financial advisors Archives - Southwestern Retirement Planning Advisors - Retirement Planning Chandler, AZ

20 Retirement Mistakes to Avoid

Kurt Rohrs — Sat, 08 Sep 2018 01:15:33 +0000

Mistaking Journalists for Financial Advisors

Most of these people majored in English or Journalism, not Finance. They give general advice targeting a general audience. There is no attention paid to your specific situation or wants needs, and desires. You need to sit down with a professional Financial Advisor to properly address those concerns.

Retiring without Liquidity or Diversity

“Don’t put all your eggs in one basket” … Yes, they were talking about your investments too. You need to address any number of possible market situations and personal situations and make sure to have funds readily available to deal with them.

Living on the Interest without Touching Principal

This locks you in to one distribution strategy that may not be appropriate under every circumstance. Some prudent management of multiple sources of income may give you more flexibility in dealing with changing circumstances.

Retiring without any Real Goals

If you have no idea what you want to do with the rest of your life it will be difficult to determine what your needs will be. This kind of uncertainty can be troubling.

Assuming you will be in a Lower Tax Bracket when you Retire

This assumes that Congress would never raise taxes. This may not be a reliable assumption.

Trusting a Calculator to tell you When to Retire

“Retirement Calculators” are designed for a general audience and may give you a general idea of what you may need. They also give very little direction on how to provide sufficient retirement income to meet your needs.

Retiring early only to Reduce your Social Security Benefit

Taking Social Security benefits early but needing a part-time job to fill the gap may cause the benefit to be reduced as well as permanently losing increased benefits available to you by delaying retirement.

Drawing Income form the Wrong Assets

If you have choices between multiple streams of income, which when should you choose and in what proportion? You may need to consider many factors including Taxation, Liquidity, Reliability, and Returns. A detailed analysis may be a good idea.

Choosing the Wrong Beneficiary

When you pass away, who will receive your remaining wealth? IRAs, Pensions, Life Insurance policies, Annuities and other financial instruments may all have beneficiary designations that need to be reviewed periodically to make sur e that they are up to date and align with your intentions.

Retiring without Estate or Insurance Planning

How do you protect the transfer against “Creditors and Predators”? How do you avoid taxation? How do you avoid Probate? You may want to consider careful Estate Planning to make sure your financial affairs are in order before that time.

Retiring on Hope

You should have an idea of what your expenses will be in retirement, how much you will need to save, when you can afford to retire, and how long your savings should last.

Ignoring Inflation

Prices for goods and services don’t stay the same. They may increase over time, especially Health Care costs, which have been rising faster than most other costs. You usually need more Health Care as you get older.

Making Seat-of-Your-Pants Money Decisions

What looked good today may not look so good tomorrow. One bad mistake can damage your retirement plans badly. Getting experienced, objective advice from a professional Financial Advisor can help you make more informed decisions.

Handing your Heirs Tax Problems

Proper Estate Planning can help ensure that your heirs maximize their inheritance instead of passing it along to the Government in the form of taxes.

Dismissing the Need for Long-Term Care

Contrary to popular belief, Medicare does not cover much on Long-Term Care expenses. You will have to come up with most of the funds yourself. Have you planned for this?

Being Talked into the Wrong Investments

Are you being sold a particular investment or are you being provided with options that are appropriate for your situation. You should insist on financial advice that is based on what is in your best interest.

Losing a Big Chunk of your Retirement Money in One Wrong Move

There are many decisions to make on moving money around at retirement including distributions options and rollovers. These need to be done properly to maximize your retirement benefits and to avoid undesirable outcomes.

Thinking Tomorrow will be just like Today

Past performance is not an indicator of future results. You may need to periodically reposition assets to address liquidity, stability, and income needs.

Retiring without an Investment Strategy

Investing in Retirement can be far different than investing before Retirement. You will be living off of savings during Retirement instead of trying to grow your portfolio. This needs a new strategy to be considered.

Set Goals as you Save and Invest

What are you trying to accomplish? Fund Retirement? Save for College? Build an Emergency Fund? Saving and investing based on well-defined goals can give you more focus on strategy and planning activities necessary to achieve your desired outcomes.

Conclusion

Proper planning can help you avoid mistakes that can lead to undesirable outcomes. You should meet with an experienced Financial Advisor to get some help. You can also get some more detailed information on this topic by requesting a free copy of our eBook “20 Retirement Mistakes Retirees Make and How to Avoid Them” by emailing to info@SWRetire.com.

