I'm Ready to Retire. What Should I Do?

So, you’re ready to retire and you’re not quite sure what you should be doing about your retirement. There are many moving parts that need to be sorted out.

What are the discussion priorities and what timelines do I have?

Those are really good questions and every retiree situation is different - that’s why it’s important to work with a financial advisor.

There are many financial advisors out there, so you should work with an advisor you are comfortable with. Some advisors are conservative, and others believe in a combination approach of Mutual Funds, Variable Annuities, and Fixed Annuities; it’s all about how comfortable you feel about the advice you’re receiving.

What Should I Know If I Feel Comfortable?

If your structuring tax qualified monies out for usage, i.e. creating a stream of payments, be mindful of the tax impact of monies that are being distributed. Also, make sure you don’t run out of monies – it needs to last.

To the point of making it last, consider what can happen to your retirement dollars if the markets don’t perform as expected. It seems with a bull market of nearly nine years the correction could be in sight, or just around the corner. I like my clients to look at Fixed Index Annuities or Laddered Bonds for safety, growth and control of their hard-earned monies.

Many retirees are heavily waited in stock like accounts that are NOT geared for de- accumulation and income structuring. If this is not properly set up than the retiree gets hit with losses perhaps and never really is able to recover his/her money. As I eluded earlier, it’s extremely important to have your retirement monies in accounts that are geared for distribution primarily and have principle protection.

What About a Negative Sequence of Return?

Oh yes, and by the way that can have a devastating impact on your funds. A negative sequence of return is a market correction or a Black Swan event that dramatically changes the trajectory of your retirement values. If you lose 50% of your money to a big correction in the market you will need to make 100% of it back. Try pulling that trick off when you’re using the money to live on.

So, it’s important to NOT risk your hard-earned monies in places that can do it quickly, AKA the stock market.

Also, I’m not telling you what to do it’s just my experience that most clients who own IRAs, 401Ks, and other tax qualified accounts. Some individuals never understand how to properly structure payments out to themselves.

Tax qualified accounts are meant to be used to subsidize your income, so you can enjoy your retirement. Sadly, there are so many that never understand how to set up payments that are never going to lose earnings and principle. Leaving these monies to others other than your spouse could mean heavy taxes. It’s called “Income with Respect to the Descendent.”

All of these monies are taxed at 100% of the beneficiary’s tax bracket, unless it’s a spouse or the beneficiary opts out for an inherited IRA. My 30 plus years of experience is, the kids usually take the cash value of the IRA and pay the taxes. It’s too bad. I have seen a lot of money get melted away and sent to the Internal Revenue Service. Let us know how we can help you and keep that from happening to you and your family.