Retire Today

Most people think tax planning means finding ways to pay less in taxes this year. But reducing today's tax bill doesn't necessarily mean you'll be better off in retirement.

Jeremy Keil talks with Freeman Linde, author of Tax Savings Strategies, about how couples over 50 can think more strategically about taxes before and during retirement. Explore the difference between tax preparation and tax planning, why deferring taxes isn't always the best choice, and how Roth conversions can be evaluated using projected future tax rates.

For disclosures and conflicts visit keilfp.com/disclosures.

Turning 65 doesn't mean Medicare works the same way for everyone. Some people are enrolled automatically, others need to sign up, and those who are still working may have additional decisions to make.

Jeremy Keil walks through five common Medicare mistakes that can create confusion, unexpected costs, or coverage problems. He explains why employer coverage isn't always enough to delay Medicare, how Parts A, B, C, and D fit together, and why Medicare Advantage and Medigap require different considerations.

For disclosures and conflicts visit keilfp.com/disclosures.

What does a successful retirement actually look like? Is it having $1 million, $2 million, or even $10 million saved? Is it having enough retirement income to cover your expenses, minimizing taxes, or simply having the freedom to spend your time however you choose?

Jeremy Keil shares responses from four retired listeners who define retirement success in very different ways. Their stories touch on setting savings goals, spending money you've worked decades to accumulate, managing Medicare IRMAA costs, building dependable retirement income, and enjoying time with family and community.

For disclosures and conflicts visit keilfp.com/disclosures.

Retirement planning often begins with a financial question: Will I have enough money? But once the paycheck stops and the financial pieces are in place, another question can become just as important: What am I going to do with the rest of my life?

Jeremy Keil talks with Arlene Nelson about her own transition into retirement as a single woman. Arlene expected retirement to bring freedom, but after the initial excitement wore off, she found herself struggling with a lack of structure, connection, and direction.

For disclosures and conflicts visit keilfp.com/disclosures.

Annuities tend to generate strong opinions. Some people insist they're terrible. Others talk about them as though every retiree should own one. Jeremy Keil and Jeremiah Konger of Annuity Association argue that both approaches miss the more useful question: When does an annuity actually make sense within a retirement plan?

Jeremiah and Jeremy discuss common misconceptions about annuities, including fees, access to money, market exposure, guarantees, and the financial strength of the insurance company issuing the contract. Plus, Jeremiah highlights the 4 major types of annuities and what typical use cases they apply in.

For disclosures and conflicts visit keilfp.com/disclosures.

Scammers don’t only hack into a computer to steal from their victims. Increasingly, they're trying to hack the person using it.

Learn practical ways to reduce your vulnerability. Robert’s three-step Analyze, Authenticate, Act protocol provides a simple response to suspicious communications, while unique passwords, password managers, two-factor authentication, and updated devices can create additional barriers for criminals. The goal isn't to assume you're too smart to be scammed. It's to build habits that make it harder for a scammer to get through.

For disclosures and conflicts visit keilfp.com/disclosures.

Do you really need a financial advisor in retirement? Jeremy Keil argues that the answer depends on a better question: What do you actually want a financial advisor to do for you?

After reading responses from Kiplinger readers about whether they use financial advisors, Jeremy noticed that most people immediately focused on investment management—choosing investments, managing portfolios, or trying to improve returns. Real retirement planning extends well beyond investments. For retirees deciding whether professional advice is worthwhile, start by identifying the problems you need help solving. Once you know what you need from an advisor, you can make a much better decision about whether—and what kind of—financial planner is right for you.

For disclosures and conflicts visit keilfp.com/disclosures.

A retirement plan is more than an investment portfolio and a decision about when to claim Social Security. Jeremy Keil is joined by financial advisor Joe Schmitz Jr. to compare the planning processes they use to help clients coordinate the many financial decisions that come together at retirement.

Joe explains his five-pillar approach covering tax planning, investments, income, healthcare, and estate planning, while Jeremy compares it with his own five-step Retirement Master Plan. Despite approaching the process from different angles, both emphasize an important point: your investments should serve your retirement plan—not become the plan itself.

For disclosures and conflicts visit keilfp.com/disclosures.

