Your Next Act: Retirement Lifestyle Considerations

The Life By Design you are currently living or actively pursuing is one that you’ve predefined. You made choices about what you want your days to look like, where you want to live, and what you want to do on the weekends. Some of the choices you’ve made are big (relocating to another state, getting a timeshare, etc.) and others are small (what does your coffee/tea habit consist of- daily Starbucks? French press at home?). Chances are you weigh these decisions carefully and make them with a bigger goal in mind. But how long-term are your long-term goals? Now is a great time to revisit your goals and decide if they follow you through to your next act- your Retirement Life By Design.

Many of us are used to planning for the bigger and the better with that being the end of the goal. Most individual’s spend their careers aiming to maximize gains while delegating slowing down and enjoying to the period known as retirement. Though this is historically the common way of doing things, it does not need to hold true for you and your individual Retirement Life By Design if it doesn’t make sense for you. Whether or not you’re at this stage in your retirement planning, these could be things to keep an open mind to as your journey unfolds…

Retirement Lifestyle Options

  • A second career. After you have retired, it is possible to work part-time in a new career. Whether it’s working at your favorite beachside locale to meet new people and enjoy the view or finally dedicating more time to something you love while simultaneously benefitting from a paycheck, a second career may offer you possibilities you hadn’t previously considered.
  • A partial change to your current career. Don’t wait for retirement to make a change, make it now. It is possible to change your job partially by switching to a position that is more sustainable for you for a longer period of time and won’t lead to burnout. A wonderful example is that of a surgeon (consider the physical demands of such a career) deciding to make the transition into becoming a professor in the field.
  • A total change to your current career. Change your job entirely now, perhaps worker longer, but in a field you are passionate about and provides enrichment you would be happy to continue longer. A lifelong desk worker may realize that working to full retirement age (or beyond) isn’t the mentally exhausting task it would have been if they make the change to a career in personal training.
  • A change of location. Many people make the decision to downsize their home after becoming empty-nesters and many others may decide to relocate in the name of property taxes. Whatever your motivation for a move it’s something to consider as you plan your retirement whether it’s down the street or on the other side of the globe. Consider the lifestyle itself a location might dictate and how it could affect your retirement age.

These options may open up a whole new path or possibilities to your Retirement Life By Design. Take your own personal situation into consideration along with your long-term aspirations and your full retirement age (see 2024 Important Numbers). Remembering also that retirees of today and tomorrow have ever longer life expectancies to account for when planning their Retirement Life By Design. It is impossible to plan for every aspect of your future, but thinking ahead, taking it at your speed and enjoying every step of the way is always a good place to start. Add to that a Protection Plan and flexibility of mind to find contentedness in what you have for a true Life By Design!

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

How Retirement Has Changed

The retirement you are planning for and will experience is very different than the retirement your parents have told you about and what you have witnessed. The days of big pension checks are gone. There are two main ways in which modern retirement has changed- medical costs and retirement lifestyle. The reason for these changes can be attributed to societal changes in what is expected and accepted. This article explores how these two main changes, retirement lifestyle and medical costs, will impact your retirement.

What is Your Retirement Life by Design?

Your retirement begins with creating a vision and goals that you may have identified as desirable for yourself. Retirement Life By Design for you may include shifting your activities to volunteer work, working part-time in the industry you have loved for the past 40 years or unfolding your chair and reading a book on the beach every morning. Of course there are many different visions for living a full rewarding life and only you can know which is the right fit for you. Your personal plan can and will need to be fluid during your 20 to 30 year retirement journey.

Think about your retirement activities. What mental picture do you develop? Once you have captured your vision it serves you well to use communication to find harmony with your partner, if you have one, and their vision for retirement as well. Once you know what you’re aiming for it becomes possible and, by default, more feasible to plan for it.

Funding Your Retirement With Multiple Retirement Portfolio Allocations

Working with a Retirement Management Advisor® in implementing a financial plan to adequately fund your retirement can save you from the risk of running out of money in your later years. Strategic planning can provide the peace of mind you are seeking in your retirement plan and save you struggle and frustration by properly addressing issues on the subject of taxation and future liability cost for what could be 30 years. LBDIAS actively manages your retirement funding with Retirement Portfolio Allocations that each serve a specific purpose in helping you realize your Retirement Life By Design.

We start by designing these four foundational portfolios for every retiree; Reserves, Longevity, Income, and Growth. Our Four-Core process allows us to guide retirees to and through retirement with fundedness matched to your specific needs. Appropriately funding each of these four portfolio allocations sets you up to be able to experience your Retirement Life By Design.

  • Reserves: This is your Emergency and Unexpected events fund.
  • Longevity: Lifetime Healthcare & Long-Term Care Protection including the possible need of Life Insurance is funded to reduce risk
  • Income: Manage your net income cashflow needs at a safe withdrawal rate including inflation risk for funding your retirement lifestyle including tax liabilities.
  • Growth: This portfolio allows risk to diversify for total return. Upside can be withdrawn for discretionary spending.

