December 9, 2024 Weekly Update

We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

 

How to Retire at 62 in 2026 With Peace of Mind

Radon and Murs discuss:

How to build the foundational steps for retiring at age 62 and achieving peace of mind in retirement planning. They dive into the critical questions that need to be answered, the data required to assess retirement readiness, and the steps to create a retirement roadmap. With this episode as the first of a two-part series…

 

How to Retire at 62 in 2026 With Peace of Mind

The Peace of Mind Roadmap: A Two-Step Approach

We often begin retirement planning by addressing foundational questions. This includes understanding your goals, taking an inventory of your financials, and clarifying expenses. Our Peace of Mind Roadmap process is designed to help you retire with confidence. It consists of two parts:….

How to Retire at 62 in 2026 With Peace of Mind

Retirement is an exciting milestone, yet it comes with important questions: “Have I saved enough?” and “Can I truly retire comfortably?” If you’re planning to retire at age 62 in 2026, the steps you take now will shape your financial freedom and peace of mind. This guide, inspired by our Secure Your Retirement podcast, walks you through how to prepare, what questions to ask, and how to build your personalized Peace of Mind Roadmap.

The Peace of Mind Roadmap: A Two-Step Approach

We often begin retirement planning by addressing foundational questions. This includes understanding your goals, taking an inventory of your financials, and clarifying expenses. Our Peace of Mind Roadmap process is designed to help you retire with confidence. It consists of two parts:

  1. Gathering Data: Collecting and organizing financial information, understanding your goals, and clarifying your spending needs.
  2. Building Your Plan: Analyzing your data, exploring scenarios, and developing a financial plan tailored to your needs.

Let’s break these steps down so you can start preparing your Peace of Mind Roadmap.

Step 1: Gathering the Right Data for Retirement Success

The cornerstone of any effective retirement plan is accurate and comprehensive data. Here’s what you need to consider when gathering your financial information:

Assets: Building Your Financial Snapshot

We ask clients to create a financial inventory, which helps determine if retiring at 62 is feasible. Here are the key areas to assess:

  1. Cash on Hand:
    1. How much do you have in checking, savings, money market accounts, or CDs?
    2. Understand the purpose of your cash: Is it for emergencies, investments, or daily expenses?
  2. Life Insurance:
    1. What types of policies do you have?
    2. Is the policy term or permanent? If permanent, is it intended for income, cash value growth, or a death benefit?
  3. Annuities and Non-Qualified Investments:
    1. Are your annuities growth-oriented or income-generating?
    2. Identify other investments like brokerage accounts or stock portfolios.
  4. Retirement Accounts:
    1. Document your IRAs, 401(k)s, and Roth accounts.
    2. Know your employer match for current contributions.
  5. Real Estate:
    1. Evaluate the value and liabilities of your primary residence and investment properties.
  6. Pensions and Deferred Compensation Plans:
    1. Understand the income stream from pensions, including cash balance plans or deferred compensation plans.

Liabilities: Understanding Debt and Cash Flow

Taking stock of debts is essential when planning to retire comfortably:

  • Mortgages: Determine your payoff timeline and monthly costs.
  • Car Loans: Factor in when these will be paid off.
  • Other Debts: Include liabilities like credit cards or personal loans.

Income Sources: What’s Coming In?

Your retirement plan is only as strong as its income streams. These include:

  • Social Security: Get an estimate of your benefits at 62, full retirement age (67), and age 70.
  • Part-Time Work or Consulting: Will you continue working to supplement your retirement income?
  • Rental Income: Calculate how much income investment properties generate.

Expenses: Breaking Down Spending

A well-rounded retirement plan accounts for three categories of spending:

  1. Essential Needs:
    1. These include fixed costs like mortgage payments, utilities, and groceries.
  2. Wants:
    1. Travel, hobbies, dining out, and memberships fall under this category.
  3. Legacy Giving:
    1. Charitable donations and gifts to family are also part of your financial picture.

Tip: Focus on net spending—what you need monthly after taxes. This ensures a realistic view of your financial needs.

Estate Planning Essentials

A solid plan for retirement includes preparation for the unexpected. Ensure you have up to date:

  • Will
  • Power of Attorney
  • Healthcare directives
  • HIPAA release forms

These documents protect you and your loved ones in the event of unforeseen circumstances.

Step 2: Building and Analyzing Your Peace of Mind Roadmap

Once you’ve gathered the data, it’s time to analyze it and build your Peace of Mind Roadmap. This is where we apply financial modeling to answer the critical question: “Does my plan work?”

Scenario Analysis

In your Peace of Mind Roadmap, we create various scenarios to test the strength of your plan. For example:

  • What if inflation rises faster than expected?
  • How will healthcare costs impact your savings?
  • Can your assets sustain your lifestyle if the market underperforms?

