We talk to a lot of people every day, and while every situation is unique, we do tend to find some common questions being asked. More often than not, that includes how they’ll be able to maintain their lifestyle in their retirement years. So, we thought we’d share a few questions of our own to help you assess how prepared you are for retirement.
Question #1: Do I Have Enough to Comfortably Retire?
To determine how much money you need to comfortably retire, first you’ll need to assess how much income you’ll need every month.
First, cover your basics. What monthly income is required to meet your financial obligations? But, let’s be honest, you don’t want to retire just so you can sit on your porch and watch the grass grow. You want to enjoy your retirement years.
That’s why, on top of the basics, you should also consider any traveling or hobbies you want to pursue during your retirement. How much income do you need to live the life you’ve always dreamed of?
Once you have a number in mind, you’re ready to start creating a retirement income plan. This the Foundation step of our Financial House retirement planning approach. We want to help you create an income plan you can’t outlive custom designed for you.
Question #2: How Will I Maintain an Income Stream in Retirement?
If your only source of retirement income is your Social Security, you can have peace of mind knowing that retirement “paycheck” is going to be coming for the rest of your life.
However, if you want more than what Social Security will provide, you can supplement your income using your IRA, 401(k), or other retirement accounts.
You may consider using an annuity. Now, if you’re like most people, you either love or hate annuities. I’ve rarely met someone who’s indifferent to them. That said, many things about annuities have changed over the years. An annuity is a fixed sum of money paid to someone each year, usually designed to last the rest of your life.
Setting up an annuity can potentially help you to avoid outliving your money by guaranteeing an income stream.
Question #3: What Will My Tax Rates Be in the Future?
Nobody knows the future, but with the current state of the economy, where do you think taxes are headed? Unless something changes before December 31, 2025, tax rates are going to revert to what they were in 2017 before President Trump’s Tax Cuts and Job Acts was signed into law. I’m fairly confident they will go up even further.
This creates a potential threat to your retirement income. That’s especially true if you’re heavily invested in tax-deferred accounts like IRAs, want to pass your money on to heirs in a tax-efficient manner, or own real estate.
By doing proper tax planning, we can help you reduce the impact any tax changes in the future will affect your income.
Question #4: Are My Retirement Funds Really Diversified?
All too often, when we review someone’s finances, they believe they’re more diversified than they really are. They have different types of accounts, sure, but those various accounts are all invested in similar ways.
Or they’re invested in various industries that react similarly under certain economic situations. What you want is to invest in assets that react differently under volatile economic conditions.
So, are your retirement accounts really as diversified as you think? Our team of Financial Architects would be happy to sit down with you and review your risk factor and how truly diversified you are.
We can also help you define any of the questions above and more regarding your retirement plan.
When you’re ready to retire, give our office a call at (435)773-9444 to schedule your complimentary Financial House review.