Retirement Planning
1. Define Your Retirement Vision
Most individuals start planning for retirement with a single financial goal that may not align with what is truly important to you. We think differently. We believe it starts with defining your life vision, which includes what you want to accomplish and how much money you'll need to reach that goal.
Your individual retirement vision is the foundation of everything else in your plan, including:
- How much you will spend
- When you will spend it
- Where you will spend it
- What types of healthcare systems you will use
- What types of tax strategies you want to implement
To help envision your future after retiring, take some time to think about your answer to these questions:
When you think about your ideal week during retirement, what image comes to mind?
Do you want to travel regularly, stay close to family, or split time between locations?
Will you work part time, consult, or volunteer?
What health-related activities and daily routines do you envision as you enter into your 70s and 80s?
Together these four questions represent your retirement vision and values and guide you in developing a comprehensive plan for creating and maintaining your future lifestyle.
2. Translate Goals Into a Realistic Spending Plan
Your retirement income plan depends on how much money you expect to spend in retirement. We develop concrete estimates of your future retirement expenses and help you separate your need for money from your desire for money, as well as from the legacy you wish to leave.
Our approach allows you to build flexibility into your spending assumptions.
Your realistic spending plan depends on, but is not limited to:
- Living expenses;
- Housing costs and maintenance;
- Travel and leisure activities;
- Medical expenses and insurance premiums;
- Financial assistance to adult children or elderly parents; and
- Future, large, one-time purchases such as a new vehicle, renovations, and relocations.
Ultimately, you will not only have a projected monthly dollar amount to work with, but also a prioritized list of expenses and a flexible plan you can follow if the economy is weak.
With a dependable spending plan in-hand, you can more easily identify where to cut back while keeping what is most important to you.
3. Inventory Your Resources
With an understanding of your objectives and the costs associated with retirement, we work with you to conduct an inventory of your resources and assets.
- Employer plans such as 401(k) or 403(b)
- Traditional and Roth IRAs
- Brokerage and savings accounts
- Pension benefits when applicable
- Social Security
- Business income or rental income
- Real estate equity
This process leads to increased clarity on the money sources available to you.
It's common for people to feel "behind" in their savings, but this can often be attributed to not having an accurate view of all the resources they have for retirement.
This unsettling feeling often goes away once clients have a well organized account of their current resources. Having all your funds listed together also helps your advisor identify other savings opportunities.
4. Build a Durable Income Strategy for Your Future
When it comes to retirement planning, the emphasis should be on converting savings into sustainable sources of income and establishing an appropriate income level that will last throughout your final years.
During the yearly income evaluation process, we help you coordinate:
Social Security
Your Social Security timing decisions have a huge impact on the long term financial success of your retirement. We guide you through the pros and cons of claiming your benefits before full retirement age, at full retirement age, or after full retirement age. This decision is based on your life expectancy, marital situation, anticipated level of income in retirement, and the role of Social Security within your overall retirement plan.
Investment Planning & Withdrawal Strategy
By developing a comprehensive withdrawal strategy, we help you reduce investment risk and maximize tax efficiency.
This includes creating a structured process for:
- Which accounts to draw from first;
- How to balance taxable, tax-deferred, and Roth assets;
- How to maintain liquidity for surprises; and
- How to respond when markets decline.
Once you have a clearly defined withdrawal strategy and contingency plan, you can begin to worry less about what you will do if the market trends down.
5. Plan for Taxes With Intention
Tax planning is ongoing with respect to your retirement. We work to educate clients on how various forms of income may affect each other and what will happen under both federal and Arizona tax laws.
At Benefit & Financial Strategies, our advisors assist clients in developing a tax strategy that includes, but is not limited to:
- Coordinating withdrawals across tax buckets;
- Evaluating potential Roth conversion windows;
- Managing required minimum distributions;
- Reducing the risk of unintended tax spikes; and
- Aligning charitable goals with a tax-aware plan.
Our team is also knowledgeable in tax laws changes. Therefore, our approach is flexible and continually updated to help you develop a framework that can be adjusted to reflect changes in laws and in your personal circumstances.
6. Healthcare & Long-term Care Readiness
Generally viewed as an underappreciated aspect of retirement planning, health care expenses pose a challenge not only due to high dollar amounts associated with premiums and out-of-pocket costs but as well as how unpredictable these costs may be.
In addition to formal planning regarding your retirement, we assist you in developing plans for:
- The transition to Medicare
- Choosing coverage that matches your needs and location
- Anticipating out-of-pocket costs and medication expenses
- The possibility of long-term care needs
- Family caregiving responsibilities
Many individuals in Northern Arizona depend on access to specialists and specific healthcare and medical services when making their housing decisions and budgeting for their travel plans.
By integrating healthcare planning as a critical component of your overall retirement plan, you avoid the unsettling possibility of having to create a new plan-of-action after your retirement strategy is already in place.
7. Address the Risks that Can Derail a Plan
Your retirement plan should include stress testing and prepare for predictable surprises. A comprehensive plan should address the following key risks:
Longevity Risk
We all hope to live a long and healthy life, but some fail to plan for how long retirement may last or what it may require. Preparing for longevity risk allows you to spend with more confidence and lessen the worries of outliving your money.
Inflation Risk
Even low levels of inflation can significantly erode your purchasing power over time. We include inflation protection strategies in your retirement planning process to maintain actual purchasing power and not just nominal dollar values in your retirement accounts.
Sequence of Returns Risk
The negative impact that a downturn in the market has on your portfolio early in retirement can be dramatic. We provide you with flexible spending limits and other strategies so you can mitigate this risk.
Life Changes & Family Issues
An adult child moving back home, caring for a parent, or a health emergency can dramatically change how you live in retirement. We create safety nets and decision support systems so that your retirement plan can be quickly modified without added stress.
8. Make Housing a Strategic Decision
Housing can be more than an individual’s choice of lifestyle; it might even have a direct impact on one’s financial health as well as their healthcare.
You have many factors to weigh when considering your retirement housing situation. For example:
- Whether to pay down a mortgage before retirement
- How to weigh downsizing, staying put, or relocating
- The true cost of aging in place
- Renovations that support long-term mobility and comfort
- Proximity to family and care
Having a home either adds stability or creates unwanted problems. Our job is to assist you in making sure your home contributes to your retirement rather than being a barrier to achieving how you want to spend your golden years.
Benefit & Financial Strategies' Retirement Planning Process
Our mission is to develop a comprehensive retirement plan without the complexity.
Plan development phases:
Step 1: Discovery & Goal Clarity
We discover what you want your retirement experience and opportunities to be about.
Step 2: Financial Inventory & Baseline Plan
We will organize all your income streams, accounts, and benefits in one concise, organized, and easy to interpret way.
Step 3: Strategy Development
We will create a strategy that integrates your investments, taxation, Social Security alignment, and risk management with your goals.
Step 4: Roadmap Implementation
You receive a step-by-step action plan of key priorities, in the form of a timeline and decision points.
Step 5: Continual Monitoring
Retirement planning is ongoing and we regularly analyze the impact of changes in your financial situation, markets, and policies to help keep you on track.