Do You Plan on Getting a Nip & Tuck?

Healthcare & Wellness in Retirement

If you are retired or close to your retirement, there is still the possibility that you are underestimating your future medical and long-term care costs. Medical expenses will not diminish in their frequency and will certainly see an increase in pricing as your retirement progresses. Your healthcare funding in retirement begins with Medicare, but does not end there. Medicare premiums are determined by your income two years prior to your enrollment and are typically automatically deducted from your Social Security benefit payment

Beyond considering what Medicare will and won’t cover, you need to think about what is considered healthcare to you personally in your lifestyle. Do you want the active lifestyle of a retirement community or have you spoken to your children about having them come in to help? Do you plan on getting a nip & tuck? Do you have a personal wellness guru? Do you have a fitness trainer? Your retirement healthcare and wellness savings come from your Longevity Allocation- a bucket that cannot be underfunded. Contact us to learn more about utilizing a Health Savings Account (HSA) to fund your retirement healthcare.

The best solution for the rising and abundant medical costs you will face in your future is to both place protection for long-term care and build your Longevity retirement portfolio that’s adequately funded.

The Go-Go Retirement

How old will you be upon retirement? 60-something? 70-something? How old are you now? What is the difference? 5 years? 10 years? The point being- in the early phase of your retirement you will likely be very much who you are today… Same interests, same hobbies, same energy levels, same or similar aspirations. Just as being 18, 30, or 50 evokes a different visual for you than it did for the generations before you, retirement has changed. You may just continue to be go – go – go, into your upper 90s.

Retirement Management Solutions

Solutions for these two problems, retirement lifestyle and medical costs, can be planned in a way that preempts the problem itself. Taking the time now to think about your retirement lifestyle regardless of when you plan to start living it. This can resolve many of the issues you may encounter in retirement planning at least with respect to making good long-term decisions. If you are able to make choices now about what you want to do in the future, you can make the appropriate choices for both now and then when it comes to things like your taxes, investments, and spending habits.

Life By Design Investment Advisory Services can help you identify the best ways to approach these solutions and put them into action. Contact the team today to set up your next appointment and proactively prepare for your retirement.

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

Do Retirees Experience Inflation?

Inflation is a huge fundamental risk for retirees. Inflation means risk in loss of buying power over the next 20, or even up to and over 30, years. So let’s take a look at how a retiree actually experiences such risk.

“A 60 year old loses 50% of their purchasing power by age 85 at a 3% inflation rate.”

Inflation & Your Retirement: Will You Have Enough?

How many years have you continued to work with a specific retirement date in mind? Your entire focus was: Will I have enough? Often the focus is on what you need for your initial fixed income or identifying what would be a safe withdrawal rate, entirely based on a predetermined amount of fixed expenses. The best way to approach your retirement planning is with a base inflation rate taken into account and applied to your estimates for income needs to cover expenses, medical/long-term care costs, etc.

So when it comes to the cost of goods (cost of living) what is your expected increase for the purchase of these goods? Expected purchasing costs need to be applied to everything from travel costs to your grocery bill. Inflation has to be considered in every aspect of your lifestyle- down to the wine you drink.

Many of us are unsure how to calculate future inflation and let alone know how we should be increasing our withdrawals at the first of each year. When creating your retirement portfolio you should be increasing the amount that you withdraw each year.

“Inflation is the greatest risk to retirees.”

Healthcare & Inflation Risk

If you have begun receiving Social Security, maybe you have noticed your benefit payment increased by about $59 dollars. Fact: For 2024 the Social Security Department increased your benefit by 3.2%. This is measured by the CPI (Consumer Price Index) – COLA.

CPI measures the average cost of goods increased over time in eight major categories and is widely used as an economic indicator for government and business. However, healthcare costs are rising exponentially by comparison.

Upon retirement, how much do you expect you will spend on your healthcare? A 65 year old couple retiring this year should expect to spend $300,000 on healthcare during their lifetime.

Where is that $300,000 being spent? The largest cost is from Medicare co-payments, deductibles, Medicare Parts B & D premiums and out of pocket prescriptions.

This represents a new high. $300,000 is a 30% increase from 10 years ago and up 1.7% from last year according to Fidelity Investments. Unfortunately these estimates do not include long-term care costs. Many retirees over the years are transitioning to senior housing communities. The benefits are great in that you have a community of activities and increased care service, but one must expect and plan for increased rents over their lifetime. According to Burnham-Mais the increase has been between 2% and 3% (over how long?).

