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

Author

Senior Tax Advisory Group

Posted on

Jan 25, 2023

Book/Edition

Colorado - Colorado Springs

“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 story—understanding 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 you’re 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 one’s planned age at retirement versus one’s life expectancy. If an individual retires at 65 and lives until 90, his or her money has to last for 25 years. “It’s 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 today’s world of planning,” Andreson remarks. “It’s likely because no one likes to think about mortality, but this is something that can’t 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 doesn’t 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. Darian is the CEO of Colorado Spring’s Senior Tax Advisory Group a Registered Investment Advisory Firm and Insurance Agency.

Website: www.SpringsTax.com

Other Articles You May Like

Keeping Independent Senior Living Costs Affordable

Keeping Independent Senior Living Costs AffordableBy: Country Meadows |  Independent LivingAs people plan for the future, one common goal among older adults is to maintain independence in the comfort of their own homes for as long as possible. However, life is unpredictable, and there may come a time when seniors find themselves in need of a little extra support with everyday tasks or simply crave companionship. Independent living is designed for seniors who are generally healthy and active, but prefer a community setting that offers convenience, social engagement with others and amenities such as meals or recreational activity programs. Independent senior living costs can vary widely based on several factors such as location, amenities, additional services provided and type of housing.Housing typeThe type of housing a senior chooses can significantly impact independent senior living costs. When seeking information on various types of housing, seniors will find options that may include apartments, cottages, condominiums or single-family homes. Larger or more luxurious accommodations typically come at a cost with higher fees.LocationParticular geographic areas can influence overall expenses. Independent senior living in urban or high-demand locations will have higher costs than those in rural areas, as is the case in private homes or rental properties. For example, independent senior living in New York City will come at a much higher rate than living in rural Pennsylvania.AmenitiesIndependent senior living costs often include a range of amenities and services such as fitness centers, activities programs, housekeeping, laundry and transportation services. The more extensive and upscale the amenities, the higher the cost may be. Consider which amenities are important to you and your loved one when choosing senior living accommodations.Meal plansSome independent living communities offer meal plans as part of their services. The cost of these plans can vary based on the number of meals provided each day as well as dining options available, such as special meals where premium menu items such as filet mignon or lobster are offered.Utilities and maintenanceIndependent senior living costs may include utilities and maintenance services in their fees, as is the case at Country Meadows Retirement Communities. Others may have separate charges for these services, which is why its essential to clarify items included in the monthly fee.Healthcare servicesWhile independent living is designed for seniors who are relatively healthy, some communities offer healthcare services or have arrangements with healthcare providers and vendors such as nursing agencies and medical specialists. Additional healthcare services may come with extra costs.Community fees and depositsThere are several different types of senior living communities, and with those come a wide variety of costs. A Continuing Care Retirement Community, also known as a CCRC, may require a large entrance fee for admission as well as a monthly charge to guarantee service availability at every level of care. Other senior living facilities may require a community fee in addition to monthly charges. This fee may cover administrative costs, reserve funds or contribute to community improvements.Social and recreational activitiesAccess to social and recreational activities may be included in the monthly fee at some senior living communities, such as Country Meadows Vibe program. Some independent senior living costs might include higher fees for organized events, outings, entertainment, classes and fitness services.Transportation servicesTransportation services for medical appointments, shopping trips and social outings may be included in independent senior living pricing at some communities. At other locations, transportation services may be billed separately depending on a variety of factors such as distance and time of day.Security and safety featuresIndependent senior living costs typically include secured building entrances and 24-hour emergency response systems in private apartments. Additional security features which might incur higher fees are 24/7 medical alert systems and security personnel, which can significantly impact cost.Its crucial for seniors and their families to thoroughly review the costs of each community. Additionally, considering the long-term financial implications, including any potential increases in fees, is important when evaluating the affordability of senior independent living.Stop by one of Country Meadows Retirement Communities nine campuses in Pennsylvania or one in Frederick, Md., to pay us a visit. For information about any of our locations or services, or to ask a Question, please reach out to our expert advisors. Were here to help! Country Meadows

