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September 7, 2023
On the NewRetirement Facebook group, we asked, “What is one insight you gained by going through the process of creating a retirement plan?” It is clear from the responses that creating a plan can create confidence, wealth, security, fewer taxes, an earlier retirement, and much more.
The insights are varied and reflect the fact that there is no one right way to plan or to even think about retirement.
Keep reading for 19 insights gained by some smart people who are actively planning their secure future:
Kate says, “The biggest insight I got by creating a retirement plan, was that it is okay to plan around what matters to me.”
She continued, “Lots of financial advisors, articles, and friends have great ideas for how to plan a retirement, but only some of that advice applies to my situation and what is important to me. And, what is important to me is what is most important.”
Michael said it a different way, “There are many ways to get to the end goal. There are many solutions that make you successful in retirement.”
A lot of people already retired or planning retirement come to the realization that trying to estimate future taxes and making a plan to minimize this expense can go a long way to preserving your assets.
In fact, tax insights were the lessons most mentioned by people.
The NewRetirement Planner helps you see your tax liability — projected each year, all the way into the future. It enables you to see where you might want to minimize your income, make withdrawals more strategically, optimize when you start Social Security, think through when to convert assets, and more to save on taxes.
Scott said, “Taxes, taxes, taxes! Plan ahead or you will be unpleasantly surprised…”
And, Barbara points out that taxes hurt even more in retirement: “Taxes are more of a concern because they are going to go up and it hurts much more and is a more ‘front of the mind’ pain when we have to write those big checks to the government versus having them taken out of our paychecks before we even see that money. Once it’s in our hands, it more painful to see it leave — especially once we are retired and watch the news more and see what’s happening with our tax dollars!”
Shana added that she is glad to have a plan that “Gives you a forward-looking view of tax liabilities/obstacles and time to make adjustments and strategies before it’s too late.”
Using a Roth allows you to be certain about future tax obligations — you won’t have tax obligations any on your Roth accounts.
Kathy emphasized (with all caps and three exclamation points) the power of saving into a Roth. She said, “Failing to plan is planning to fail. Save the max you can and, if younger, take advantage of ROTH!!!”
Mary added, “I wish I would have done some Roth in my early days of working!”
You have options for how to save money for retirement — in a Roth or a traditional account.
So, the theory is that by saving money in a Roth when you are younger, your money is more likely to appreciate greatly and you won’t pay taxes on that growth.
Don’t think it is too late if you are nearing retirement and haven’t saved into a Roth. A Roth conversion is when you take money that you have in a traditional 401(k) or IRA account and move it into a Roth 401(k) or IRA. When you do this, you will need to pay taxes on the money you withdraw. However, any future gains will grow tax-free.
Jun said, “Glad I did ROTH conversions early in my life.”
If you are lucky enough to be planning on passing on a financial legacy to heirs, you might consider the benefits of having those funds in a Roth account.
Brian said, “It pays to get money into a Roth, especially for those you’re leaving your estate to.”
Because Roths grow tax-free, they are particularly good for money that is going to be invested for a long time. This is often the case with funds that will be inherited by heirs. So, in many cases, you can save your beneficiaries tax money by passing on a Roth instead of a traditional account.
When you turn 72, you must take Required Minimum Distributions (RMDs) from your tax-deferred accounts. These withdrawals are counted as income and may 1) move you into a higher tax bracket and 2) trigger higher costs for Medicare – what you pay is determined by certain income thresholds.
Greg expressed frustrations with these costs, saying that he gained insight into, “How RMDs at age 72 will increase my yearly Medicare premiums by thousands. I feel I am paying for the same benefit at least twice with no end in sight.”
And, it is true. The very highest earners will pay over $5,000 more for Medicare than the lowest earners.
NOTE: It may be possible for you to avoid these surcharges and save thousands each year if you pay attention to the income thresholds and lower your income when possible.
Retirement insights are not always about money. Mike said, “I learned that I will have many ‘negotiations’ with family members about where to live, how to spend money, and allocate the free time that will become available from not working 50+ hours a week as I have for the past 33 years.”
When you are working, you have less choice about how and with whom to spend your time. In retirement, you gain total freedom and that freedom can almost feel problematic. The most successful and perhaps happiest retirees have a retirement plan for their money — and their time. If you are worried about your time, here are a few useful resources:
Aristotle is credited with the thought, “The more you know, the more you realize you don’t know.”
His wisdom is true for financial and retirement planning — the more you know about financial planning, the more you realize you don’t know about financial planning.