Why You Need Inflation Protection

The rising cost of long-term care is now a huge part of your retirement funding plan. Let’s imagine now you’ve lived a wonderful 20 years since your retirement date, navigating all of the life and world changes. What an amazing accomplishment. However, you or your loved one could be quickly faced with needing assisted care at home or in a facility.

Fact: Average cost for this type of care in 2024 is approximately $108,000/year for an average length of 3.5 years of care in today’s dollars is almost $378,000 for total out-of-pocket expense.

Cost is expected to conservatively increase at 3 to 5%. This means a 60 year old today can expect to have long-term care at over $800,000 25 years from now.

So why is it important to have inflation protection planned for and implemented into your retirement plan?

Life By Design Investment Advisory Services can help you identify the best ways to approach these solutions and put them into action. Contact the team today to set up your next appointment and proactively prepare for your retirement.

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

What is a HSA?

Health Savings Accounts (HSAs) are the undeniable top choice for paying for current medical expenses or saving for future healthcare costs. But they don’t stop there…

HSAs are the most tax-advantaged savings account available.

Medical expenses are one of the facts of life. Regardless of your age, current health, lifestyle or tax bracket, you will inevitably at some point incur healthcare costs. Knowing that you’ll be spending on these expenses eventually, it makes sense to save the most possible tax on those expenses by putting savings into an account designed specifically for healthcare expenses.

Not beginning contributions to your HSA as soon as possible means time and money lost from the tax deduction and tax-free lifetime earnings. Did you know that you can only contribute to your HSA until age 65, before your Medicare benefits begin?

The Increasing Cost of Healthcare

A 65 year old couple retiring this year should expect to spend $300,000 on healthcare during their lifetime. Retirees typically have a fixed income, so it makes sense to fund your Longevity bucket well and take advantage of tax savings opportunities where possible. HSAs are a solution.

HSAs must be paired with a qualified consumer-driven health plan (CDHP), which typically has higher deductibles than other health insurance plans. (Higher deductibles are offset by the lower monthly premiums that CDHPs often have.)

The Best Way to Save for Retirement

Always take advantage of any matching your employer offers on your HSA and 401(k) contributions- it’s free money.

If you can max out your HSA contributions with payroll withholding, do so. HSA contribution limits for 2024 are $4,150 for individuals with self-only insurance coverage and $8,300 for individuals with family insurance coverage. Additionally, once you are over age 55 you can contribute an extra $1,000 to your HSA annually as long as you are already eligible to make HSA contributions.

It’s important to note that you may only contribute to your HSA until you reach age 65 and before your Medicare benefits begin. Not participating in a HSA while you are eligible is time and money lost from the tax deduction and the tax-free lifetime earnings to which it is privileged.

HSA & Taxes

HSA contributions are a tax deduction at the federal level (though they are taxed at the state level in California). Those FICA tax savings are like an extra 7.65% for you (and your employer, if they are matching you!). One of the biggest perks of an HSA is its triple tax benefit– contributions are tax free, withdrawals are tax-free, and interest grows tax-free — making it the most tax-advantaged savings account on the market.

Withdrawals from your HSA are tax-free when used for a qualified medical expense. Any withdrawals for non-qualified expenses face applicable income taxes and an additional 20% penalty. But, that 20% penalty goes away after you turn 65, so non-medical withdrawals after 65 are treated exactly the same as withdrawals from a traditional 401(k) or IRA.

Health Savings Accounts are a great way to save for your retirement longevity needs. Our next best bit of guidance on the topic though: Do everything you can to stay in good health now. Invest in yourself for now and the future by taking part in the best healthy lifestyle that works for you.

Life By Design Investment Advisory Services is a HealthSavings Advisor. LBDIAS can help you identify the best retirement solutions for your specific needs and put them into action. Contact the team today to set up your next appointment and proactively prepare for your retirement.

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

Retirement Strategies & Your Legacy Plan With Prop 19

On November 3, 2020 California voters approved Proposition 19 (Home Protection for Seniors, Severely Disabled, Families and Victims of Wildfire or Natural Disasters Act) to change the state constitution, which makes major changes to a property owner’s ability to transfer their Proposition 13 assessed value property. The measure generally expands a qualifying homeowners ability to transfer the assessed value and tax base price of their home while simultaneously narrowing the property tax benefits provided to inheritors of commercial and residential properties- including children and grandchildren. These significant property tax changes went into effect on February 16, 2021.

We would like to draw your attention to the opportunities available with the portability of your assessed value and tax base should you be considering relocation or downsizing within California.

THE EXISTING LAW: PROPOSITION 13

Passed by voters in 1978, Proposition 13 (“Prop. 13”) taxes California properties based on their assessed value (also known as the base year value or taxable value) rather than their fair market value. Assessed value is generally determined by including the purchase price and cost of improvements, plus an increase of no more than 2% per year unless and until there is a change in ownership.