Financing Senior Care & Assisted Living

PERSONAL FUNDS Utilizing personal funds to pay for a move to a Senior Living Community is an uncomplicated option for some people. Whether it be through savings, liquidating certain assets, or drawing upon investment income, this strategy provides seniors with a payment method that they have the most direct control over. Working with a financial advisor to plan for this is often beneficial. In addition, many Senior Living Communities have special team members who are experienced in financial matters and can offer assistance as well. SOCIAL SECURITY & MEDICARE   Social Security payments can be used to help pay for the costs of living in a Senior Community. However, the amount it would cover will depend on the recipients monthly benefit.  According to U.S. News and World Report, the current average benefit paid is $1,657 each month. It is important to understand that while Medicare does not cover the actual costs of living in an Independent Living, Assisted Living or Memory Care Community, it does help pay for other critical needs, such as prescriptions, doctor visits, medical equipment and  other health care related expenses. LONG TERM CARE INSURANCE & LIFE INSURANCE Long Term Care insurance (LTC) is a special type of policy that helps pay the expenses of home care or a Senior Living Community. The amount of benefit available from a LTC policy can vary by such factors as the amount of the monthly payment, as well as the duration of the benefit.  Some life insurance policies can be cashed in for a lump sum payment while the insured is still living under what is known as a Life Settlement arrangement. Policy holders should review their life insurance contracts to see if this feature is available to them.    VETERANS BENEFITS If you or a loved one served in the military, the U.S. Department of Veterans Affairs (VA) has programs that can help pay for certain Senior Living services. While these dont pay for direct housing expenses, the VAs Aid and Attendance benefit is available to veterans that meet certain income requirements and also have difficulty performing activities of daily living (ADLs), such as dressing, eating, bathing, using the restroom, or moving about.  REAL ESTATE ASSETS If the person thinking about moving into a Senior Community is a homeowner, their house can be a good revenue source. Selling the home, renting it out, or arranging for a Home Equity Line of Credit (HELOC) are all ways to help pay for living expenses at the new residence. If you have any questions, call us today at 402-819-0669.

Home Care for Independent Seniors

Most seniors today prefer to remain in their own home for as long as possible. They dont want to give up their independence by moving in with family or into an independent living facility. This is known as aging in place and can be a viable option for seniors who need little to no assistance with activities of daily living.In-home senior care services from Gentle Shepherd Home Care in Colorado Springs can make this possible. Our caregivers are trained to handle an array of elderly care services from companionship to meal prep to medication reminders to transportation and more.In this article, well explain some of the benefits of in-home care for independent seniors.Who Needs In-Home Care Services?Gentle Shepherd Home Care offers a variety of in-home care services for all ages and needs. However, most of the time, patients who need home care are elderly. If youre unsure if your loved one needs in-home care, consider the following questions:Does your elderly loved one hear the phone when it rings?Do they understand how to safely store food and toss it when it has gone bad?Are they able to cook and clean up after eating?Are they attending social/family gatherings?Can they do their own laundry?If the answer to any of these is no, your loved one may benefit from in-home care.4 Benefits of In-Home Senior CareWhile it can be difficult to accept, nearly everyone will require some type of assistance after the age of 65. If the thought of moving in with relatives or a nursing home/assisted living facility is unappealing for your loved one, in-home senior care can help them age in place.Four benefits of in-home senior care include:Household MaintenanceThere is a lot of work that goes into keeping a household running smoothly. Caregivers can help stay on top of household chores such as laundry, handyman services, housekeeping, and more. They may also help with financial and healthcare management, as well as appointments and financials.TransportationFor many seniors, transportation is an issue, especially at night. Unfortunately, public transportation is not always safe- especially for elderly people. However, one of the services offered by caregivers includes transportation.Personal CareMany seniors need assistance with activities of daily living including meal prep, bathing, dressing, and more. In-home senior care providers can be in the home to help with these activities.Health CareAging usually brings a variety of health concerns as well. Some caregivers are trained to help with these concerns including taking blood pressure, blood glucose readings, medication reminders, and more. Many times, health insurance will cover a portion of these services.Schedule Your Care Assessment TodayIf you believe that you or your loved one may benefit from elderly care services, schedule a no-obligation care assessment. Gentle Shepherd Home Care offers care services for all ages and needs. We can offer companionship for your loved one, and many of our caregivers are able to provide medical care as needed.

Local Services By This Author

Colorado Communications Organization

Continuing Education 6775 Rangewood Drive, Colorado Springs, Colorado, 80918

Colorado Communications Organization provides education to our local community on current Life, Health and Wealth issues through educational programs developed by local experts. Communication is the key to success in everything you do. We are devoted to bringing current, useful information to Southern Colorado.

Senior Tax Advisory Group

Income Tax Filing 6775 Rangewood Drive, Colorado Springs, Colorado, 80918

"Senior Tax Advisory Group is a company that specializes in serving the retirement needs of anyone over the age of 50. We have helped over 3,000 people in the greater Colorado Springs area since 2002. Our Review and Discovery process helps you discover if your current strategies match up with your future plans. Our proprietary process helps guide you through retirement. Well help you make informed decisions, avoid costly mistakes, lower income taxes, increase your estate size, and we are experts at removing unnecessary risk This proven process helps us create a sound plan based on facts and logic not emotion and opinions. Thats what makes our firm different!"

Colorado Communications Organization

6775 Rangewood Dr, Colorado Springs, Colorado, 80918

Colorado Communications Organization provides education to our local community on current Life, Health and Wealth issues through educational programs developed by local experts. Communication is the key to success in everything you do. We are devoted to bringing current, useful information to Southern Colorado.