Important Reasons to Consult a Retirement Planner

William Waggoner II |

Rochester Hills Retirement Planners - Stoney Creek Advisors

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Retirement may last a great deal longer than you think. Due to advancements in medicine and safety, life expectancy statistics have increased over time. While this may signal that you will live longer, it also signifies that you will need a greater retirement fund to support yourself during your years when you are not working. A married woman who is 65 years old has a 50% probability of living into the age of 90, according to the Money Guide. This most likely indicates that a typical retirement phase may last up to 25 years.

If you are well-prepared for retirement, a higher life expectancy is wonderful news. If your retirement planning is not on track, it can be cause for alarm. Your retirement fund would need to last 35 years, for instance, if you intend to retire at 65 and live to be 100. Your retirement savings, however, would need to last you 15 years if you retired at 65 and lived until you were 80. The amount of retirement savings needed for maintenance is notably different in both of these instances.

If your initial strategy was to rely on a pension or Social Security benefits to cover your retirement expenses, this is also cause for concern. In the United States, pensions are now practically nonexistent, and Social Security payouts are barely adequate. The typical Social Security payout in 2020 was only around $1,500, which may not be enough to support your retirement expenses. This suggests that in order to live comfortably and stress-free in your later years, you need a retirement plan that can never fail.

a checklist for retirement planning that outlines six items to think about before retiring.

The complexity of retirement planning may necessitate consulting with a retirement advisor. Retirement consultants provide you with more than simply a nest fund for your golden years. Additionally, they offer you a distribution plan for your drawdown years to ensure your financial security. These consultants help you prepare for health costs, long-term care costs, tax management, and, if necessary, estate planning. They also offer guidance on how to withdraw money from retirement savings accounts without incurring penalties.

The following are some justifications for hiring a retirement financial advisor:

They simplify retirement planning by:

Planning for retirement can be a challenging process that calls for professional knowledge. Your capacity to maintain financial security throughout retirement may be impacted if you neglect any important components of retirement planning. Therefore, even if retirement planning may seem simple to you, it can be costly if it is not fail-proof. So, the secret to a comfortable retirement may lie in seeking assistance from a skilled retirement investing advisor. Making early contact with a retirement planner can also enable you to benefit from the power of compounding. The more possibilities you have to build up a larger corpus, the earlier you should start strategically saving and investing your money. An effective retirement financial advisor may assist you in filling in the blanks and providing pertinent information in addition to advising you to build a sizeable retirement reserve, such as:

When is the ideal time to start drawing Social Security benefits?

When you retire, how much income will your investment portfolio produce?

What retirement accounts ought to you take money out of first?

Which accounts are accessible if you want to save more money?

Should you think about a Roth conversion or a 401(k) rollover?

For instance, you might decide to take early retirement at age 62, when Social Security withdrawals are permitted. However, if you start receiving your benefit at this age, you'll probably receive a lesser check than if you wait until you're 68 or older. According to research, delaying withdrawals until you reach the age of 70 can enhance your Social Security check by more than 50%. As an alternative, you can get assistance from your retirement investment advisor in building a diversified investment portfolio that is in line with your objectives, risk tolerance, and time horizon. Regarding withdrawals, a retirement planner can assist you in coming up with a solid strategy to take your withdrawals in a way that minimizes taxes and maximizes returns.

They can assist you in building a sufficient retirement fund:

The worry of outliving their retirement corpus is a big concern for retirees nowadays, mainly because to an increasing life expectancy and, in certain cases, due to early retirement. Whatever the cause, a longer retirement period necessitates building a larger retirement fund to cover your non-working years. Approximately 50% of retirees will need to cut back on their retirement spending, either forcibly or voluntarily, in order to prevent outliving their assets, according to the Consumer Financial Protection Bureau. Furthermore, 90% of retired singles and 1 in 5 married couples depend on Social Security to supplement their retirement income. However, as mentioned, the average retiree's Social Security payments may only replace up to 40% of their wage.

Therefore, it's crucial that you understand just how much you'll need to live a secure retirement. To figure out how much you need to increase your wealth before retiring, utilize a retirement calculator. To calculate exactly how much money you'll need for a pleasant retirement, you'll need to enter basic information like your life expectancy, monthly costs, estimated retirement income (from all sources of income plus investment return), and your existing retirement corpus. The expert will assess your present style of living and provide you with an estimate of how much you would need for a secure retirement. Once the target has been established, a retirement investment advisor can create a plan to assist you in reaching your retirement savings objective. The advisor can suggest various retirement savings vehicles, such as an Individual Retirement Account (IRA), a 401(k), a Roth IRA, etc., and assist you in understanding their benefits and drawbacks, as well as their withdrawal conditions, penalties, and tax advantages. Your risk tolerance, investment horizon, and financial goals will all be taken into account as you build your investing portfolio with their assistance. Additionally, they will design your portfolio with a long-term perspective and assist you in maintaining perspective throughout choppy market conditions. You may prevent short-term losses and safeguard your investments by doing this. A retirement financial advisor can help you over time as you age and your circumstances change by helping you modify your portfolio. For instance, if you have more than ten years till retirement, your advisor would suggest investing more money in instruments with a growth bias, such as stocks. In contrast, a retirement advisor may change your portfolio as you get closer to retirement to incorporate safer investments like bonds, etc. and may focus more on capital preservation than growth. Additionally, your retirement advisor can assist you in determining how to pay for your child's educational costs without jeopardizing your financial security or retirement stability.