On average, California real estate has appreciated in value at a rate higher than 2% per year, so the longer a property is held, the greater the difference is between its assessed value and its fair market value. This equates to a greater difference in the taxes paid on said property versus what they could be potentially. 

Proposition 13 will remain the current law even after Proposition 19 goes into effect. The impact will be to these the exceptions called the “parent-child exclusion” (“Prop 58”) and “grandparent-grandchild exclusion” (“Prop 193”) and the significant tax benefits they provided.

NOTABLE CHANGES: CA PROP 19

The two main takeaways we’d like to highlight for our California clients are (1) the benefit for homeowners who are age 55 or older being able to transfer the assessed value of their primary residence and (2) the changes to property transfers between parents and children (and grandparents and grandchildren).

#1 TRANSFER OF ASSESSED VALUE

  • What this means: Homeowners aged 55 or older have the possibility of replacing their primary residence (relocation within California, downsizing; extended also to those needing home replacement after a natural disaster) and transferring the tax basis from their current primary residence to the new home. The value limit for the new property is the sum of the factored base year (or assessed) value plus $1 million.
  • The takeaway: Review your retirement plans. If you’ve been considering a change for your Retirement Life By Design this could present a interesting tax opportunity for you.

#2 GENERATIONAL TRANSFERS

If a property is sold or transferred, the property taxes can sometimes increase dramatically as a result. Proposition 19 changes the previously established generational exclusions. However, under limited circumstances, the sale or transfer of property to children/grandchildren will not be reassessed if certain conditions are met and properly submitted.

  • What this means: The ability to transfer a primary residence between parents/grandparents and a child/grandchild without reassessment will no longer apply unless two conditions are met: the parent’s/grandparent’s primary residence becomes the child’s/grandchild’s primary residence within one year AND the fair market value of that same property does not exceed the assessed value by more than $1 million. In those situations where the fair market value is $1 million more than the current assessed value, then the new assessed value will be the fair market value less $1 million. This means any property that is not the primary residence will be reassessed upon sale or transfer to anyone.
  • The takeaway: Review your legacy plan. If you are planning on leaving/transferring property to a child/grandchild, be certain that they are aware of the conditions of tax basis. This could create problems if you have property you wish to sell, gift, or bequest in your will or trust such vacation homes, second homes, rental properties, and/or commercial properties.

Prop 19 provides interesting opportunities for California residents. It also creates potential complications to legacy plans you may currently hold. The team at Life By Design Investment Advisory Services is ready to assist you in navigating changes or opportunities this legislation creates for your retirement and/or legacy plans. Schedule your telephone appointment to discuss solutions and opportunities for your individual circumstances.

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

The Best Ways to Get Started With Retirement Planning

As an important and landmark phase in life, your retirement is best not left to chance. However for many, retirement planning efforts may seem overwhelming prior to taking your first steps. With many considerations to take into account from fundedness and tax planning to lifestyle and eventual legacy, you may find yourself wondering where to start. Life By Design Investment Advisory Services is here for you as you start, plan and experience your journey to and through retirement.

ENVISION YOUR RETIREMENT LIFE BY DESIGN

Prior to ascertaining that your account holds a certain dollar amount or that you understand how Medicare works, it’s important to capture the vision for your Retirement Life By Design. Do you envision yourself spending time on a passion project that you have been waiting for more time to enjoy? Do you plan on working part-time or volunteering? When you visualize your Retirement Life By Design, are you living in your current home, state or country? How often do you plan on traveling? Do you expect to make any significant lifestyle changes? Starting your retirement planning process by identifying the components of your ideal retirement lifestyle is the cornerstone of financial planning for retirement. You will not achieve your ideal retirement lifestyle if you cannot specifically identify what your ideal situation is. In my many years as a professional financial wealth advisor, I can attest to the real joy it is to witness someone really knowing what  their Retirement Life By Design is and living a retirement lifestyle of their choosing.

SET GOALS

Take a moment to consider your passions in life and give real thought about how you would like to live in retirement. Once you’ve taken time to truly reflect, it is time to write that written goals plan that may get you closer to making that ideal a reality. This is why I designed the MYGOALS Planner- with you and your goals in mind. I’ve been searching for years for the right tools and the best technique for staying on track and being organized while achieving goals. I’ve compiled those years of research and designed a tool to make achieving your goals more attainable. More importantly, I’ve designed a tool that will keep you on course for the true destination and inspiration for your life goals. With a clear plan and intentions you’ll be able to allocate your time in a way that balances must-do’s and daily life with progressive steps toward your Retirement Life By Design. These first two steps to getting started in retirement planning allow you to get your bearings and set your compass for your desired destination.