As Candace cited with her insight, “Creating a retirement plan, and educating myself along the way, made me realize how much I have to learn! It’s an ongoing process…”
In fact, planning is like an onion, you can keep peeling back layers and going deeper to increase your wealth and security.
This is the retirement planning insight gained by Jon, “Putting money into a retirement fund is relatively straightforward, but planning when and how to take it out in retirement, without heavy taxation, is much more complicated.”
Brian added, “De-accumulation gets complicated before it gets simple.” (De-accumulation refers to withdrawing your savings and assets.)
These insights are true. It is kind of like when you see a stressed-out parent with a toddler in full meltdown mode. You feel bad for mommy or daddy. However, if you have kids and have survived the teenage years, you almost want to tell the young parents that the tantrums are easy compared to the years to come — things just get more complicated as kids get older.
It is the same thing with retirement. You might think that saving takes great sacrifice, but turning those savings into adequate income that lasts as long as you do — no matter how that turns out to be — while keeping pace with inflation and unforeseen events and… and… and… is complicated.
“I often feel like there are so many moving parts to everything, my brain just ends up getting scrambled!” said Laura.
Indeed, creating a retirement plan involves twisting and turning an array of inter-related levers and knobs. One financial move has a cascading impact on a variety of other factors — good or bad.
The beauty of using online tools is that you get to control what is important to you and your financial plans. And, gaining mastery of the various financial levers can give you a deep sense of confidence, clarity, and security about your money.
Plus, the NewRetirement Planner shows you the impact of each and every change you make, which can definitely help unscramble your brain.
Laura said, “I have discovered that I am nearly envious of my friends who have only a pension and Social Security. They don’t have to figure out how to preserve retirement funds. Figuring out how to invest and withdraw retirement assets is a huge responsibility and consumes a lot of time with a steep learning curve and fear of blowing it.”
Laura is right. The pension system has a lot of merit to it. And, the system of retirement savings accounts is deeply flawed — not everyone has access to savings plans, many people don’t participate even when they have access, and, yes, even if you did save, it is incredibly complicated to turn assets into income.
These complications are one of the reasons why people turn to lifetime annuities. A lifetime annuity is like a pension you buy yourself. It may not be the most flexible or efficient place to put your money, but it takes the guesswork out of turning savings into income.
This is an insight that came up in a few different guises:
Rebecca said that creating a retirement plan showed her, “That it isn’t hard to understand how our money works. And, we can either actually plan out our retirement ourselves or we can better prepare ourselves before we speak to any financial advisor. Financial knowledge is so important, and I really appreciate feeling that I know what is going on.”
Barbara benefited from creating a retirement plan by being able to get any and all questions answered. She found that advisors didn’t always appreciate or didn’t seem to want to answer her queries. She said, “When talking to ‘professionals’ they can’t clearly answer some of my questions and I feel they think I am trouble when I ask things like ‘But if this happens, what about that…’ and so on.”
She continued, “The professionals either don’t seem to be able to work me through the cause and effect of things either because they only walk down the straight path of their business plan or just haven’t gone off their pre-scripted, paved roads.”
By creating a retirement plan, Laura gained the confidence to talk with her advisor. “I’ve learned that as much as I feel I am floundering, unprepared, and clueless after years of trial and error, research and discussion, trying to figure everything out, at least I am now familiar with it all.”
She continued, “I can now actually have a better conversation when I speak to an advisor, bank officer, or an insurance or mortgage agent. I can challenge strategies and ask about alternatives. And, whether in person, on the phone, or remotely, many have expressed shock that I understand their explanations and ask semi-intelligent questions or point out conflicts and possible workarounds.”
Not everyone wants to replace or supplement an advisor relationship. Rob said, “I was unable and unwilling to tackle it by myself. Even though I am interested and involved in our finances, I needed help from a Financial Advisor for peace of mind, assurance, and for my wife when I pass. She isn’t terribly interested in getting involved with our money.”
For many people, it is not enough to create their own retirement plan, they do want reassurances from an advisor.
If this is you, consider using a fee-only fiduciary advisor — which can help align his or her interests with yours.
John said, “The NewRetirement system helped me put everything in one place and allowed me to adjust growth and inflation percentages. Doing so I gained confidence in my retirement plans.”
Yes! Getting organized and running different scenarios are great ways to gain confidence that you are on the right track to the secure future you want.
Kelli gained insights to benefit her grandchildren. She said, “I learned to tell my grandchildren the value of saving.”
The more you save when you are young, the easier retirement will be and the earlier you can do it all because of the power of compounding returns (assuming you invest what you save). Hopefully, Kelli can share some powerful examples with her grandchildren. Here is one:
Let’s say there are a set of triplets: Jane, Jill, and Justine.
