Retirement Income Planning – Keep it Simple
By Steve Gaito
Having been a CERTIFIED FINANCIAL PLANNER TM practitioner for over 15 years and provided retirement planning services for over 27 years, I have seen many strategies to create retirement income plans. In fact, I have spent the last 8 years attending what is known as the Retirement Income Summit to keep up to date with the latest thinking on retirement planning. This year it was a virtual event but very well done. There were several conversations about COVID-19 and the impact it has on retirement income and the risk people have to take to generate income. There was another topic that I have been discussing for several years and that the tax impact on retirement plans as a significant risk in retirement. Once quote that stood out to me is “you are in control of your tax situation today. You have to get it right.”
The reality is that people are worried about their retirement. Protecting your retirement according to a Nationwide Insurance survey is the top concern for 88% of people close to retirement. Interestingly taxes were the second-highest concern at 68% with Long-Term care the third most concerning area for retirement at 56%. This is great for me personally because they are areas that I have focused on for several years.
One way I help people understand how to plan for retirement is to go back to when they started saving for retirement. The question I ask is why you saved for retirement. The answer is always the same. It was so they would have income or a paycheck in retirement that they could live comfortably for the rest of their life. Not once have I had the response I want a large portfolio that I worry about the stock market every day as the objective. So, my question is why do so many people do something different from their original objective? For most, it is lack of understanding the alternatives and the bias of those that sell them. I prefer to deal with reality and facts. If I can find an income that you cannot outlive at a reasonable cost isn’t that what your original goal for saving was? Absolutely. This addresses the first concern of a retirement income plan.
Now let’s look at the second concern, taxes. This should be a huge concern for most retirees. The reality is that COVID-19 will have a significant impact on future taxes. With the national debt expected to exceed 30 trillion dollars most believe that taxes will have to rise to pay for this. Currently, we are at the lowest personal income tax rates in modern history, but that will change. The Trump tax rates sunset or go away in 2026 and will return to higher rates. This creates an opportunity to both save now and reduce the taxes you will pay on your retirement plans in the future. It takes a strategy, but I believe this is one of the most important areas that you can minimize risk. The risk of paying higher taxes in the future. The third area of concern and this is probably the single biggest risk based on the likelihood of a long-term care event is Long-Term Care insurance. Currently, 69% of people today rely on spouses, family, and friends for care. This is very taxing on all of the above and as we have seen recently results in moving into nursing homes. After COVID-19 this is not an outcome that people want. More than 50% of COVID-19 deaths were related to Senior living facilities. Having a plan for at-home care for most people is the preferred option. With the proper planning, you can create a plan that protects your family and friends and allows you to be cared for in the comfort of your own home.
For me and my practice, I like to incorporate all three of these areas into one retirement income plan. With proper planning, these risks can be reduced or eliminated. If you can come up with a plan that gives you the certainty of income, certainty of taxes, and security of long-term care. This allows you to enjoy the freedom of retirement that most say they want. It is not that difficult, but it does take a plan. If you have questions please feel free to contact my office to schedule a time to talk about how we can create your custom plan. We do not charge for the initial consultation.
Steve is 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 firstname.lastname@example.org or visit his website at www.faithbasedhc.com.
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