By running these scenarios, we identify risks and opportunities in your plan.

The Importance of Regular Reviews

Even the best retirement plans require regular updates. We recommend reviewing your plan annually. By monitoring your financial picture, you can adapt to changes in the economy, taxes, or your personal goals.

Addressing Common Retirement Concerns

As you plan your retirement at 62, here are answers to some common questions:

Is Social Security Enough to Retire at 62?

Social Security alone is rarely sufficient to cover retirement expenses. By understanding your benefits and supplementing them with other income sources, you can create a balanced plan.

What Happens If I Outlive My Savings?

Longevity risk is a top concern for retirees. Solutions like annuities, disciplined withdrawals, and proper investment strategies help your assets last throughout retirement.

How Do I Plan for Market Downturns?

Diversifying your portfolio and maintaining a cash reserve are key strategies to protect your retirement savings during volatile markets.

The Role of Professional Guidance

Retiring comfortably at 62 is achievable with the right planning and guidance. A financial advisor can help you:

  • Align your investments with your goals.
  • Minimize taxes through strategies like Roth conversions or tax-efficient withdrawals.
  • Create a sustainable withdrawal plan that protects your principal.

Final Thoughts on Retiring at 62 in 2026

Retiring at age 62 is a dream for many, but it requires intentional planning and preparation. By gathering accurate data, understanding your expenses, and building a personalized plan, you can achieve peace of mind and enjoy the retirement you’ve worked hard for.

Schedule your complimentary call with us to ask any questions you may have from this blog. If your questions don’t all fit in a 15-minute call, we will guide you to the next steps to get some answers.

Plan wisely, stay informed, and secure your future. Remember, the key to retiring at 62 in 2026 with peace of mind is creating a comprehensive plan and sticking to it.

February 13, 2024 Weekly Update

We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage. Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for February 13, 2024

Beneficiary Best Practices in Retirement – A Yearly Check-In

In this Episode of the Secure Your Retirement Podcast, Radon, Murs, and Nick discuss beneficiary best practices and what’s discussed in a typical beneficiary’s meeting. Things can change in a year, and that’s why we believe it’s important to update or change beneficiaries annually.  

Beneficiary Best Practices in Retirement – A Yearly Check-In

Nick Hymanson, a financial planner who is also part of our team, joined us on our latest podcast to discuss something very important: beneficiary best practices. If you work with us, you know that this is something that we have covered during our financial planning strategy meeting.

Annual Financial Planning Strategies- Beneficiary Best Practices

Nick Hymanson, a financial planner who is also part of our team, joined us on our latest podcast to discuss something very important: beneficiary best practices. If you work with us, you know that this is something that we have covered during our financial planning strategy meeting.

What is a Financial Planning Strategy Meeting?

In the financial planning strategy meeting, we cover:

  • How your accounts did this past year
  • Beneficiary updates
  • Daily living changes
  • Expenses and income
  • Budgets 

We look at your financial plan as a whole during the strategy meeting. A lot of people think that the most important part of retirement planning is the end goal, but if you don’t know where you are right now, it’s challenging to navigate your way to retirement.

You need to know your milestones ahead and what to do with Social Security, Medicare and your estate plan.

Your estate plan is where beneficiaries really come into the equation. If you have a “will,” you may assume that you have everything in order and you know who is getting what. The problem is that you have a variety of other accounts that have beneficiaries listed, such as your 401(k), IRA, life insurance and even your bank accounts.

When the terrible time comes and you need to put the estate in process, proper beneficiaries on your accounts will make the lives of your heirs much easier.

What We Do to Prepare Before Discussing Beneficiaries with Our Clients

Our team reviews all your investment accounts and will call insurance companies to verify:

  • Primary beneficiaries
  • Contingent beneficiaries 
  • Percentage allocations

You may have multiple people listed as a primary or contingent beneficiary, or you can have one or two. We’ll gather information on all your financial and insurance account beneficiaries and separate them by account to make it easier to determine who is the beneficiary on what accounts.

We then present the accounts in the meeting to help you understand if your account needs to be updated.

Why do we review beneficiaries annually?

Of course, we have a lot of real-life examples of accounts that people seemingly forget to update during crucial life moments.

  • One client got divorced and didn’t remember to fix all the beneficiaries. It doesn’t matter who he is married to today. If he passed, the account would have gone to his ex, even though he is remarried.
  • Someone has a child who is in a lawsuit, so maybe you don’t want money to go to this individual based on the current circumstances.

A quick, annual review of your beneficiaries can help you better manage them because life changes can impact who you want to be named as a beneficiary on your accounts.

Common Example of Husband and Wife

Couples who have an individual account will, in most cases, have their spouse being 100% beneficiary of their accounts. If the person isn’t alive when the other person passes, the account would then go to the contingent beneficiary, who can be one or more people.

