When it comes to retirement income planning, many pre-retirees focus exclusively on “the number.” In other words, they obsess about exactly how much in assets they need to accumulate to avoid running out of money in retirement. Is it $1 million? $2 million or more?

What might surprise you is that the number is not the most important factor involved in building a sustainable retirement. Instead, other factors such as when to claim Social Security, when to retire, taxation rates in retirement, over-spending and employer retirement distribution decisions are quite consequential.

In fact, many Americans don’t realize that they can de-couple the decision to retire and the Social Security claiming question. You don’t have to claim Social Security when you retire – in fact, there may be a better point at which to claim. That depends on your overall financial and tax situation and whether you are married or not.

At LS Wealth, we recommend a consultation with an experienced fiduciary retirement income planner with tax planning expertise. You only retire once – your retirement is too important to be left to chance. A consultation with experts will position you to maximize your resources to create the most sustainable path to a financially healthy retirement.

Difficult times tend to bring the crucial element of the importance of a successful process to the forefront. I have friends across the country who are excellent financial planners. I also am acquainted with some of the most successful financial planners in the country. One of the factors that successful planners share is a well-defined planning process. At LS Wealth, we utilize our proprietary Redefining Wealth Process. We aren’t just throwing things at the wall and working off the cuff. There is a well-defined process designed to ensure that no stone goes unturned to position our clients for sustainable retirement income success.

Defined processes are vital for any retirement plan, not just from a functional perspective, but also for client peace of mind. It’s not your net worth that delivers retirement confidence, it’s knowing that you have sufficient income for a long retirement. To gain that confidence, you need to know that income, investment planning, and healthcare planning to ensure you can handle any unexpected events.

A debate has played out in the media for years regarding President Donald Trump’s tax returns. While I can’t speculate about the particulars of his taxes, I do know one thing for certain: the IRS is pretty serious about tax evasion. If there any inkling of malfeasance arose in the course of an audit, these findings would eventually surface. I don’t want to be political; my intention is to present facts with regard to business provisions that allow deductions and carry-over losses or pass-through income.

With that stated, everyone needs to remember that the American tax system is what is known as a progressive tax system. A progressive tax system imposes higher taxes on those making a higher income and lower taxes on those making less income. If you are a business owner, you pay a variety of taxes depending on your business structure, your number of employees and the sector in which you operate. You likely have professionals manage your accounting and pre-pay taxes to avoid IRS penalties for under payment.

Back to President Trump – there are a variety of provisions that would have allowed him to use business losses in one year to offset income from other years. Even if you aren’t a business owner, there are a number of tax provisions that can help you reduce your income in retirement. For example, contributing to a Roth IRA or 401(k) while you are working means that you won’t have to pay taxes on withdrawals in retirement. In addition, you won’t be subject to required minimum distributions (RMDs) beginning at age 72.

Health savings accounts (HSAs) are another great way to reduce taxes before and in retirement. HSAs are the only type of account that is triple-tax advantaged – you get a tax deduction when you contribute, contributions grow tax free and withdrawals are also not taxable when you use them for qualified healthcare expenses. Other ways to reduce your tax bill in retirement include taking advantage of long-term capital gains rates, using long-term capital losses to offset long-term gains, setting up a charitable remainder trust, tapping home equity and getting a reverse mortgage. 

When it comes to hiring a financial advisor, many investors focus on aspects such as performance, personal compatibility, or a personal connection. However, making a decision based on these or other considerations ignores the biggest issue that every investor should consider when hiring an advisor – whether that advisor has a fiduciary duty to their clients – or not. Advisors who possess a fiduciary duty to their clients are required to put their clients’ best interests above their own. Many Americans are shocked to find out that this obligation isn’t required of all advisors. In fact, most advisors aren’t required to act as a fiduciary in all their interactions with a client.

Fiduciaries are independent registered investment advisors who don’t answer to a specific financial services company with its own agenda regarding the investments that are offered to clients. They are unique in that they have a legal and ethical relationship of trust with their clients. This subject can be very confusing because there are some hybrid advisors – I call them fiduciaries in disguise – who sometimes act with a fiduciary obligation and other times don’t. However, they aren’t required to disclose when they aren’t acting in your best interest. In my opinion, working with a fiduciary advisor is only common sense. Why would you want to work with someone who doesn’t have a legal obligation to act in your best interest at all times?

Fiduciary financial advisors build long-term relationships with their clients, seeking to align your goals with your financial plan. Then, they populate the financial plan with investments designed to carry out the plan’s objectives. At LS Wealth, this is what we do each and every day in our work with clients. Like other fiduciary firms, we don’t earn income from sources like commissions, trading bonuses or trailer fees. Fiduciaries have no incentive to sell you products – instead, their goal is to help you meet your financial and life goals through building, executing and adjusting a life-long financial plan.

