Financial Planning for Retirees
You've seen a lot, but life is still beginning in many ways. You may be recently retired but need to know that you can live the lifestyle you always imagined. You know there are still critical steps to make, whether it is planning to minimize taxes or structuring your investments to withstand a market downturn.
Developing peace of mind around retirement includes answering questions like:
- How do we make an intentional effort to make our retirement years purposeful?
- How do I receive a "paycheck" from my portfolio now that my regular paycheck went away?
- What is a reasonable spending level for us?
- Are our assets positioned in a safe manner, knowing that we still need some growth for a long retirement?
- How do we position our portfolio for a reliable stream of income without taking too much risk?
- Are there critical tax moves to make early in our retirement? How do I manage my taxes later in retirement?
- When do we take Social Security, taking into account taxes and longevity?
- How do we manage health care expenses in retirement, and how do we take into account long-term care needs?
- If I wanted to age in place, what are the major considerations?
- We would like to help out with our grandchildren's education, but can we?
- Do we have the right documents and people in place in the event of my incapacity?
- What are some of the best ways to get involved with my community?
- How do we leave a legacy that is meaningful to us?
There are both financial and quality of life issues we must address both now and throughout our retirement journey. I want to make sure we have a trusted fiduciary advisor were something to happen to either of us.
Case Study: A Retiree Success Story
Situation
Tom and Ellen recently retired, but for most of their lives they managed their own finances and kept a close eye on everything. They were disciplined savers, had accumulated meaningful assets, and always took pride in staying involved. As retirement approached, they wanted a second set of eyes to confirm whether the approach that worked during their working years would still hold up now that they were living off their savings instead of adding to them.
The couple was interested in Roth conversions but were unsure whether now was the right time or whether the tax impact would make them regret the move. Related to that, they were concerned about IRMAA, the income-related surcharge that raises Medicare Part B and D premiums, and how a large income event could push them into a higher tier. They wanted to be intentional about helping their kids, but they weren't sure how much they could give without creating problems for their own plan.
Analysis and Planning
We modeled a four-year Roth conversion window before Tom and Ellen's required minimum distributions begin. Utilizing our Wealth Planning Services, we gave them specific conversion recommendations to stay just under the next IRMAA threshold rather than optimizing for the lowest possible tax bracket alone. We discussed the tradeoff between paying more tax now and reducing forced income later. That analysis also set the boundaries for their gifting: an annual amount they could give consistently, including in a year when the market was down.
We built their retirement income around a distribution strategy designed to replace their paychecks while preserving flexibility. In addition, we ran a survivor scenario showing how their income and IRMAA exposure would change if one spouse passed away well ahead of the other, and confirmed their Social Security claiming strategy. We also reviewed their insurance and estate documents for consistency with the rest of the plan and simplified a few accounts to reduce administrative overlap.
Outcome
Tom and Ellen came away with a specific conversion schedule which we executed for them each year. They had a gifting number they knew they could sustain, and a clear picture of how their income and Medicare costs would hold up if either of them outlived the other. Now, we meet with them twice each year to review any changes and keep their strategy aligned with their goals. We manage their investments and monthly cash distributions so they can enjoy retirement without thinking twice about when the next check is going to hit their bank account.