Book Appointment

S2E3 - Retirement Income Plan

Season #2

Q: What do I need to know in order to retire? (1:48)

A: There are a lot of things that you need to know as we go into retirement. Unfortunately, there really isn't a handbook out there. HR doesn't give you your gold watch and a handbook that says welcome to retirement! Here's what you have to do first:

You can see more in my guide: 5 Questions to Ask Before you Retire

You need to create a process for managing your finances. The old rule of managing money that has gotten you this far starts to work against you in retirement. During our working years, a lot of "default" decisions are setup for our benefit. In retirement, the default action can be detrimental to our lifestyle. So having a proactive process is essential for success.

Some of the decisions you will need to make in retirement:

  1. How to Allocate Your 401k
  2. Should You Take Over Your 401k?
  3. Where you hold investments (in your brokerage account vs tax-deferred accounts.)
  4. Social Security? Take Early? Take Late. Mix and Match? Survivorship Planning
    (see here for my SS guide)
  5. Are we protected from market losses?
  6. Excess Taxation? 
  7. When do you want to retire?

it sounds weird. Right. But, I don't know how many people I talk to, who haven't made the decision to retire, and they come to me, and they're not sure if they can retire or they want to know when they can retire. And I've said this before in the show...make the decision to retire and then let's figure out how to make it happen.

There's almost always a way to make it happen.

It may not be the way that you want it to be. This may make you say, well, you know what? I really want to take that extra cruise every year. So I'm gonna work another year to save, or you might look at the numbers and say, I can work another ten years, and it won't impact my lifestyle in retirement.

Q: How much money ou actually need is based on your expenses and cash flow, correct? (16:20)

A: That's what cash flow is. Money in, money out.

So how much money is going out, right?

What are you paying for the mortgage? What are you paying for? Gas? What are you paying for hobbies for food? Um, so until you know what your expenses are and then what. Or potential income you can get from social security. We can't begin to address any other questions in retirement.

Now, the next question to answer, once we have the idea of how much we're our cash flow is, is our assets are, and what we can potentially tap into for retirement. And we know how much we need for retirement, and we know how much we're getting from social security, right? Or at least the range of possible options are?

The next question is, how do we fill that gap? How do we go from what we're getting from social security to meet our anticipated needs in our retirement? And hopefully with some kind of cash cushion.

And we have to invest our money, so the question is how? How do we do it in a way that grows faster than inflation but doesn't put our retirement at risk? (18:18)

Q: What are some of the hidden mistakes that people make in retirement? (26:00)

A: Aside from the fact that you have to have your money invested, making sure that the money that you have in retirement is tax efficient because in retirement, the rules about taxes and money change.

So in retirement, all of a sudden, we lost all of our ability to reduce our taxes, and all of our savings can get taxed at much higher rates. So we need to make sure that the decisions we're making are designed. To reduce our taxable income and stretch out our retirement savings as long as possible.

And that means that the decisions we make are not automatic.

It doesn't automatically mean converting all of our money to tax-free and having a huge tax bill upfront. And it doesn't mean automatically that we wanna spend money out of our retirement savings. What it does mean is we gotta be strategic about things and think about how every decision will affect us.

How will this affect me two years from now, five years from now, 10 20, right?

Look to the future, look to our crystal ball so that we're making smart decisions for ourselves and our loved ones.

See more in the guide: How to Pay Zero in Taxes in Retirement

Or, for a full class on how to transition into retirement, check out The Simple Path to a Golden Retirement!