TonyRobbins.com

https://www.tonyrobbins.com/wealth-lifestyle/man-on-the-street-what-is-a-fiduciary/

The advent of COVID-19 abruptly changed the decision-making around retirement — at least as long as the pandemic lasts. While retirement is mainly a financial decision, it’s also a decision related to time and how you spend it. If you’re thinking about retiring soon, ask yourself: “What do I gain from retiring, and what do I lose from retiring?” In the midst of the pandemic, the leisure activities that many enjoyed are limited, such as travel, visiting family and friends, eating out and shopping. Of course, retirement has a much longer horizon than the next year or two — for many, it will last 25 or 30 years, or longer. If you still want to go ahead with early retirement or retirement at a more traditional time, consider consulting with a fiduciary financial advisor such as LS Wealth that can help you determine whether you can build a sustainable retirement income plan. There are also a number of online tools that can help you get a grip on your readiness for retirement, including AARP’s Early Retirement Calculator, Social Security Benefits Analysis, Medicare Eligibility and Premium Calculator and Networthify’sWhen Can I Retire Calculator.

Regardless of which candidate is elected on November 3, it seems likely that there will be 401(k) plan winners and losers. While both candidates have promised simpler IRS rules, such an outcome is usually elusive as rules tend to get more complex, rather than less. This looks to be especially true if Biden is elected, in which case we are likely to continue down the rabbit hole of additional complexity. Biden’s proposed changes create additional incentives for lower income households to contribute to these plans over Roth IRA accounts.

In contrast, these proposed changes reinforce the argument for higher earning households to favor Roth 401(k)s or IRAs over traditional 401(k) or IRA contributions. I say this because reducing unpredictability in retirement is a major goal of all of our retirement planning at LS Wealth. Clearly, contributing to a Roth IRA or 401(k) creates needed stability in retirement because Roths aren’t subject to taxation in retirement while traditional IRAs and 401(k)s are. While we don’t have a crystal ball, the risk of higher taxation in the future is higher than ever with deficits skyrocketing.

Investor’s Business Daily

https://www.investors.com/etfs-and-funds/retirement/retirement-planning-win-loss-joe-biden-401k-plan/

As lifespans increase, more seniors are living longer in retirement. Most imagine spending that time traveling, pursuing hobbies and spending time with family. While many realize their health will decline, they aren’t setting funds aside to pay for the medications, rehabilitation and long-term care expenses that Medicare doesn’t cover. Not only that, but most seniors have no clue how much out-of-pocket health expenses, including long-term care, are likely to cost them in retirement. Fidelity Investments estimates that the average 65-year-old couple will spend $295,000 on out-of-pocket costs, excluding long-term care, in retirement. Retirees, and soon-to-be-retirees can use this number as a starting place for their own estimates, taking into consideration their ages, health situation, family history and healthcare and long-term care costs in their area. To manage healthcare costs, retirees can use Medicare Advantage Plans while pre-retirees can save and invest in Health Savings Accounts (HSAs), which are triple-tax advantaged.

Forbes

Annuities can offer guaranteed lifetime income in retirement, protecting your income stream from market declines and the risk of outliving your savings. However, during the 10 year bull market that ended earlier this year, many near-retirees and retirees were reluctant to tie up their savings in an annuity due to the potentially higher returns offered by the bull market, according to Wade Pfau, PhD, author of Safety First Retirement Planning: An Integrated Approach for a Worry-Free Retirement. However, when the COVID-19 pandemic struck, confidence in future bull market returns eroded, leaving near-retirees and retirees more willing to consider annuities as a strategy for lifetime income. If you are in a situation where you have sufficient retirement assets, purchasing an annuity can help you fund your financial goals in retirement. These goals must include creating a stream of ongoing income that can cover monthly expenses in retirement. In a bear market situation, deferred annuities can be quite attractive because you can purchase future income today while giving your capital the opportunity to grow.

https://www.forbes.com/sites/wadepfau/2020/04/03/is-buying-an-annuity-in-a-bear-market-a-good-idea/#37a8491658ab

The Wall Street Journal Article

For the first time since World War II, the size of the U.S. debt load will reach or exceed the U.S. gross domestic product. The primary cause? Coronavirus spending, falling gross domestic product and a decline in tax revenue. Even without the pandemic, spending was projected to rise in the coming years due to the retirement of the Baby Boomers, which will cause increased spending for Social Security, Medicare and Medicaid.

It seems inevitable that taxes will rise at some point to increase revenue to counter this increasingly heavy debt load. Therefore, it’s wise to engage in proactive tax planning to prepare for a retirement with higher tax rates. That could include engaging in Roth IRA conversions to take advantage of current low tax rates. By converting traditional IRAs to Roths now, you will position your finances to a lower-tax posture, retaining more of your income for yourself throughout your retirement.

The Motley Fool

https://www.fool.com/retirement/plans/401k/rule-of-55/

If you’re aiming for an early retirement, the Internal Revenue Service’s Rule of 55 can help you plan for that retirement in a proactive way. This rule permits withdrawals from your current — or most recent — 401(k) plan if you leave a job for any reason, including a layoff, quitting, getting fired or early retirement at age 55 without a 10 percent early withdrawal penalty. Early retirement is definitely possible, but the additional expenses involved in a longer retirement mean that you need to save more. Tapping your most recent 401(k) without penalties through the Rule of 55 is one strategy that can help you accomplish that goal.