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“Saving” is the usual buzzword when it comes to planning for your post-work years. But accumulation leading up to retirement is only half the story—understanding how the funds will be dispersed is the other crucial, yet often overlooked, aspect of the planning process. While a recent Prudential study notes that there are more people than ever before retiring and entering the distribution phase, their knowledge about this delicate period of managing investments and coordinating withdrawal strategies is often limited, and could be costly.“When you’re over the age of 50, you need more than a pie chart, you need a distribution plan” says David Stryzewski, principal of SPG Advisors, a financial planning firm located in Kirkland, Washington. “There are approximately 10,000 people retiring every day. Of these retirees polled, the number one concern consistently shared is that they fear ‘running out of money in retirement.’ It seems there is too much emphasis today on the diversification of portfolios and pie charts, and not enough time and attention spent on how to coordinate and fund quality of life in retirement. No one can control when the next major market correction will occur, but there are dozens of critical things that a retiree can control, which can result in hundreds of thousands of extra dollars in their pocket, giving them a far better opportunity to address the fear of running out of money.”
Since many of these retiring baby boomers will rely on social security as a good portion of their post-retirement income, understanding how the system works and how various decisions that will impact the amount of benefits received make it vital to get good information prior to distribution time. “The revelation of Social Security is not so much about when you file, as much as it is about how you file,” comments Stryzewski, who authored the popular workbook Maximizing Social Security: Knowing What You Can Do, So you can Know What You Should Do and shares these tips through public lectures at local universities. “When a plan is properly designed, we regularly see families receive a few hundred thousand extra dollars in Social Security benefits over a lifetime, in addition to tens of thousands of dollars in tax savings based on the tax favorable nature of these benefits becoming a larger part of their income distribution plan.”
In addition to designing a plan to maximize benefits, taxes are another important planning consideration. “Although social security income is not taxable in and of itself, other income sources like withdrawals from 401ks or pension plans can cause our benefits to become taxable as high as 85%. For most, what they pay in taxes will represent the single largest expense they will have in retirement, just next to healthcare” says Stryzewski. Changes in the tax codes, like the ones being proposed by President Trump, also greatly affect how much tax retirees will pay on their income, so staying abreast of these types of changes and how they affect social security as well as other types of savings vehicles is also a key to keeping more money in the bank and seeing less going to the IRS.
With so many moving parts to the retirement planning equation, Stryzewski emphasizes the importance of enlisting the assistance of a planner, particularly one who focuses on the distribution phase. “Do-It-Yourself is too expensive when it comes to retirement planning. Though a bit of money is saved in the short-term, the unfortunate reality is that this type of planning can be both difficult to quantify and to properly execute, so mistakes are easy to make. There are no do-overs, so getting it right from the start makes all the difference,” he says.
And what exactly should a distribution plan consider? Of course, the most obvious consideration is one’s planned age at retirement versus one’s life expectancy. If an individual retires at 65 and lives until 90, his or her money has to last for 25 years. “It’s surprising how a simple thing like estimating life expectancy and the need to coordinate a plan to fund the needed after tax income is so rare in today’s world of planning,” Stryzewski remarks. “It’s likely because no one likes to think about mortality, but this is something that can’t be avoided when talking distribution.” Other important considerations include estate planning, inflation, the rising costs of healthcare and prescriptions in conjunction with a rising need for them as we age, all of which should be explicitly discussed and mapped during distribution planning.
Whatever the particular considerations and whatever form the conversation about distribution takes, it has to happen and should be an ongoing part of the planning discussion. “The bottom line is that no one should feel comfortable calling him or herself a ‘retirement planner’ if he or she doesn’t include Social Security maximization, withdrawal strategies or tax implications in their planning process. Putting these missing pieces together in the puzzle can make all the difference in the world.”
Contact Info:
Name: David Stryzewski
Email: Send Email
Organization: SPG Advisors
Phone: 425-821-9442
Website: http://www.SPGAdvisors.com
Source URL: http://councilofeliteadvisors.com/liftmedia
Release ID: 235368
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