FUNDEDNESS

Now you need to achieve fundedness. Fundedness is your funded ratio with regard to retirement readiness and the measure of ensuring you’re prepared to support longevity needs- generally for a 30-year horizon. Your individual fundedness is based on the goals you have set for your Retirement Life By Design. Fundedness is not an arbitrary amount you have set aside for when you stop working. Life By Design Investment Advisory Services believes a well-balanced retirement portfolio includes buckets marked for growth, income, longevity and reserves. Ranging from conservative and protective to higher risk growth opportunities, each bucket serves a purpose.

  • Growth- This portfolio allows risk to diversify for total return. The upside can be withdrawn for discretionary spending.
  • Income- A portfolio created to manage your net income needs for retirement and lifestyle.
  • Reserves- This is your emergency and unexpected events fund. This fund aims to cover things you have not envisioned for your Retirement Life By Design, but that may await you regardless.
  • Longevity- Fund for your lifetime risk. This includes your life and healthcare Protection Plan.

IMPORTANT POINTS TO REMEMBER

  • Understanding your Household Balance Sheet- LBDIAS uses a Four-Core process to insure a comprehensive and holistic financial plan is in place, implementing planning tools and solutions continuously each and every year. Our financial analysis is completed from a Household Balance Sheet view. A thorough analysis of your finances in a way that will help you truly understand whether or not you have retirement fundedness. 
  • Checking your compass continually- Life and financial goals are best served by frequent action and review. The hope would be that you set goals that have your long-term, in this case the span of a lifetime, in mind, though it is natural for us as humans to place increased emphasis on the nearer future when setting goals. Checking in with the destination you have set on your compass as well as whether or not you are stallion the path to said destination is essential to your success.
  • Start the process of aligning your life goals with your financial plan now- It is never too late or too soon to analyze the alignment of your life goals and your financial plan, though you are best served by starting sooner. Start this good habit now if retirement is still a way off and it will be second nature as you begin actively planning for your retirement. Encourage the next generation to follow suit.
  • Meet with a wealth advisor- Wealth comes with complexities in planning and execution of the plan. A wealth advisor can assist you in the points outlined above. Only an elite few advisors hold the prestigious, advanced Retirement Management Advisor® certification, which is delivered by the Investments & Wealth Institute®. The RMA® program is an advanced certification for advisors who want to mitigate clients’ risks and master the retirement planning advisory process, all within an increasingly fiduciary environment. The RMA® program teaches financial professionals to take a holistic approach to your retirement needs. RMA® professionals look beyond managing investments or retirement products and take a multidisciplinary approach to develop a complete framework for your retirement plan. Investments & Wealth Institute® authorizes the use of the certification mark RMA® to individuals who have met rigorous experience and ethical requirements, have successfully completed graduate-level coursework, and have passed the Retirement Management Advisor® Certification Examination. RMA® designees also agree to meet ongoing continuing education requirements and to uphold the Institute’s Code of Professional Responsibility.
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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

MyGoals For Retirement Life By Design

In my many years as a professional financial wealth advisor, I have very seldom seen an example of someone really knowing their Retirement Life By Design- let alone a retirement lifestyle of their choosing- and having a written goals plan to support them in getting there. We all have dreams and the desire to seek the things we believe will bring joy and fulfillment. Studies have shown that the happiest people prioritize time over money. I believe it is more important that you actually know how to achieve the goals you have for yourself and for what reasons you want to accomplish them.

This is why I designed the MYGOALS Planner- with you and your goals in mind. I’ve been searching for years for the right tools and the best technique for staying on track and being organized while achieving goals. I’ve compiled those years of research and designed a tool to make achieving your goals attainable. More importantly, I’ve designed a tool that will keep you on course for the true destination and inspiration for your life goals.

Ask yourself when was the last time you evaluated your life goals? Have they changed recently? Have you since adjusted your financial goals to match? Where do you want to see yourself in 1, 10 and 20 years?

It’s essential to consider your goals, passions and purpose in context- the span of a lifetime. Remembering things that may have mattered to you a few or many years ago, but that no longer hold value. Utilizing the MYGOALS planner in this way can help you implement a vision specific to your Retirement Life By Design.

The word “retirement” has a tendency to conjour up ideas of someone at the end of their viable life taking time to “do nothing”. This widely accepted definition must be rejected. It’s time to reframe your retirement and include it in your life plans beyond setting aside some money and assigning it to be “dealt with” or “faced” when the time arrives. It’s time to create goals that are truly rich and meaningful to you.

Is MYGOALS for Retirement Life By Design right for you?

Ask yourself these questions:

  1. Do I know what my purpose is in life? Am I living my life in a way that reflects that and the things I’m passionate about? If I am not, when am I planning on starting?
  2. Do I have a detailed vision of my Retirement Life By Design? Have I shared this vision with my spouse or partner? Do I know what their Retirement Life By Design looks like?
  3. Do I have an action plan for my arriving at my Retirement Life By Design? Are my short-term goals, decisions and actual use of resources like time and money coherent and supportive of my long-term goals? Can I list the specific things I have accomplished in the past six months on my long-term goals?

