. Your strategy to claim Social Security should not be based on just the amount of your benefits, but also the impact this will have on your taxes, Medicare premiums, and spousal benefits. The best way to ensure you get the most out of your benefits is by getting a customized Social Security analysis.

3. Tax planning could help you keep more money in your pocket.

There’s a big difference between tax preparation, versus tax planning. Tax preparation is something you do with your Accountant or CPA every year. You’re simply reporting what happened last year. But if you want to reduce your taxes and keep more of your hard-earned money in your pocket, this requires a forward-looking tax strategy.

Using tax planning strategies could help you save a small fortune in taxes in retirement. And the sooner you get started, the more you could potentially save.

4. Manage risk through the power of diversification

Diversification is one of the most underrated pillars of financial planning. Many people think that diversification is just having a mix of stocks, bonds and mutual funds. But there’s a lot more to it than that. Diversification will play a key role in other aspects of your financial game plan including taxes, income, and your investment returns.

The bottom line …

Having a strategy for income, Social Security, taxes and diversification could help you retire much sooner than you know. If you don’t have a strategy for any one of these items, you’re missing opportunities to make the most of your hard-earned savings and investments.