5 Retirement Planning Questions
Even when you’re a week away from retirement, there’s a good chance that you’ll have a lot of questions left. Retirement planning is evolving, and if you want to secure your retirement and sleep well at night, you need to have answers to a few crucial questions.
We’re going to outline retirement planning questions that we receive most often from our clients.
In fact, we’ve compiled a list of five questions that everyone hoping to retire can answer.
5 Retirement Planning Questions and Answers to Secure Your Retirement
1. How Much Should I Have Saved?
How much money is enough for your retirement? This is a difficult question to answer because every family and lifestyle is different. We’ve seen families have millions of dollars in their retirement accounts and struggle through retirement.
Adversely, we’ve seen families with just a few hundred thousand in their retirement accounts have a fantastic retirement.
The total retirement portfolio amount is relative to a family’s lifestyle.
There is also a school of thought that for retirement, you should:
- Save 25 times your highest-paid salary
Instead, we like working through the numbers for ourselves. If a person has a pension, rental income or other debts or income that factor into the equation, they may need significantly less or more than this figure.
The question of saving enough is understanding how much you plan to spend in retirement. If you want to go on lavish vacations, you’ll need to have more in retirement than the person that’s paid off their home and wants to live a quiet life.
2. When is the Best Time to Take Social Security?
Our number one YouTube video with over 100,000 views focuses on whether a person should take Social Security at 62 or 65. In fact, you can watch this video right on YouTube here.
Many people are taught to retire at 70 because that’s when you’ll receive the most money from Social Security.
And that’s true.
If you live until you’re 90 or 95, take Social Security at 70. However, what if you lived to 72? You would have been if you had taken Social Security at 62, right?
The answer comes down to this:
- If you retire early, do you need to take money out of your retirement account to cover Social Security if you don’t take it? For example, do you need to take out an extra $2,000 from your accounts per month to hold off on taking Social Security? If so, you’ll likely benefit from taking Social Security early.
- If you don’t need the money from Social Security right now, wait until you’re 70 because it will maximize your benefits.
Unfortunately, there’s no one-size-fits-all answer here.
3. Should I Rethink My Risk Exposure in My Retirement Accounts?
When we have troubling times in the market, many people question their risk exposure. If the market fluctuates, you need to think about your risk exposure. In fact, you should always think about risk exposure to safeguard your retirement.
The way we handle risk is by:
- Taking your retirement total
- Understand risks
- Learning when you get uncomfortable when there are losses
- Creating a portfolio around being uncomfortable
If you have $1 million, it is crucial to know that if you lose 20%, you’re losing $200,000. Many people will feel uncomfortable at a 10% loss with this retirement amount, but if you have $10 million, you’re likely less scared to lose 10% of your money.
In short, you always need to consider your risk before and during retirement to ensure that you can have a comfortable retirement.
4. Is an Annuity a Good Option for Retirement?
Annuities often have the most questions about when knowing where to put their money. Unfortunately, annuities are very complex, but we do have quite a few articles on annuities that we’ve linked below for you:
- What Are Annuities & Should You Consider One?
- What Are Annuities and How Do They Work?
- How to Get Guaranteed Income with a Fixed Indexed Annuity
Simply put, there are three reasons why you may want to look at an annuity as a good option for your retirement:
- You want to build an income that will last a lifetime.
- You don’t want to go into bonds and are looking for a safe alternative.
- You want to invest in the market and want tax deferral.
For most people, the first two options are the main reasons to have an annuity. Bonds aren’t doing well right now, so an annuity is an excellent option to consider.
5. How Will Taxes Affect My Retirement?
Taxes are always on people’s minds. From a tax perspective, retirement accounts often have their own rules on taxation. For example:
- 401(k) / IRA are pre-tax
- Roth accounts are tax-free
- Brokerage accounts are taxed on gains or losses throughout the year
Each of these retirement buckets has different taxation rules. Then you have Social Security, maybe pension income and so on that may be taxed. People who take Social Security and are still earning an income really need to think about their taxation because they will need to pay taxes on these accounts.
When you’re 72, you’ll need to take the required minimum distributions.
Tax-deferred accounts require you to take required minimum distributions, which will impact your taxes.
Roth conversions are a very powerful option that does apply to some retirees. The idea is to pull money from an IRA and put it in a Roth account, which is tax-free. Since taxes are likely to go up, tax planning is crucial to help you reduce your taxes in the future.
We can even walk you through a retirement-focused financial plan where we answer all these questions and help you fully understand what it means to retire in your situation. If you’re interested in talking to us, we have a 15-minute, complimentary session where we can discuss these details with you.
We have also linked a free course of ours below to help you get started on the right path to retirement.
Click here for our FREE course on how to secure your retirement in 4 easy steps.