If you are unsatisfied with your responses to any of these questions or want to take a more active role in securing your long-term goals, then MYGOALS Planner is for you.

The latest edition of the MYGOALS Planner is now available.

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

Social Security & Your Retirement Life By Design

Retirees today are the first generation that have arrived at retirement with 10-20 years longer in retirement than their previous generation. Retirement choices are not risk free, nor is it the end. I like to think retirement is a means to a beginning, and for many people Social Security Income can also be known as Retirement Security. But what is the best choice for you and your longevity plan? 

PLANNING YOUR RETIREMENT

You are given so many options in designing your retirement life that it is important to work with an Advisor with this area of expertise to coach you on the subjects of when, how and where to start in a way that best fits your entire family plan and lifestyle choices.

You may choose to retire early from your career, yet still be passionately inspired to explore new ideas and other income sources. So before you make that SSI claim we suggest you build your vision plan first and become more familiar with the choices you have available. Deciding when to claim benefits will have a permanent impact on the benefits you receive. Claiming before your full retirement age can significantly reduce your benefit, while choosing to delay actually increases your future benefits.

KEY FACTS & CONSIDERATIONS

How do I qualify for retirement benefits?

There are two basic requirements that make an individual eligible: attaining age 62 and being fully insured. Being fully insured means having 40 work credits. A work credit is earned for a certain dollar amount earned each year by the worker. This means that you would need a minimum of 10 years of work to qualify for benefits. Note: Calculations are based on your 35 highest years, despite what some individuals fear when considering working part-time before claiming benefits. For 2024, one credit is earned for every $1,730 earned, up to a maximum of four credits per year. People born after 1960 have a full retirement age of 67.

What if I delay Retirement Credits to my Full Retirement age and how do my delayed Retirement Credits affect my retirement benefit?

They are additions to benefits if retirement benefits are delayed beyond full retirement age. Delayed credits may accrue up to age 70. The Delayed Retirement Credit provisions allow for any month for which a worker was at least full retirement age, was insured for retirement benefits, and did not receive retirement benefits. The amount of the Delayed Retirement Credit will receive an annual credit of 8% up to age 70. It is estimated that claims taken at age 70 are 76% higher than those taken at 62.

Am I able to work while receiving Social Security Benefits?

Yes, you can work while receiving retirement benefits. However, Social Security Retirement benefits are meant to replace, in part, earnings lost to an individual due to retirement. So, under the law, those benefits could be reduced if earnings exceed certain amounts.

YOUR EARNINGS TEST

For beneficiaries who are younger than FRA, deduct $1 from benefits for each $2 earned over the annual exempt amount (2024 – $22,320). In the year in which full retirement age is attained, deduct $1 from benefits for each $3 earned over the full annual exempt amount in the months prior to FRA (2024 – $59,520). This is referred to as the earnings test. These amounts are listed and can be found on the Social Security website www.SSA.gov

You will want to fully understand all your income sources and strategically make the considerations for taxable income in retirement. 

INCOME TAXES & YOUR SOCIAL SECURITY BENEFIT

There could be federal income taxes on your Social Security benefits even if you’re not working. This usually happens if you have other income in addition (such as wages, self-employment, interest, dividends and other taxable income such as Capital Gains that must be reported on your tax return).

You could pay income tax on up to 85% of your Social Security benefits, based on Internal Revenue Service (IRS) rules. If you file as:

Considering all income sources and when to initiate them in retirement can be a little complicated. The various strategies can make the choices essentially taxable or non-taxable, and knowing the key defining benefits is where optimization begins. For example consider when your other taxable retirement accounts should begin receiving distributions.  Are you considering to retire prior to FRA? One possible strategy is to create your income from another retirement account and defer the Social Security Income to age 70. Or if married a combination of income sources and strategies can be engaged. The Social Security Administration- due to IRS tax legislation changes since 2016- has made substantial changes to other previously utilized benefits such as the old claim and defer, or spousal maximization choices so be cautious and stay informed as to what would be the most appropriate plan for your future benefits. 

Looking Ahead to 2035

Your future benefit is not written in stone and your Retirement Income plans should acknowledge that. According to the Social Security and Medicare Boards of Trustees annual report, both trust funds will be depleted as of 2035. If these predictions hold, beginning in 2035, beneficiaries will receive about 75% of their scheduled benefit until at least 2093. The report closes tasking lawmakers with enacting legislation to address these financial challenges “sooner rather than later”.

To learn more about your Retirement Security and Income Optimization, sign up with MY Social Security at www.ssa.gov/myaccount, or schedule your appointment with Monique Marshall , RMA® AIF®.

