Income Planning

Top 5 Ways To Maximize Income In Retirement

May 24, 2024 by Joe Lucey

Your retirement should be a time of enjoyment and fulfillment, when you finally have the time to pursue the things you’ve never quite gotten around to. But it’s unlikely you’ll get around to them at all if you’re lying awake at night, worrying over running out of money. A financially secure and comfortable retirement is possible with the proper considerations, so that you really are free to live as you please. Prevent yourself from living off of savings alone by creating a robust income generation strategy. Even in your golden years, there are ways to continue to replenish your earnings. Based on our expertise, here are the top five ways to do so:

1. Reduce Your Tax Burden

Income taxes can be your largest expenditure in retirement. Withdrawals from tax-deferred accounts, such as traditional IRAs and 401(k)s, are subject to income tax in the year you withdraw those funds, potentially leaving you with a hefty tax bill. You may know how much you’ve saved in each of your accounts, but do you know how much you’ll pay in taxes on those savings?

In order to maximize your income, consider relying more heavily on strategies like Roth conversions or tax-efficient retirement accounts for savings. Minimizing your tax burden is a core focus of our work at Secured Retirement, and we believe this is one of the most impactful ways to maximize your retirement earnings.

2. Make The Most of Social Security

Social Security stands out as a particularly valuable source of retirement income, offering financial security throughout a lifetime. In fact, the Stanford Center on Longevity reports that Social Security income meets more retirement planning goals than any other retirement income generator. A few reasons for this include that it’s:

Tax-privileged: A portion of each payment is provided tax-free. This is in contrast to other retirement options like annuities, where all payments are taxable as ordinary income.
Inflation-adjusted: These benefits keep pace as the cost of living rises.
Cheaper than other forms of longevity insurance: Social security is cost-effective, offering financial security without the worry of funds running out.

Social Security benefits are essential, and the optimal strategy for it often depends on individual circumstances. Tailoring claiming strategies and their timing to ensure you can spend confidently in your retirement.

3. Rebalance Your Portfolio

Especially as you near retirement, achieving the right mix of assets becomes more and more important. The main reason for rebalancing is to control risk, not necessarily to improve returns, and in doing so, you’ll better preserve your nest egg. For example, right now, US stocks are having more success than US bonds and international stocks, and this continues to shift. Leading up to retirement, your margin of safety is actually smaller than when you’re actually in retirement. To ensure your portfolio keeps on track, it’s important to rebalance on a regular schedule.

4. Guard Your Nest Egg from Inflation

Inflation is as high as ever right now and, unfortunately, it can potentially erode your retirement income by diminishing your purchasing power over time. Everyone suffers because of inflation, but especially when considering the cost of healthcare, a particular spending cost for many older adults, it’s even more important to be able to defend against it in retirement.

While it can be difficult, it is possible to provide some insulation from inflation. Fixed-payout assets can often take the biggest inflation hit so diversification is key. Treasury Inflation-Protected Securities (TIPS) and real estate investment trusts (REITs) provide effective solutions, as they’re not highly correlated with stock or bond markets.

Additionally, when planning your spending, being a little more conservative with your starting withdrawals in periods of high inflation can be beneficial. While higher prices might not make a huge dent in your retirement over one or two years, they can have a huge impact over 20 to 30 years, giving inflation its moniker as retirement’s “silent killer.”

5. Explore Additional Income Options

Diversify your retirement income sources by exploring alternative investment opportunities, such as real estate, annuities, or dividend stocks. The most successful retirements aren’t built on assets or savings alone, they’re built on your ability to continue generating income in retirement. By creating a diversified income plan, you can mitigate risk and ensure your long-term financial security in retirement. These assets provide additional streams of income to supplement your retirement savings and enhance financial resilience.

Income generation is a central component of a successful retirement plan, and it’s an area we specialize in. By implementing strategies in these five areas, you’ll be well-suited to enjoy a robust retirement plan that withstands market fluctuations and provides financial security. You deserve the retirement you’ve dreamed of. To review your plan for income in retirement, please give us a call at 952-460-3290.

Navigating the Most Dangerous Decade: How To Thrive In Transition

March 28, 2024 by Joe Lucey

In terms of retirement, there’s one particular span of 10 years that is the most critical. Known as
the “most dangerous decade,” the five years prior and the five years post your retirement are
the greatest predictors of retirement outcome. The term “most dangerous decade” was coined
by retirement researcher Wade Pfau who found that over 80% of retirement outcomes are
determined during these ten years. Reasons for this include the general shift in lifestyle,
spending, and investment management.

As you navigate this fragile phase, careful planning and strategic decision-making become
important to ensuring long-term financial security and health in retirement. It’s key to receive the
advice of a trusted expert in this period especially; however, there are a few things you can do
to best position yourself for this crucial time.

Rethinking Income Strategy

Many people think that achieving a savings goal is the single most important element of
preparing for retirement. The truth is that it’s even more important to create a strategy around
generating income in retirement. You simply don’t know how long savings will last. Creating an
income strategy in retirement equips you with an action plan that continues on. The more
diversified your income streams are, the better off you’ll be. Dividend-paying stocks, i-bonds,
real estate investments, annuities, and more all provide additional income streams. Diversifying
income streams enhances financial resilience and ensures a steady cash flow even as you
move out of the workforce.

