O-Rings in Retirement
By Steve Gaito
Recently my pastor during his sermon described the impact that an O-Ring had on the Space Shuttle Challenger. Most of us that were alive when this happened can remember this clearly. We remember seeing it lift off and shortly thereafter explode in the sky. For our space program, this was a tragic day. What is not commonly known is that there was a scientist that was trying to warn them of the problem. First, it may be helpful to understand what an O-Ring is and what it does. Basically, it is a small ring of rubber that seals where two parts come together. While small it is especially important. In the case of the Space Shuttle, it was the seal between the flames and the fuel. You can imagine what that meant. Alan McDonald was trying to warn people about what could happen, but the “experts” simply dismissed him and proceeded with the launch. To read the whole story go to NASA.gov and search Challenger to find the article.
So, what does an O-Ring have to do with retirement? The reality is that it has less to do with the O-Ring and more to do with what McDonald was trying to do. He was trying to warn them of a pending catastrophic situation that eventually played out with the explosion of the Challenger. With our retirement plans, many people rely on “Experts” to help them plan for their retirement. While most believe that they are doing the best, they fail to understand that in retirement several O-Rings must be dealt with. The two that come to mind immediately are taxes and long-term care. If not addressed it creates a failure in your plan. Knowing when to pay taxes and how to minimize the impact of future taxes can make a difference in the quality of your and your spouse’s life in later years. As an example, if you are taking out $50,000 from your IRA a year and have an effective 20% tax rate you pay $10,000 in taxes and get to keep $40,000 to spend. If there is a 5% increase in taxes the numbers change to $12,500 to the government and $37,500 to spend. Now, this may not seem like a huge difference, but later in life when every dollar counts it makes a big difference. What about a 10% increase? This would mean $15,000 to the government and $35,000 to you. Many people think this will not happen, but like the Space Shuttle, it can and does happen. Most of the time when one spouse dies and the surviving spouse changes from married filing to single. The second O-Ring in retirement is Long-Term Care. In North Carolina, the average cost of a Nursing Home is $94,252, Assisting Living is $54,489 and Home Care is $49,178. These costs, and 3 out of 4 people needing some form of care, reveals the need for planning for your Long-Term Care needs. What impact would a $300,000 to $400,000 expense have on your plan?
My goal in writing this article is not to scare people, but to inform you of the O-Ring that is in your retirement. My job is to make sure that each of these is properly addressed, so you do not have an unexpected tragedy later in life. My website has lots of free information and I provide a free initial consultation either in my office, on the phone, or via Zoom. In any case, it cost you nothing to make sure your plan does not have an O-Ring that fails when you need it the most.
Steve is the owner of Faith-Based Health Care and Retirement Resource Management. He is a National Speaker on the topic of Social Security optimization, quoted in national publications like Money Magazine, US News and World Reports, and Fox Business. Steve loves to educate and teach on financial topics like taxation of retirement accounts, long term care, healthcare, and efficient savings plans for small businesses. He has provided financial planning for missionaries through the International Mission Board. You can find Steve at 68 South Main St. in Marion, NC by calling 828-559-0299, email email@example.com or visit his website at www.faithbasedhc.com.
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