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

How to Live Your Life By Design With Your Partner in Retirement

Interestingly enough, when it comes to retirement, most couples spend a good amount of time planning financially, but then often neglect to plan for the emotional and behavioral aspects of retirement. Specifically, how will you and your partner live your Life By Design independently and together in retirement, without the distraction of work you have become so accustomed to over the years?

Everyone approaches retirement differently, but there are a few items to consider when doing so with your spouse. Co-dependency is potential occurrence to be cognizant of as you settle into your new retirement chapter. While time together is precious, maintaining a social connection with others is essential for mental health and can keep your marriage or partnership thriving for many years to come.

It’s important to note that couples at any life stage- retirement included- may have very different expectations or ideas regarding how they will live individually and as a couple. Either spouse may anticipate more involvement from the other in various ways, which is why it’s important to always maintain communication, openness and understanding with one another. Being on different pages may result in disappointment if either partner is feeling neglected or isn’t receiving fair consideration of their needs during this time.

COMMUNICATE CLEARLY

It’s never fair to expect your loved ones to read your mind or for you to expect them to know how you’re feeling. You might need more alone time and if that’s the case, it’s important to make sure your partner is aware that it’s part of your nature, not necessarily a rejection of their company. After so many years together, it’s safe to assume that your spouse knows a bit about your temperament, but spending an increasing amount of time with one another may alter how you’re both feeling. A need for space can be addressed by detaching yourselves to encounter new hobbies and interests.

CULTIVATE SEPARATE HOBBIES & FRIENDSHIPS

It’s important to focus on building your individual social life in order to avoid becoming too dependent on your partner. In addition to strengthening and maintaining existing friendships, you may want to consider joining a club or organization or volunteering for something you are passionate about so that you have opportunities to develop new relationships. Additionally, the time you spend apart is likely to give you something to talk about when you are together.

SPEND TIME WITH OTHERS AS A COUPLE

Individuals have reported that they experience the most content or happy feelings when they socialize with both their partner and other adults, as opposed to only their partner. Developing, and ultimately maintaining friendships beyond your family or spouse is extremely important to your mental and physical well-being.1 Growing with others who share similar interests can help you maintain a well-rounded and consistently positive attitude.

ALLOW YOURSELVES TIME TO ADJUST

Above all else, it is important to remember to be patient with each other during this time of transition. Change takes time and involves experimenting with various ways to succeed before finding what works for you. At the end of the day, you and your partner are individuals who have different interests and personalities, which is presumably why you fell for one another in the first place. Keeping in mind these details and being respectful of one another’s thoughts and feelings is key.

SHARE YOUR GOALS

A great exercise in cultivating hobbies and encouraging clear communication is the completion and sharing of your MYGOALS Planner with your spouse. If you and your spouse both take the time to explore their passions and purpose and identify concrete goals they have for their life and retirement, it becomes easier to communicate what your goals are and how you envision your Life By Design. You may discover points where your interests and aspirations converge and diverge, allowing you to forge a path, together, to a fulfilling retirement.

Recognizing that retirement represents one of our last, and often most momentous, chapters in life can help one realize that it is the time to take on challenges of which you’ve always dreamt. Through communication, understanding and patience couples can experience these cherished moments together.

 

  1. https://www.mentalhealth.org.uk/publications/relationships-21st-century-forgotten-foundation-mental-health-and-wellbeing
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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

Are You Rothing?

HOW TO AVOID THAT FUTURE TAX BOMB IN RETIREMENT

As we plan and prepare for living a Retirement Life By Design, ask yourself this question- what would need to be your perfect mix of future income sources? Your IRA, 401k, SEP and 403b make up your future income and could be a tax bomb, and the IRS is very much looking forward to your share and contractual contribution to taxes. Somewhere along our journey of accumulation we were lead to believe we would be in a lower tax rate at the age of 70, well this is just not always the case- especially for higher-income earners later on. Todays tax complexities have really been a main focus for our firm. Higher retiree income earners are challenged with an increased loss of benefits and even surcharges on Medicare Part B, which means a reduction in your Social Security payment. This is all calculated each year at tax time. So what is the Tax Bomb? It’s the future tax liability from your deferred IRAs at the time of distribution and mandatory distributions now at age 73 (if you were born after 1/1/1960, the RMD age is 75). To understand more specifics on 2024 taxable income and the IRMAA Medicare surcharges view 2024 Important Numbers.

Paying taxes voluntarily is a strange thing for most people to consider. But it may help to think of it like this – why pay tax on the harvest instead of on the seed? Most people will face a retirement that will require them to pay income tax on all their earnings for the rest of their lives. However, those retirees with Roth IRAs will have the benefit of taking distributions for the rest of their days with no taxes, and in most instances, even for their heirs.