For example, if you’re married and leave your wife as the primary beneficiary and she passes before you, the contingent beneficiary would be “next in line.”

Joint accounts work a little differently.

On joint accounts, you’re both co-owners of the account, but you can have beneficiaries listed on the account.

Spouse and Three Kids

While you’re free to do as you wish, it’s most common for a person to leave their spouse as the primary beneficiary of their accounts. You should also list your kids as contingent beneficiaries so that if your spouse is no longer living, the account will go to your children.

It’s most common to offer an even percentage to each child, in this case, 33.33% share to each of the three children.

In certain cases, one of the children may receive 0.01% extra to make an even 100%.

Spouse and Two Kids Who Each Have Children

Every scenario is a bit different, and we really want to illustrate the importance of following beneficiary best practices. If you’re like most couples, you’ll:

  • Name your spouse the primary beneficiary
  • Name your children as contingent beneficiaries

Let’s assume that each of your children has a child, so you have two grandchildren. Your eldest child dies. What will happen to your grandchild? Does all the account go to the sole, living child?

You can put measures in place that allow you to pass the funds to your grandchildren. You can even pass the funds to children who may not be born at the time of naming your beneficiaries.

A strategy to use is called Per Stirpes.

What Per Stirpes does is allow for the funds, which you name for Child 1, to flow down their family tree if they pass away. You don’t even need to list the grandchildren on the account when using per stirpes.

Per capita can also be used, which means that the account goes to your kids only. In this case, if you have two kids and one passes, the other child will receive 100% of the account. You can also opt to give one child 75% of the account or 10% – it’s up to you. Certain clients opt to do this when one child makes significantly more money than another or they have a medical condition.

Children do have a right to disclaim their inheritance, which, if the benefit goes down the lineage, can have its tax benefits. Perhaps your child wants their children to inherit the money, so they disclaim their portion, and it goes to your grandchild.

If your grandchild doesn’t make any money or is in a lower tax bracket, this can be beneficial.

Annually, you need to review and update your:

Major life changes are a good time to review these documents, too. If you get married, divorced, have a child or grandchild, it’s a good time to look through your beneficiaries and be sure that everything is in order.

Schedule a 15-minute call with us if you would us to help you review your beneficiaries.

July 3, 2023 Weekly Update

We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

This Week’s Podcast – You Have Enough to Retire, but How Do You Create an Income.

Listen in to learn the importance of starting a withdrawal strategy in the first few years of retirement to avoid a sequence of return risks. You will also learn about all the things you should be thinking about if you want to retire early or at any age to keep your life fun and exciting in retirement.

What’s the importance of having a financial professional to help you with the withdrawal strategy to avoid the stress of the deaccumulation phase? Learn here…

 

This Week’s Blog – You Have Enough to Retire, but How Do You Create an Income.

In this scenario, the couple wants to retire at 55 – one year from now. They want to know the best way to take their distributions. The couple plans not to touch the qualified money until they hit age 59.5.

They go on to say that they understand the 4% rule, but they don’t…

You Have Enough to Retire, but How Do You Create an Income?

An article came across our desk from MarketWatch about a couple in their 50s who want to retire early. They have $4.5 million in savings and don’t know what to do to withdraw the money in retirement

Breaking down the couple’s assets, they have:

  • $2.3 million in taxable accounts
  • $2.2 million in retirement assets

The couple has the assets to retire, but this article resonates strongly with us at Peace of Mind Wealth Management. How do you build a plan that will last 20 – 30 years and take care of your family?

The article’s response was pretty standard: seek professional advice instead of trying to do it yourself because everyone and their circumstances are different.

With that setup, let’s dive into the meat of the topic and explain how we recommend you create an income stream.

What the Couple Lets Us Know About Their Situation and Ideas

First, the couple wants to retire at 55 – one year from now. They want to know the best way to take their distributions. The couple plans not to touch the qualified money until they hit age 59.5.

They go on to say that they understand the 4% rule, but they don’t know whether to take money monthly, quarterly, or annually. The couple planned to take money off the table after the 2021 peak, but waited until 2022 for tax purposes, and that backfired.

They also want to know how often they should withdraw money from their accounts.

From our perspective, we love the idea of a retirement focused financial plan. As you grow up you are told to save. Save as much as you can, and dump the money into 401(k), IRA, life insurance, brokerage accounts, emergency funds, and so much more.

Suddenly, you’ll exit the accumulation phase of life and need to enter the distribution phase.

The money you’ve built up needs to last the rest of your lifetime. This is where the anxiety phase seems to kick in:

  • Did I save enough?
  • Did I plan enough?
  • Do I have enough money to last the rest of my life?

We see clients that have less than $4.5 million for retirement and some with substantially more.

