Countdown To Retirement


Senior Tax Advisory Group

Posted on

Jan 25, 2023


Colorado - Colorado Springs

Getting ready for retirement can be exciting. With such a huge lifestyle change, you should consider starting to lay the groundwork now. Here are some tips to help you through that transition.

Create a realistic budget.

When planning your retirement budget, remember that some expenses may decline in retirement, but your medical expenses will most likely go up as you age. Plus, be sure to include any long-term care expenses.

Set a firm retirement date.

You probably have an idea of when you’d like to retire, now could be a good time to set that date in stone. This is also a good time to talk to a Retirement Planning Specialist to help determine when you should claim Social Security to maximize your benefits and factor that into your planned retirement date.


Determine your retirement lifestyle.

In-depth research is a must no matter where you plan to live in retirement — whether it’s in another country or a nearby assisted-living community. Aside from obvious factors like the weather, you should also consider factors like state and local taxes, the local real estate market, proximity to friends and family, access to the kinds of activities you enjoy, and access to high-quality healthcare. If possible, take some of your saved vacation time and spend a couple of weeks living as you plan to in retirement.


Review your portfolio.

Soon you’ll be switching over from putting money into your retirement accounts to taking money out. If you haven’t already done so, you should rebalance your investments in preparation for retirement. For example, you may want to reduce the amount of risk. You may want to look at more income producing investments such as fixed indexed annuities, or income producing bonds. The number 1 concern in retirement is running out of money. This is also a good time to take your account statements to a financial professional who has experience in retirement planning and ask for guidance.

To learn more about Senior Tax Advisory Group call them at 719-596-4844. 

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When Retirement Saving is Done, Distribution Planning Makes all the Difference

Saving is the usual buzzword when it comes to planning for your post-work years. But accumulation leading up to retirement is only half the storyunderstanding how the funds will be dispersed is the other crucial, yet often overlooked, aspect of the planning process. While a recent Prudential study[1] notes that there are more people than ever before retiring and entering the distribution phase, their knowledge about this delicate period of managing investments and coordinating withdrawal strategies is often limited, and could be costly. When youre over the age of 50, you need more than a pie chart, you need a distribution plan says Darian Andreson, principal of Senior Tax Advisory Group, a financial planning firm located in Colorado Springs, Colorado. There are approximately 10,000 people retiring every day. Of these retirees polled, the number one concern consistently shared is that they fear running out of money in retirement. It seems there is too much emphasis today on the diversification of portfolios and pie charts, and not enough time and attention spent on how to coordinate and fund quality of life in retirement.  No one can control when the next major market correction will occur, but there are dozens of critical things that a retiree can control, which can result in hundreds of thousands of extra dollars in their pocket, giving them a far better opportunity to address the fear of running out of money.Since many of these retiring baby boomers will rely on social security as a good portion of their post-retirement income, understanding how the system works and how various decisions that will impact the amount of benefits received make it vital to get good information prior to distribution time. The revelation of Social Security is not so much about when you file, as much as it is about how you file, comments Andreson. When a plan is properly designed, we regularly see families receive a few hundred thousand extra dollars in Social Security benefits over a lifetime, in addition to tens of thousands of dollars in tax savings based on the tax favorable nature of these benefits becoming a larger part of their income distribution plan.In addition to designing a plan to maximize benefits, taxes are another important planning consideration. Although social security income is not taxable in and of itself, other income sources like withdrawals from 401ks or pension plans can cause our social security benefits to become taxable as high as 85%. For most, what they pay in taxes will represent the single largest expense they will have in retirement, just next to healthcare says Andreson.  Changes in the tax codes, also greatly affect how much tax retirees will pay on their income, so staying abreast of these types of changes and how they affect social security as well as other types of savings vehicles is also a key to keeping more money in the bank and seeing less going to the IRS.With so many moving parts to the retirement planning equation, Andreson emphasizes the importance of enlisting the assistance of a planner, particularly one who focuses on the distribution phase. Do-It-Yourself is too expensive when it comes to retirement planning. Though a bit of money is saved in the short-term, the unfortunate reality is that this type of planning can be both difficult to quantify and to properly execute, so mistakes are easy to make. There are no do-overs, so getting it right from the start makes all the difference, he says. And what exactly should a distribution plan consider? Of course, the most obvious consideration is ones planned age at retirement versus ones life expectancy. If an individual retires at 65 and lives until 90, his or her money has to last for 25 years. Its surprising how a simple thing like estimating life expectancy and the need to coordinate a plan to fund the needed after tax income is so rare in todays world of planning, Andreson remarks. Its likely because no one likes to think about mortality, but this is something that cant be avoided when talking distribution. Other important considerations include estate planning, inflation, the rising costs of healthcare and prescriptions in conjunction with a rising need for them as we age, all of which should be explicitly discussed and mapped during distribution planning.Whatever the particular considerations and whatever form the conversation about distribution takes, it has to happen and should be an ongoing part of the planning discussion. The bottom line is that no one should feel comfortable calling him or herself a retirement planner if he or she doesnt include Social Security maximization, withdrawal strategies or tax implications in their planning process. Putting these missing pieces together in the puzzle can make all the difference in the world. For more than 2 decades, Darian Andreson, CSA, has been guiding (and educating) retirees as they transition into retirement. 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Backdoor Roth IRA