Non-spousal beneficiaries (there are exceptions) are required to recognize 100% of all the IRA inheritance within 10 years. This brings a tremendous amount to tax revenue from Traditional IRAs to the IRS with this Baby-Boom generation, the majority of whom have built their retirement wealth on hard earned savings in these retirement plans vs. the previous generations that lived on pension funds. Additionally one of the biggest benefits to a Roth owner is there is no RMD (required minimum distribution) on your IRA.

As you plan and prepare for retirement or even in retirement today, there is a Roth for you. Let me share a little history on Roths. They really began to take interest in 1997 and since then there have been six legislative changes to some of the features and benefits. Early on the Roths were not explored by higher income earners due to the income limits to contribute with after tax dollars. If you did participate, the maximum contribution over the age 50 in 1997 was $2,500. Fast forward to 2024… what if I could tell you that you could potentially contribute up to $69,000 a year into your qualified retirement plan as a high income earner?

SO ARE YOU READY? LET’S START ROTHING.

There are many options in Roth contributions and conversions, that depend on several factors. Below are the 5 biggest ideas we have for exploring what might be a starting point to then deepen the scenario that’s right for you and your future retirement income and tax awareness. This article is meant to share highlights and bring familiarity of Rothing options. We advise you meet with your Wealth Advisor at LBDIAS or your CPA to further understand the tax strategies and know the hold requirements to satisfy the full tax free distributions in the future.

1. TRADITIONAL ROTH

Funding with after tax dollars that grow tax free on contributions and earnings. All future withdrawals if held for the required 5 years and combined with reaching age 59.5 will not be taxed. Current contribution limit in 2024 is $7,000, over age 50 catch-up $1,000 for total of $8,000. Non-working spouse contributions are also eligible based on MFJ. Caution, this type of Roth with after tax dollars is subject to MAGI phaseout limit of $230,000 – $240,000 for a (MFJ) married filing joint. (See tax facts for 2024)

2. 401K ROTH

This is a growing option in employer plans. Contributions regardless of income is $30,500 ($23,000 max contribution + over 50 $7,500 catch up). Check also to see if the employer offers matching contributions on your Roth. My recommendation is to consider this a serious option if you have built up a substantial pre-tax IRA. Next, look to making after tax non-qualified contributions up to higher thresholds, then convert with no taxable event on contribution to a Roth IRA, also known as a Back Door Roth.

3. CONVERSIONS

Traditional IRA or any of the previously mentioned qualified IRA accounts can be converted without any income limitations. The converted amount is taxable at time of conversion. This is the biggest impact area for reducing the future tax-bomb. If you have an opportunity to convert in a reasonable tax scenario or have a substantial loss or reduction in other income in a particular year, you could possibly pay taxes at this time less than what would be expected in the future. Many retirees discover in retirement up to 85% of their Social Security Income is taxable and combined with other investment income such as capital gains from other assets or even a sale from a property. These all combined together create a collision of new tax issues. Plus IRMAA surcharges that were never imagined. If you hold a large pre-tax IRA, consider ways to convert strategically. If you’re retired today and have not yet initiated your distributions, consider building the Roth conversion now to reduce future RMDs and reduce the tax liability to any non-spouse heirs.

4. MEGA BACK DOOR ROTH

After-tax non-deductible contributions are made in the 401k- typically funded after maximizing the $30,500 to your IRA, or Roth IRA- then you’re possibly allowed a total contribution of $69,000 using the figures in 2024 Important Numbers. Once the contribution is funded you can convert the non-qualifed account over to a Roth IRA. Only earnings accumulated during the time in the traditional IRA 401(k) account would trigger a taxable amount. The end result is that you have just converted to tax-free growth for all your future years without present income restrictions. Doing this as a pre-retiree is an amazing opportunity to make an impact against that tax-bomb later.

5. RENTAL PROPERTY CONVERTED TO VACATION HOME ROTH

Investment real estate owned and purchased by your Roth that can be used for your future vacation home. Convert your pre-tax (traditional) IRA to a Roth. You will be taxed on the converted amount on your tax return for that year. Another strategy is to stretch out the taxable event converting over a period of years, or build up your contributory Roth account and purchase the real estate in your Roth IRA. All net receipts of the rental are simply deposited into your Roth IRA account at your custodian. Once you achieve the age of 59 1/2, and it has been at least 5 years since you converted all to a Roth IRA, you are able to take a full distribution of your Roth IRA without penalties or taxes. In your case, you can take a distribution of the property – moving it from the Roth IRA to your individual name, completely free. Better yet, all the rental earnings for the past five years can stay in the Roth account and be re-invested, or withdrawn, all based on your choice including leaving the property there for infinite years and to your heirs tax-free.

TAKE THE NEXT STEPS.

Call in and work with Life By Design Investment Advisory Services to learn more about our wealth strategies encompassing your future and retirement concerns. Speak with Wealth Advisor Monique Marshall, RMA®, AIF®, who specializes in retirement wealth management strategies. Contact us today.

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.