There are a lot of people you think about when you consider your retirement and legacy plans: Yourself and your spouse, your children and grandchildren, other family and friends. But do you think about Uncle Sam? The government plays a role in every retiree’s life through taxation and the social safety net, and making sure you understand how those things will affect your spending is another important piece of preserving your nest egg.
Think of Social Security as a financial puzzle. Most people just jam the pieces together, hoping it works. But there's a strategic way to assemble them for maximum benefit.
In part 1, we discussed income from investments and savings, but Social Security is another vital source of funds in retirement. On average, it covers about 40% of retirees’ income nationwide,3 but for higher-income individuals, it’s closer to 27%.4 No matter what, this raises the question: where will the remaining income come from? Only about 15% of people still receive pensions,5 making Social Security optimization even more critical.
Choosing the right age to begin drawing Social Security benefits can vastly impact your overall retirement income. Additional factors such as your marital status, other assets, and life expectancy must be considered. We have an entire blog post devoted to key questions and considerations about Social Security that digs deeper into this important program.
Making the wrong decision about when to claim Social Security could potentially cost you up to half a million dollars over your lifetime.6 To help you make an informed decision, we offer a Social Security Optimization Report as part of our no-fee mini retirement plan. This report provides personalized numbers and strategies to help maximize your Social Security benefits.
Healthcare in retirement is a landscape filled with confusing acronyms, complex regulations, and a barrage of marketing messages. But don't worry, we can help light the way, and help provide you with a clear, strategic path to ensure your healthcare needs are met without jeopardizing your financial security.
Healthcare needs can change dramatically when you transition from the familiar structure of employer-sponsored plans to the uncharted territory of retirement. If you retire before the age of 65, the transition can be particularly challenging. You might find yourself facing the daunting prospect of COBRA, which, while offering temporary coverage, is notoriously expensive and only lasts for 18 months.7 Alternatively, you might explore plans from the Affordable Care Act exchange, which requires careful consideration of subsidies and plan options.
But the real complexity begins when you reach age 65. At this age, you'll probably be inundated with a flood of information from countless Medicare supplement providers. Direct mail, television commercials, online ads, and persistent phone calls will all likely try to convince you that their plan is the absolute best. Choosing the right plan from this overwhelming array of options can feel like an impossible task.
At Chamberlin, we know this isn't a one-size-fits-all situation. We understand that your healthcare needs are unique, so we take the time to ask detailed questions about your medical history, current doctors, medications, healthcare utilization, and specific preferences.
We'll consider factors like:
By gathering this comprehensive information, we can help you tailor a Medicare plan that aligns perfectly with your specific requirements and budget. We'll help you understand the nuances of Medicare Advantage, Medicare Supplements, and Part D prescription drug plans, helping to ensure you can make informed decisions.
Our ultimate goal is to help you navigate the complexities of Medicare and ensure you have access to the quality healthcare you need without unnecessary financial burdens. We want to help eliminate the confusion and give you the confidence to make the right choices for your health and your financial well-being.
Taxes: the unseen drain on your retirement. Every dollar paid to the government is a dollar not available for your future. Are you aware of how much they're costing you? We're about to show you how you can fight back and reclaim your financial freedom.
Imagine this: you're in a business partnership, but the other party—the IRS—can change the rules of the game at any time. That's essentially the situation with your 401(k) and IRA accounts. The tax laws of tomorrow might be vastly different from what they are today.
For more than two decades, we've been crafting personalized tax strategies, tailored to each client’s unique assets and resources. One powerful approach is creating what we call 'tax funnels.' Think of it as strategically distributing your income across various tax brackets to minimize your overall tax burden. This could involve converting traditional IRA funds to Roth IRAs during lower tax years, or strategically timing withdrawals to stay within specific tax brackets or other tax strategies.
Imagine you have a large traditional IRA. By gradually converting portions of it to a Roth IRA during years when you’re in a lower tax bracket, you're essentially paying taxes on that money now, when rates are potentially lower, and ensuring future withdrawals are tax-free.14 This can drastically reduce your tax liability in retirement, potentially even allowing you to operate within the 0% tax bracket for certain income sources.
Another critical concept is understanding the impact of Required Minimum Distributions, or RMDs. Once you reach a certain age, you're forced to take distributions from your traditional retirement accounts, which are taxed as ordinary income.15 If you haven't planned for this, you could find yourself pushed into a higher tax bracket, greatly increasing your tax burden.
We also consider the tax implications of Social Security benefits. Depending on your other income, up to 85% of your Social Security benefits can be taxable.16 Strategic planning can help minimize this impact.
Our goal isn't just to save you money; it's to help you optimize your entire tax situation and maximize your retirement income. We want to ensure you keep as much of your hard-earned money as possible.
Now that we’ve examined the ways to bolster your income and minimize big-ticket expenses in retirement, it’s time to look at the longer term picture of legacy planning and how to leave your loved ones in a strong financial position when you’re gone. In part 3, we’ll examine insurance and estate planning and how they can be powerful ways to keep your financial legacy intact.
Chamberlin is here to help you navigate the options and create a plan tailored to your needs, goals and dreams. Visit our online Learning Center for more retirement resources, and If you're ready to take the next step, we invite you to schedule a call with one of our experienced retirement educators today to take the first step toward a confident financial future.
Remember, your retirement dreams are closer than you think. Don't wait to build the retirement you deserve – take action now!