For Retirement, Income Matters as Much as Savings

Kurt Rohrs — Mon, 02 Jul 2018 20:04:01 +0000

Steady income or a lump sum? Last year, financial services firm TIAA asked working Americans: if you could choose between a lump sum of $500,000 or a monthly income of $2,700 at retirement, which choice would you make?1

Sixty-two percent said that they would take the $2,700 per month. Figuring on a 20-year retirement for today’s 65-year-olds, $2,700 per month comes to $648,000 by age 85. So, why did nearly 40% of the survey respondents pick the lump sum over the stable monthly income?1

Maybe the instant gratification psychology common to lottery winners played a part. Maybe they ran some numbers and figured that the $500,000 lump sum would grow to exceed $648,000 in twenty years if invested – but there is certainly no guarantee of that. Perhaps they felt their retirements would last less than 20 years, as was the case with many of their parents, making the lump sum a “better deal.”

The reality is that once you retire, income is the primary concern. The state of your accumulated retirement savings matters, yes – but retirement is when you start to convert those savings to fund your everyday life.

Could you retire with income equivalent to 80% of your final salary? If you have saved and invested consistently through the years, that objective may be achievable.

Social Security replaces about 40% of income for the average wage earner. (For those at higher income levels, the percentage may be less.) So where will you get the rest of your retirement income? It could come from as many as six sources.

Systematic withdrawals from retirement savings and investment accounts. You may start taking distributions from these accounts at an initial withdrawal rate of 4% (or less). If these accounts are quite large, the income taken could even match or exceed your Social Security benefits.3

Private income contracts. Some retirees opt for these, though the income they receive may not be immediate.

Pensions. The health of some pension funds notwithstanding, here is another prime source of income.

Your home. Selling an expensive residence and buying a cheaper one can free up equity and reduce future expenses, thereby leaving more money for you to live off in the future.

Passive income streams. Examples include business income produced without material participation in the business, rental income, dividends, and royalties.

Work. Part-time work also lessens the pressure to draw down balances in your retirement and investment accounts.

Work longer, and you may indirectly give your retirement income a boost. One recent analysis from the National Bureau of Economic Research concluded that by delaying your retirement even three to six months, you could give yourself the potential to raise your standard of living in retirement as much as you would if you save 1% more of your pay over 30 years.3,4

Remember that earning too much in retirement can impact your Social Security benefits. Part of them can be taxed if your “provisional income” surpasses a certain threshold.

Social Security calculates your provisional income with the following formula: provisional income = your modified adjusted gross income + 50% of your yearly Social Security benefits + 100% of tax-exempt interest that your investments generate. (Since pension payments and retirement account withdrawals are considered ordinary income by the federal government, they both count in this formula.)3,5

If you are a married taxpayer who files a joint income tax return, as much as 50% of your Social Security benefits can be taxed if your provisional income tops $32,000, and as much as 85% if it exceeds $44,000. For single filers, the 50%/85% taxation thresholds are set at $25,000 and $34,000.5

Although your retirement benefits may be taxed, more retirement income is decidedly better than less – and a key part of retirement planning is estimating both your retirement income need and your retirement income potential. Talk to a financial professional about that matter before you retire.

Kurt Rohrs may be reached at (480) 812-8640 or kurtrohrs@SWRetire.com

Southwestern Retirement Planning Advisors, Inc.

3800 S. Alma School Road, Suite 123

Chandler, AZ 85248

www.SWRetire.com

Registered Representative offering securities and advisory services through Independent Financial Group LLC,

a registered broker-dealer and registered investment adviser. Member FINRA/SIPC

Southwestern Retirement Planning Advisors, Inc. is not affiliated with Independent Financial Group LLC

OSJ Branch: 4041 MacArthur Blvd. Ste. 240, Newport Beach, CA 92660

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – fool.com/retirement/2018/01/02/lifetime-income-retirees-need-it-and-heres-how-to.aspx [1/2/18]

2 – ssa.gov/planners/retire/r&m6.html [1/25/18]

3 – cbsnews.com/news/the-top-retirement-decisions-facing-older-workers/ [1/25/18]

4 – nber.org/papers/w24226.pdf [1/18]

5 – ssa.gov/planners/taxes.html [1/25/18]

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