Some of the most tempting retirement investing mistakes begin with ideas that sound perfectly reasonable: move to cash when the market looks expensive, put everything in CDs while rates are attractive, leave stocks behind once you retire, or rely on dividend stocks for income. The problem is that each approach can allow one concern or prediction to dictate an entire investment strategy.

Jeremy Keil answers five listener questions about investing in retirement. The surprising truth about retirement investing is that many questions are answered more clearly by re-focusing on when you'll need the money and what you need it to accomplish, rather than predictions about what markets, interest rates, or individual investments will do next.

For disclosures and conflicts visit keilfp.com/disclosures.

Retirement can change how you approach life insurance, mortgages, income, and investments. Jeremy Keil answers three financial questions retirees may not expect to face.

When people think about retirement planning, oftentimes they naturally think about their investment portfolio, Social Security, or taxes. Those are important parts of the plan, but after helping hundreds of people retire, I’ve found that some of the questions that cause the most confusion aren’t about the stock market at all.

They’re questions like: What should I do with an insurance policy I’ve owned for decades? How do I prove my income to a mortgage company when I don’t receive a paycheck anymore? Can I find an investment that provides the principal protection I want while also receiving capital-gains tax treatment?

These questions can catch retirees by surprise because the financial world doesn’t always work the same way after you retire.

The specific answers will vary based on your circumstances, but all three illustrate a broader principle I think is essential to good retirement planning: Don’t begin with a financial product. Begin with the problem you’re trying to solve.

“I’ve been paying premiums on my whole life insurance policy for decades now that I’m retired and my kids are financially independent. Should I keep paying for it? Does it make more sense to cash it in?”

This is a great example of how a financial product can outlive the original reason you purchased it.

If you bought life insurance decades ago when your children were young, you may have needed the death benefit to protect your family financially. Now you’re retired, your children are financially independent, and that need may no longer exist.

That doesn’t necessarily mean the policy no longer has value.

The first thing I’d want to confirm is exactly what type of policy you own. I’ve had people tell me they have whole life insurance when the policy was actually converted to universal life decades earlier. The guarantees, premiums, interest, and other characteristics can differ, so start by understanding what you actually own.

From there, I would generally evaluate three possibilities.

Cashing in the policy may be the simplest solution. You’re finished paying premiums and can use the cash value elsewhere.

But don’t make that decision without looking at the tax consequences.

If the policy’s cash value exceeds the amount you’ve paid into it, surrendering it may produce taxable income. On the other hand, I’ve worked with a client whose situation was essentially the reverse: he had put about $50,000 into an older policy whose remaining value had fallen close to zero.

Rather than simply surrendering the policy and losing the potential usefulness of that cost basis, we contacted the insurance company and the company holding an existing non-IRA annuity. We determined that the policy could be exchanged into that annuity, allowing the cost basis to transfer with it.

That’s a more complex example, but it illustrates why I don’t like making these decisions based solely on whether someone still “needs life insurance.” There may be tax consequences attached to a policy you’ve owned for decades.

At the other end of the spectrum, keeping the policy may make sense even if the death benefit isn’t particularly important to you anymore.

I’ve seen older whole life policies credit interest in the 3% to 4% range. If your alternative is putting the same money into a bank account, it’s worth comparing what the existing policy is actually providing.

There may also be tax characteristics worth considering. The growth within the policy can be tax-deferred, and if the policy ultimately pays a life insurance death benefit to the beneficiaries, that death benefit is generally received income-tax-free under the circumstances I described.

The point isn’t that everyone should keep an old whole life policy. It’s that you should evaluate the policy you actually own before assuming it’s obsolete.

There can also be an option between surrendering the policy and continuing exactly as before.

With one recent client, we evaluated the amount they had paid into the policy and the growth that had accumulated. We took out the cost basis and left the accumulated interest in the policy. Then we asked the insurer about reducing the paid-up insurance amount so the client wouldn’t have to continue paying premiums at the same level.

That allowed us to address several different objectives rather than forcing the decision into a simple “keep it or cash it in” choice.

When evaluating an old permanent life insurance policy, I’d want to understand at least:

The answers can tell you much more than simply asking whether you still need life insurance.

“Now that we’re retired, we don’t have paychecks anymore. If we want to rent an apartment or apply for a mortgage, how do we prove our income when most of our money is in retirement accounts?”