Jane, Jill, and Justine all saved $120,000 over a 10 year period and all will earn a 7% return through when they turn 65. But, that is where the similarities end. Their ending balances will be dramatically different.
When you create a retirement plan, you are also bound to discover some shoulda, coulda, wouldas.
Michelle said, “I discovered that I ought to be saving more.”
Frank wished he had saved into a Roth account earlier. He said, “Wish I would have just paid the taxes when I earned the money. I had always believed I would be in a lower tax bracket when I retired. Then I learned about RMD’s.”
Shana had an observation, “I have seen many people ‘retire’ and, because they are 62, immediately take Social Security and blindly go into retirement without knowing important things. Many realized that in all reality they couldn’t afford to retire and had to return to the workforce or live a lower budget lifestyle than they expected. And, even worse later realized the tax consequences of their uneducated decision to retire. The importance of having a look-ahead view and drawdown retirement plan in place before retirement cannot be overemphasized.”
Bill suggests that “The biggest lesson was that waiting to age 60 to see a financial planner was dumb. We should have started in our 40s with checkpoints every 5 years.”
These regrets highlight the need to create a long-term plan for your wealth and security as early as possible. (Though it is never too late to get started, as the tip about teaching grandchildren to save shows, early planning does pay off.)
Kelli learned another hard lesson. “I learned that not being involved in finances (my husband does it and did for all our marriage) is stupid. Everyone should know the status of numbers.”
It is not pleasant to think about, but the reality is that one spouse is going to outlive the other. And, the surviving spouse is going to have to take over the financial plans. Furthermore, if only one spouse is doing the planning, the needs and wants of the other may not be accounted for.
Chris said, “My insight is that no matter what the numbers show, I mentally struggle to trust the numbers.”
Chris is not alone. A lot of people struggle with making the leap into retirement. After all, your entire way of living — earning a paycheck, saving money — gets turned upside down and you are faced with spending what you have spent a lifetime accumulating.
David said, “I learned about the bucket approach to draw from different sources at different times. This will allow me to maintain my lifestyle and be tax-efficient.”
A bucket approach can be a great way to take some appropriate investment risks with one “bucket” of your money and keep other “buckets” in more conservative investments.
Jordana learned, “I never even want to retire and that is what’s safest and healthiest for me anyway.”
This can be very true. If you enjoy your work, then sticking with it is a great “retirement” plan. Working keeps you mentally, physically, intellectually, and socially engaged. And, in the best of circumstances, it also gives you meaning and purpose.
Retired or not, aging well usually means that you can get the social interaction, sense of purpose, and stimulation that work provides.
Tom said, “I don’t know if I’d call it ‘gained’ insight, but the planning process reinforces the need to have priorities and continually revisit those priorities.”
Kenneth made a very specific self-aware trade-off. He conveyed that he learned, “Mostly that early retirement isn’t happening for me — at least not before age 55. It would be more stressful trying to juggle things, than just working two more years.”
It is true that most people have limited retirement resources and can’t do everything. And, without a plan, you are apt to do whatever presents itself. By planning you can decide what your priorities are and make sure that you organize around achieving or experiencing what is important to you.
David realized that long-term care can be an expensive bomb in the best-laid plans. He said, “My main area that I want to really go deeper in planning is long-term care. Long-term care is a big wild card for me.”
People tend to be worried about being able to retire. No one wants to jump in too soon and face the prospect of running out of money or not being able to afford healthcare.
However, creating a retirement plan often gives people the insight that retirement is entirely possible:
Henry said, “The insight I got was that I might be able to retire early.” Rebecca discovered her early retirement date, “That retirement earlier than expected, maybe in our late 50s is entirely possible.”
Kathleen discovered that “I am in good shape for retirement.” J.C. echoed that sentiment and said, “I gained comfort in knowing that we are in fine shape.”
James found that he can “Feel really good about my retirement decisions.”
Lemuel declared that he had, “Clarity, confidence, and optimism toward a financially secured retirement.”
Jolene found that they were ready for retirement, “We discovered that my husband and I could retire early — with or without passive income — and that we could reduce taxes in the coming years through conversions.”
Jun was able to say that, “Enough is enough.”
Mimi proclaimed, “I’m doing better than I thought.”
Sarah was delighted to learn, “That we can cut back on our business at the end of the year and semi-retire. We would have never known that without the NewRetirement Planner. We are going to cut back to about 1/3 our income and be fine. I’m so excited!”
And, the list goes on…
No two planning experiences will ever be the same. There are common themes, but you can create a plan that is right for you and gain the insight that you need.
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