Generally, you can only contribute to a Roth IRA if you have taxable compensation and income less than the top of the phaseout range for your filing status (see chart below). If your income is greater than that threshold amount, you are prohibited from contributing directly to a Roth IRA. A backdoor Roth IRA allows a taxpayer to bypass income limitations by first making a nondeductible contribution to a traditional IRA and then converting it into a Roth IRA. Due to the distribution rules for traditional IRAs, this works best if you have no other traditional IRAs. Roth IRA Limits 2023                        Roth IRA PhaseoutsIndividual Contribution Limits              MFJ or QW $ 204,000 to $ 214,000        Under age 50 $ 6,500                            Single, HOH, $ 129,000 to $ 144,000                                                                                                                                                  Age 50 or older $ 7,500    Conversion of nondeductible IRA.If you make a nondeductible contribution to a traditional IRA, you can convert the entire amount tax-free. Only the earnings on the nondeductible IRA contributions are taxed.Example: Manny is single and has a modified AGI of $250,000. He wishes to save money in a Roth IRA so he can make nontaxable withdrawals upon retirement. In 2022, he opens a traditional IRA with a $6,000 nondeductible contribution and a couple months later, converts it to a Roth IRA. He has no other traditional IRAs. At the time of Roth conversion, the account had increased in value by $250, which is the only taxable part of the conversion.Working with the right financial professional is critical! Be sure to work with a financial professional who understands taxes and can help you plan and take the necessary steps toward a tax-free retirement.

Fork in the Road: Repair or Replace Your Vehicle

Deciding whether to put more money into an aging car or to replace it with a new or used vehicle is rarely a simple decision. Plus, skyrocketing vehicle prices and economic uncertainty are making the decision process even tougher.Signs It Is Time To Replace Your CarTo help you decide if it is time to replace your vehicle, look for these signs:The kids would rather walk miles to their friends house than ride in the car.Your oil bill is higher than your gas bill.The mechanic names a repair bay after you.Your employer politely asks you to park next door.The sound of the engine causes tornado sirens to blare.If none of these apply to you, congratulations! Your car might still be street legal, but there are other things to consider. All joking aside, making the final call can be difficult. Heres a few helpful ideas:Making An Informed DecisionDetermine your risk threshold. No one wants to live in constant fear of being stranded or being in an accident because something in the car gave out. Reliability needs to be considered for every car, but especially if the typical route is remote, dangerous or unpredictable. It is even more important if you live in an extreme climate that is either very hot or very cold.Take newer car costs into account. While the idea of a newer, shinier car sounds nice, make sure you are counting all the costs especially if you need to add a car payment. Beyond the monthly principal and interest, keep in mind that insurance and annual registrations will likely be higher, too.Spend Some Time with The NumbersWhile a new, shiny car is fun, all too often it can create future financial hardship. So also consider the long-term financial impact of your decision. This includes:Used versus new car. Used cars typically give you the best price value, but limited supply is making used cars more expensive.Financing a vehicle has pitfalls. If replacing your car will require financing, be careful. Interest rates are going up and highly leveraged loans can quickly put you into more debt than the car is worth. This often happens if your car is damaged in an accident.Cars are unpredictable but taking an analytical approach and making the best decision with the facts that you have will pay off more times than not.Article Submitted by Senior Tax Advisory Group. Call them with any questions at 719-596-4844

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