Navigating the Transition to Retirement

Posted in:

Published: August 11, 2015

Transitioning to Retirement

You’ve thought about retirement for years. Now, here you are getting close, and you feel… anxious, nervous, and for some of you, even terrified.

You’ve been saving for years. The thought of starting to spend that savings makes all kinds of questions run through your mind. What if the market goes down? What if you don’t have enough? Should you start Social Security now so you have some income coming in… but, wait, you’ve read that it is better to wait and begin benefits later.

How should you withdraw your money? Once a year as a lump sum? Should you take money out of your 401(k) or out of the brokerage or mutual fund savings you have accumulated?

What about taxes? Should you make quarterly tax payments? How much will you have to pay?

These are new questions to you. We’ve heard them hundreds of times. And we have answers.

The answers, however, are unique to your situation.

Take Social Security as an example. Maybe you’ve heard it is better to wait and start your benefits at age 70. Yet just last month we recommended one man start at 65. And the month before we recommended a woman start at 62. Why would we do such a thing?

The man is single, has no previous marriages, is not in great health, and has a family history of short longevity. Starting benefits now made sense based on his circumstances.

The woman is married, not working, and her spouse is much older than she is. When her husband passes, she will get his higher survivor benefit amount and her own benefit amount will be dropped – so in her case it made sense to start her benefit as early as possible.

Such decisions need to be made based on your situation – not based on a generic rule of thumb that may not apply to you.

We don’t use retirement rules of thumb to give advice. Nor should you. We see too many mistakes made that way. Dana covers several of these mistakes in her MoneyOver55 article 7 Outdated Retirement Decisions People are Still Making.

Since we don’t use rules of thumb, what do we use?

We start with each client’s financial situation. We look at their current savings and investments, age, income, and expenses.

We analyze their Social Security options and provide a recommendation on how and when they should begin benefits. We also explain why.

We look at their pension options (if they have one) and determine if they should begin benefits at retirement or at a later date, if they should take a lump sum or annuity option, and if married, what type of survivor benefit option they should choose.

We project their future income taxes to see if it makes sense for them to withdraw funds from an IRA or other type of account, and to determine if they would benefit from converting IRA assets to a Roth IRA.

We put all this info together and test it in two ways; first by using something called a Monte Carlo analysis, which projects potential results using a random sequence of future investment returns.

Next we use an historical audit, which takes account balances and withdrawals and shows the client what would have happened if they retired in 1927, 1928, 1929, 1930… the historical audit shows you how well a particular investment approach would have worked for each potential past retirement year from 1927 going forward.

For us to feel confident that a retirement income plan will work, the results of all of this have to fall within a certain pre-defined range of outcomes that we have set.

Because of the thorough analysis work that we do, we feel quite confident in the retirement income plans of the clients who work with us.

If you want to feel that confident in your own plan, we invite you to have a conversation with us. We always offer complimentary introductory meetings (via web meetings for long distance clients, or in person for Arizona clients).

You can learn more about our services in Frequently Asked Questions About Our Services.

If you would like to set an introductory meeting, first we ask that you complete an easy to answer set of online Pre Meeting Questions.