How Do You Start Withdrawing?

Based on the article, we know that the individual who wrote into MarketWatch understands the 4% rule. This rule is simple: if you withdraw 4% of your assets annually, you should maintain your assets throughout retirement.

Let’s say that you have $1 million in an account and take $40,000 out of the account annually. In a “predictable” market, this means you’ll replenish the money you take out each year.

We saw in 2022 that the market fell 20% – 30%, depending on the index. In 2020, the market fell over 30% in just a few weeks.

Markets are not predictable. Every few years, we do see volatility and corrections.

While the 4% rule is slightly off and is more like 3.3%, meaning for every $1 million you have in retirement accounts, you can confidently take out $33,000. Rates of returns have gone down, and inflation has gone up.

The times when 7% – 10% gains were almost certain in the markets are, in our opinion, not in our future. You’ll have years of gains in this range or higher, but on average, the market fluctuates too much for it to be predictable.

Based on this information, you should speak to a financial professional and look at all the pieces of retirement and how they fit together.

The person who responded to the question mentioned something else that was important: sequence of returns risk.

What is Sequence of Returns Risk?

If you start your retirement in a down scenario, your return risk goes up. For example, if you wanted to retire in January 2022 and wanted to withdraw $5,000 a month for retirement, it was a bad time.

The markets went on a steady 12-month decline with no recovery phases in the middle.

A person may have had $1 million at the start of the year, but when the year experiences a downturn like 2022, the $5,000 you take out is turning into a higher percentage of your portfolio.

The portfolio stress becomes higher when you withdraw on a down asset.

If the first early years were down 10% or 20%, you could get into a very tricky situation where you might receive 7% returns a year now. However, those initial down years really hurt your chances of the account lasting through retirement.

For us, it makes more sense to consider where you’re withdrawing the money and think about withdrawing money from accounts with less risk.

You may even need to adjust the number of withdrawals you have during down years.

Gap Between the 55 and 59.5 and Funding Retirement

Since the person is retiring before 59.5, they do risk being penalized if they touch their retirement accounts before the age of 59.5. The person writing in understood this fact, but they will need to fund retirement for 4.5 years in some other way.

You can tap into your non-retirement accounts, and there are strategies to tap into a 401(k) at age 55.

The other thing to identify if you’re retiring early is:

  • How much do you need to spend every month? These are “needs”, including food, utilities, mortgage and so on.
  • How much do you want to spend every month? “Wants” include things like vacations, visiting grandkids and so on.

We also need to think about pensions and any income that may be coming in that is not tied to your retirement account. Since the person is 55, we’re not considering Social Security. Early retirement age means thinking about heightened health insurance costs of around 10 years until the person reaches age 65.

When retiring at 55, the person also has opportunities to understand where to withdraw money from to make their money last.

Between the age of 55 and 75, when the person needs to take required minimum distributions, they have 20 years where they can do some pretty cool stuff. For example, they can:

  • Convert pretax to tax-free accounts
  • Reduce taxes through conversions

If the person has all their money in a traditional 401(k), they can start converting these assets through Roth conversions over these years. The ability to grow assets tax-free is a beautiful concept.

We recommend the person spend time understanding where money is coming in, where money is going out, and when various milestones in retirement will be hit.

A person can begin taking Social Security early, at retirement age or at age 70. The additional income may help pad their income needs later in retirement.

Medicare also needs to be considered and is a massive topic because of IRMAA, or surcharges for making too much money in retirement. You may take out more money from one account, but you’ll be penalized in some way:

  • Tax bracket change
  • Taxable Social Security
  • Medicare surcharges

When it comes to a withdrawal strategy, we follow a bucket approach that follows a “why” scenario for spending by breaking your money into:

  • Cash
  • Safety
  • Growth

Bank money and emergency funds are cash. This money is easy to access and will not impact retirement. Safety buckets speak to the idea of the safety of return risks. If we have a safety bucket with low risk and make a return, it brings predictability to our plan.

Finally, the growth bucket is the long-term bucket that is in the stock market and will go through ups and downs. If we can avoid tapping into this bucket, it will be allowed to grow long-term and can circumvent volatility because you don’t need to take money out of the account during down periods.

You can tap into the growth bucket when you need it for things like a vacation. It is a liquid bucket but allowing it to grow over time makes sense for our clients.

We aim to create a withdrawal strategy that minimizes risks and allows you to live comfortably through retirement. Everyone’s retirement plays out differently because your needs are unique and will change over time.

Working with someone who lives and breathes retirement strategies can help you create a withdrawal plan that minimizes risks and tax burdens, and considers volatility in ways that “general” rules, like the 4% rule, do not.

Do you have questions about retirement and want to speak to a professional?

Click here to schedule a 15-minute call with us today to discuss your retirement concerns.