What question do I get asked the most?
As a father, it’s been, “What are we doing tomorrow?” I get that asked every night, once by the first kid and then again by a second who didn’t hear me answer the first time around.
As a husband, it’s “What are you working on?” My wife would be the first to admit that she asks that as a management technique, more like a cattle prod, to make it through a to-do list, work-related or not!
As a personal financial advisor, it's “How are we doing?” which is a pretty good question.
It leads to a whole lot of other questions, some from me and some from the client. We get into conversations like “Compared to who?,” “Are we on track with our plan?,” "Did we meet our goals?," or "When can I retire?" Then for some pre-retirees, I hear, “Can I actually, um, retire now?” because even with our best intentions, life can get in the way like a health crisis, family member in need, relocation, or layoff and accelerate the timeline.
Best laid plans and all.
When it comes down to it, there’s so many ways to get to and define retirement, such as traditional retirement, early retirement, semi-retirement, mini-retirement, career-pivot retirement, and entrepreneurial retirement.
Some of you may be early enough in this process to explore a few of those, but others may be full speed ahead to an approaching target date. Whichever way you get there, retirement brings with it a host of questions and decisions, especially concerning income and financial management. For those who haven't retired yet, understanding where your future income will come from, how distributions work, and the complexities of managing various accounts is crucial. Take stock of what investments, cash, inheritances or other assets that you have, and ask this question:
If the answer is yes to the latter, as in "Yes, expert guidance would help me retire faster or with fewer mistakes and then stay retired as intended," then keep reading.
Here's a guide to what happens when you retire and how bringing your accounts over to our firm either at the finish line, or as you go, can help streamline your transition.
Preparing Your Retirement Income
Before retiring, it’s essential to establish a clear understanding of where your income will come from and how much you need to take and the flip side, how much you can afford to take. Some typical sources may be:
- 401(k), 403(b), 457 Plans: Many companies offer 401(k) or other retirement plans (Traditional or Roth), allowing employees to save pre-tax income for retirement. These accounts can be rolled over into an IRA once you retire, offering more flexibility and potentially better investment options.
- IRAs: Individual Retirement Accounts are a popular choice for retirement savings, offering tax-deferred growth. Roth IRAs, in particular, allow for tax-free growth and withdrawals, making them a valuable tool in retirement planning. You may also have a SEP IRA if self-employed, a SIMPLE IRA, or inherited IRAs with special distribution rules.
- Pensions: If available, pensions provide a steady income based on your salary history and years of service. Potentially, you can take a lump sum payoff if it makes sense. Some pensions can be good, but a lot of people underestimate the risks associated. We’re seeing less pensions with more individuals needing to be responsible for their own retirement.
- Social Security: Understanding the timing and strategy for claiming Social Security benefits (and depending on your age, if you want to plan it for it at all) can significantly impact your retirement income.
- Personal Savings and Investments: These include any savings accounts, stocks, bonds, ESOPs, HSAs, life insurance, variable or fixed annuities or other investments you might have.
Understanding Distributions
An effective withdrawal strategy ensures your savings last throughout retirement. It involves understanding the tax implications of different accounts, deciding the order in which to withdraw funds, and mitigating risk to maximize savings. Once you reach 73, based on current federal tax code, you must start taking minimum distributions from most retirement accounts, except Roth IRAs. Calculating these correctly is important to avoid penalties. Knowing how to manage distributions from your retirement accounts is key.
Why Consider Bringing Your Accounts to Our Firm?
Managing retirement accounts and distributions on your own can be complex. Make it a financial advisor you can trust.
People come to me for the service.
I can help you consolidate your accounts, which can simplify management and potentially reduce fees. I would be able to provide personalized financial planning based on your specific goals and needs, helping to maximize your retirement income. My experience, training, and software will help manage your investment portfolio, ensuring it aligns with your retirement objectives and risk tolerance. I stay current with tax laws, investment strategies, and economic forecasts, which can significantly impact your retirement. Additionally, I know my way around tax law and develop tax-efficient withdrawal strategies to help minimize your tax burden and maximize your net income, which all start with how and where you save during your pre-retirement years. For some, the most valuable service an advisor offers is peace of mind, knowing that a professional is at the helm, not a robo-advisor, not a rotating door of employees at a nearby bank, not a call center that you don't have ties to, and not a money coach. An actual human with a personal relationship with you, trained and credentialed, backed by a team of professionals at LPL Financial, our broker-dealer firm.
Conclusion
Retirement is a time to enjoy the way you do best, such as family, hobbies, friends, or travel (just insert the words “new and old” in front of all those nouns). It’s not a time to stress the financial management. Preparation actually goes back to those three questions that my family and friends ask me:
1. What are you doing tomorrow?
2. What are you working on?
3. How are you doing?
I'm here when you want answers.