Establishing a realistic budget is one of the most important steps. Typically, we use pre-retirement spending as a baseline and then adjust those expenses we know will change in retirement. If spending appears to be too high, we work with you to find a plan designed to weather the inevitable ups and downs of the market.
In retirement, your income will most likely come from a combination of social security income, withdrawals from your portfolio and—in some cases—a pension. We work with you to design a portfolio withdrawal strategy that is tax efficient and—if it is important to you—allows you to pass assets to your heirs in a tax efficient manner as well. Lastly, for clients that work with us on an ongoing basis, we handle the mechanics of funding your needs from your portfolio.
For most clients, a shift to retirement also means moving to a more stable portfolio for two reasons. First, it can be disconcerting to see one of your primary sources of income in retirement—your portfolio—change rapidly. Second, less volatility in a portfolio can actually improve the likelihood that you won’t outlive your assets. Nevertheless, your planning is specific to your needs and financial situation, and one of the key questions we answer is what your optimal investment approach is for retirement.
While it is possible to begin taking social security at age 62, that often isn’t the best option. Taking social security early reduces your payout and if you live a long life, it can result in a substantial reduction in the total social security benefits you earn over your lifetime. Furthermore, if you delay taking social security at full retirement age (typically 66 or 67), you earn delayed credits. The bottom line is that when you choose to begin drawing social security can have a big impact—positive or negative—on your plan, so we focus carefully on that question.
Choosing between traditional Medicare and Medicare Advantage plans and deciding what sort of supplemental coverage you might need are all questions we consider. Medical expenses are one of the biggest categories of spending in retirement, so choosing the best coverage for you is key.
Pensions are, unfortunately, not as common as they once were, but we do work with Federal Government employees and teachers who have active pension plans. Further, many clients do have plans which employers are no longer actively funding, but do provide benefits to long-time employees. A few critical decisions to make when it comes to pensions are whether to take the pension as a lump sum or annuity, when to begin drawing the pension and what survivor option to choose if you are married.