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from Lonier Financial Advisory LLC, Osprey, FL

Charting Your Retirement Lifestyle

Charting Your Retirement Lifestyle

In the last post, “It’s Not Your Father’s ‘Retirement’ If It Ever Was”, I talked about three basic retirement lifestyles based on whether you choose to continue working, and if so, part or full-time. Here is a chart that shows some of the similarities and differences between these lifestyles. As time goes on, you may change from working full-time to part-time or stop, so some of these items may be more applicable to you at different times in the future. In the next post in this series, “Retirement Planning 101: Getting Your Bearings,” I’ll discuss the role of your household balance sheet in Lifetime Financial Planning.

 

It’s Not Your Father’s ‘Retirement’ Anymore
Kicking-Back Balancing Act Keep-on Keeping-on
Employment: Have stopped working! No more earned income. Part-time employment or part-time self-employed. Less earned income than before. Continue to work full-time until some later date, hopefully with current earned income level
When to Begin Collecting Social Security: Defer if possible to increase benefit unless in poor health/shorter life expectancy or need the income Defer until later date to increase benefit and avoid taxes on benefit unless part-time earnings do not trigger SS taxes and if poor health/shorter life expectancy or need the income Defer until later date to avoid taxes and increase benefit unless full-time earnings do not trigger SS taxes and if poor health/shorter life expectancy or need the income
Working and Collecting Social Security: Not working! Benefits reduced until 66 (Full Retirement Age) $1 for $2 earned income over $14.6k. No reduction after FRA. Benefit reduction is credited (but not paid out) as if filing was deferred. If your earned income is more than double your SS benefit, there is no point in filing before FRA.
Social Security and Taxes: If taxable distributions from retirement accounts plus SS exceeds $25k and $34k thresholds, SS benefits are up to 50% and 85% taxable If all income — earnings and taxable distributions from retirement accounts — plus SS exceeds $25k and $34k thresholds, SS benefits are up to 50% and 85% taxable If all income — earnings and taxable distributions from retirement accounts — plus SS exceeds $25k and $34k thresholds, SS benefits are up to 50% and 85% taxable
Resources: Savings, pensions/SS Earnings, savings, pensions/SS Earnings, savings, pensions/SS
Lifestyle: Don’t need to work, prefer not to, may be involved in volunteer or other non-income activities, leisure, family Like working and being productive/busy and/or need the income, have some savings Like working and being productive/busy and/or need the income, have little savings
Specific Risks: Long term care — those who are healthiest may be more at risk of needing long-term care Longevity — will savings last? Health or employer issues may cut work short of needed savings/cash flow goals
Common Risks: Future Social Security and Medicare benefits, health insurance (Medigap), healthcare expense, long-term care expense, inflation, the economy, sovereign debt, market volatility, rising taxes, spending too much/outliving savings, estate planning, and government policy change
Financial Planning: May have time/inclination to be more involved in personal financial and legacy planning May be struggling with expenses and managing cash flow from income and savings Too busy working to plan — working is the plan!
The Benefits of Financial Planning:
  • • Converting savings and investments into a risk-free/low-risk retirement income flow
  • • Planning expenses, income and cash flow to last over 25-30 years
  • • Maximizing Social Security benefits, timing, and taxes with earnings from working
  • • Obtaining necessary health insurance and solving the long-term care puzzle
  • • Adjusting savings to account for economic, tax/inflation, and regulatory risks

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