This problem surprises a lot of financially secure retirees.

I’ve worked with people who have millions of dollars on their investment statements and still encounter a bank telling them they don’t have enough income to qualify for a loan.

It sounds ridiculous. But there’s an important practical distinction: lenders and landlords are accustomed to evaluating income, especially wages. A large investment account doesn’t necessarily fit neatly into the same underwriting process.

I’ve seen this firsthand.

One client had about $100,000 sitting at a bank and wanted to borrow a couple hundred thousand dollars from that same institution. The bank said they couldn’t afford the loan.

We moved the $100,000 from the bank savings account to a brokerage money market account, where it was also earning a better rate. Then we established a $3,000 monthly distribution from that account.

After two months of showing that predictable income, the bank was satisfied and approved the mortgage.

The client’s underlying financial position hadn’t suddenly improved. We had simply created the kind of income trail the lender knew how to evaluate.

The larger lesson here is to plan ahead.

If you know you’re going to need a mortgage, it may be easier to apply while you’re still working and have W-2 income.

If you expect to sell your house and rent an apartment after retirement, find out what the landlord will require before you make the move. You may be able to establish systematic monthly distributions from your assets to demonstrate the income they’re looking for.

Retirement doesn’t necessarily mean you lack the resources to qualify. But you may need to present those resources differently once the traditional paycheck disappears.

“Is there a safe investment that produces capital gains instead of ordinary income so I can keep my taxes lower?”

I understand exactly what this listener is trying to accomplish.

Long-term capital gains may receive more favorable federal tax treatment than ordinary income. So it’s reasonable to wonder whether you can combine the principal protection you might associate with something like a CD with the potentially preferable tax treatment of a long-term capital gain.

The problem is that those characteristics generally don’t go together.

Investments that can produce capital gains involve the possibility that the asset’s value can decline. That possibility of loss is part of investing. Products designed around principal guarantees or similar protections generally produce returns taxed as ordinary income rather than capital gains.

That’s why I wouldn’t begin by searching for a product that somehow combines the two.

I’d change the question.

What problem are you actually trying to solve?

Are you trying to lower your taxes?

Protect your principal?

Protect your income?

Generate a particular return?

Those are different objectives, and they may require different tools.

That principle ties all three listener questions together.

With the life insurance policy, the answer isn’t automatically to surrender it simply because you no longer need as much insurance. You first need to understand the tax characteristics, interest, cost basis, and options available within the existing policy.

With a mortgage, the problem isn’t necessarily that you don’t have enough money. The problem may be demonstrating income in the format a lender expects.

And with investments, searching for a product that provides every desirable characteristic can distract you from identifying the financial objective you’re actually trying to accomplish.

This is one reason I use a five-step retirement planning process. A good process gives you a framework for making decisions when retirement presents a financial question you weren’t expecting.

Financial products are tools.

First determine what you’re trying to build. Then decide which tool belongs in your hand.

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About the Author:

Jeremy Keil, CFP®, CFA is a retirement financial advisor with Keil Financial Partners, author of Retire Today: Create Your Retirement Income Plan in 5 Simple Steps, and host of the Retire Today blog and podcast, as well as the Mr. Retirement YouTube channel.

Jeremy is a contributor to Kiplinger and is frequently cited in publications like the Wall Street Journal and New York Times.

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Disclosures

This media is provided for informational and educational purposes only and does not consider the investment objectives, financial situation, or particular needs of any consumer. Nothing in this program should be construed as investment, legal, or tax advice, nor as a recommendation to buy, sell, or hold any security or to adopt any investment strategy.

The views and opinions expressed are those of the host and any guest, current as of the date of recording, and may change without notice as market, political or economic conditions evolve. All investments involve risk, including the possible loss of principal. Past performance is no guarantee of future results.

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Alongside, LLC, doing business as Keil Financial Partners, is an SEC-registered investment adviser. Registration does not imply a certain level of skill or expertise. Advisory services are delivered through the Alongside, LLC platform. Keil Financial Partners is independent, not owned or operated by Alongside, LLC.

Additional information about Alongside, LLC – including its services, fees and any material conflicts of interest – can be found at https://adviserinfo.sec.gov/firm/summary/333587 or by requesting Form ADV Part 2A.

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