Prepare for Healthcare Costs

Healthcare just keeps on improving! As medical advancements continue to progress, people are
living longer. That means retirement income has to stretch further as a result. Planning for
healthcare expenses is crucial, but it’s hard to anticipate these big things that haven’t happened
yet. Additionally, inflation for healthcare services continues to outpace the general economy. So,
costs for care are only going up, up, up.

A lot of people make the mistake of assuming Medicare will cover all of their medical bills in
retirement. But that’s simply not true. Medicare will cover some medical expenses. You’ll still be
on the hook for important things like vision, dental, and long-term care. While it’s difficult,
planning healthcare expenses early on is essential to mitigate financial strain in later years.
Even with the level of uncertainty, insurance premiums and medication costs are things you can
better plan for in advance.

Consider Your Investments

In retirement, your system of adding new money to your savings will shift and you’ll more
regularly be taking money out of your accounts. If the stock market is doing well, the money you take out might be balanced by new gains. But if the market is down for a while, every time you
take money out, it could be more like taking a slice from a shrinking pie. This is called sequence
of returns risk, and it’s something that all investors have to contend with.

If you retire when the market is up, you might be okay even if it goes down later. But if you retire
when the market is down, your savings might not bounce back. This risk is heightened during
the first decade of retirement when your portfolio balance is at its highest, and withdrawals may
have a more substantial impact on its sustainability. The market’s timing is beyond your
control, but you can take steps to minimize the risk. Regularly checking and adjusting your
investment mix every 6 to 12 months can help. Make sure your portfolio is diverse and matches
your age, goals, and how much risk you’re comfortable with. The important thing is to have a
plan!

Stay Active, Stay Healthy, and Stay In Touch

Beyond financial considerations, it’s extremely important to prioritize your health – mental and
physical – throughout the period right before and right after retirement. It’s a time of major life
shifts, disruption, and, frequently, some stress – no matter how welcome your retirement may
be! Staying active, engaging in meaningful activities, and maintaining social connections are
vital to a fulfilling retirement. By cultivating a healthy lifestyle, you not only enhance your quality
of life, you also reduce the risk of costly medical interventions in later years.

The most dangerous decade certainly sounds scary! And the truth is, it can have a huge effect
on your overall retirement. However, with planning and proactive strategies relative to your
income planning, healthcare costs, and investment portfolio, you will be well-positioned to
weather the storm. Your journey through retirement is not only about financial security; it’s about
living a fulfilling and purposeful life. Our comprehensive retirement planning aims to equip you
with the full package so you can do just that. To review the strategies for your “most dangerous
decade”, call us today at 952-460-3290.

5 Considerations To Help You Land the Right Financial Advisor

February 29, 2024 by Courtney Saaf

With more and more financial products hitting the market and a growing number of so-called gurus shilling financial advice from every nook and cranny of the internet, it’s more important than ever to have a trusted financial advisor in your corner. But with so many opinions floating around, how can you determine who to actually trust? Navigating through the maze of investment options, retirement plans, and financial strategies demands tried-and-true expertise and insight. We’ve put together a list of five things to consider as you sift through the noise and find a professional who’s worthy of your trust.

Communication Style: Clear and effective communication is crucial to the advisor-client relationship. In this industry, things can get complex and confusing quickly. You want an advisor who can spell it all out for you in a way you understand. Beyond that, you’ll want to work with someone who responds promptly and is willing to provide you with regular updates. Transparent and open communication fosters trust and ensures that you remain in the know and empowered throughout your financial journey.
Credentials and Beyond: Formal credentials can be a valuable indicator of expertise, but they don’t provide a complete picture of competency. In the world of financial consulting and retirement planning, there is a whole spectrum of designations ranging from rigorous to just plain formalities. Take into account a prospective financial advisor’s track record, integrity, and compatibility with your financial goals, rather than simply relying on the acronyms trailing their name.
Specialization: Just like you’d consult a cardiologist for heart-related concerns rather than your family doctor, you should seek out a financial advisor whose expertise aligns with your specific financial needs. At Secured Retirement, our specialization revolves around income and tax planning for retirement. Having a specialty indicates the presence of proven strategies. Whether you’re interested in retirement planning, estate management, or investment strategies, and depending on where you are in your financial journey, working with a specialist ensures guidance and comprehensive insights tailored to your goals.
Life-Long Learning: Even the most decorated financial professionals should seek out ongoing education and training. This is a field that is constantly changing. You want to work with advisors who keep up with this change. What’s more, you want to know that the training they’re doing isn’t on sales techniques, but in areas of financial substance. Ensure your financial partner values honing their knowledge and skills in their area of expertise so that they consistently stay on top of their game.
A Range of Approaches: Every family’s financial situation has its strengths and weaknesses. Within their specialty, your financial advisor should be able to tailor their approach to your unique situation in order to achieve your personal financial goals. You need a partner who takes the time to listen to your vision and can craft a strategy around it. There is no one-size-fits-all approach in this industry, and if anyone claims there is. . . Beware!

In the complex world of financial planning, working with competent financial professionals you can trust makes all the difference. At Secured Retirement, we’ve built our business with these very considerations in mind. We’re a partner you can rely on and thrive with.

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Connect with us today: 952-460-3290

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