They can develop a spending and withdrawal plan that meets your needs:

Making a retirement nest fund is a key step in retirement preparation. But things don't stop there. Setting up your spending and withdrawal strategy for your latter years of retirement is an essential component of creating a fail-safe retirement plan. Retirement essentially marks a transition from an accumulation phase to a distribution phase, necessitating new retirement planning techniques. Your attention turns from increasing your wealth or retirement nest egg to using the nest egg as a source of retirement income. In this stage, your advisor offers advice on how to make the most of your resources. Your financial advisor for retirement knows the particular difficulties of retirement and works to create a strategy that meets your demands while still leaving you with enough money for the future. Your retirement advisor will assist you in developing a budget so that you can reduce discretionary costs while still having enough money to cover discretionary spending.

Retirement financial planning includes developing a risk-free withdrawal plan in addition to assisting you in making prudent purchases. Each retirement savings option, such as an IRA, 401(k), Roth IRA, etc., has specific withdrawal rules. For instance, you must be 59.5 years old or older to receive penalty-free withdrawals from your IRA or 401(k). Before that date, withdrawals of funds are subject to 10% penalties in addition to any applicable taxes. However, there is a requirement to take RMDs for these accounts (Required Minimum Distributions). By April 1 of the year you turn 72, RMDs start. Penalties (up to 50% of the RMD shortfall) may apply if the RMDs are not taken or if the whole amount is not taken. However, there are no fees associated with withdrawing more money from your retirement accounts if you so choose. These withdrawal regulations can become frightening and frequently lead to mistakes that result in hefty financial penalties. However, if you work with a retirement planner, you can get reliable advice on when and how to withdraw money from these accounts. A retirement financial planner can assist you in utilizing your retirement withdrawals in a way that allows you to both pay your bills and put money away for the future. A retirement planner can also offer advice if you have any issues about rolling over your 401(k) into an IRA or a Roth IRA, combining your 401(k)s from various companies, etc.

They help you make prudent healthcare expense planning decisions:

The best years of your life are in retirement. However, a number of health problems that might increase medical costs occur along with aging. Your retirement fund is largely consumed by healthcare costs. Fidelity estimates that a typical 65-year-old couple retiring in 2021 will spend $300,000 on medical expenses. If your age or a sickness, injury, or cognitive impairment makes it difficult for you to take care of yourself, long-term care insurance reimburses you for the services you need for you to maintain your lifestyle. If you're married, this is especially crucial because you'll also need to cover your spouse's medical costs. According to these data, you need to have a sound financial plan for retirement if you want to be able to cover your medical bills as you age. Your retirement advisor can help you make long-term plans and reduce your health care costs in this area. Your advisor can also assist you in maximizing other alternatives including COBRA, Medicare, Medicaid, Health Savings Accounts (HSA), and other health insurance exchanges (Consolidated Omnibus Budget Reconciliation Act).

They can aid in reducing taxes both now and in retirement:

Your retirement savings, both now and after retirement, may be considerably impacted by taxes. Taxes must be paid on your income, investment earnings, capital gains, and contributions made to retirement savings accounts like a Roth IRA. Over time, this may have an impact on your retirement funds. Your retirement income, the state you live in, and the annual withdrawals from your retirement accounts all affect how much tax you owe. Additionally, your taxes may vary by significant amounts depending on whether you continue to work after retirement in any capacity or own property, etc. For instance, if your earnings are below the taxable income and you solely rely on Social Security throughout retirement, you will not be required to pay any taxes. However, you will pay taxes in accordance with your income level if you also receive money from sources other than Social Security, such as your IRA, investments, pension, etc. In this scenario, taxes will be applied to even your Social Security withdrawals. Your income, your spouse's total retirement income, and your tax filing status will all play a role in determining the total obligation (married filing separately, married filing jointly, single, etc.). Planning your retirement finances may include arranging your retirement income to minimize both your current and future taxes. Your retirement financial advisor can assist you in lowering your tax burden while maintaining a steady income stream for your post-working years. To construct a comprehensive estate plan, you can also enlist the assistance of your retirement investment advisor. Anyone who owns any kind of asset, not only high-net-worth individuals, needs an estate plan. In the event of financial incapacity, thorough estate planning can guarantee your security. Additionally, estate planning techniques like setting up a trust, giving to charities, etc., can lessen the tax burden on your descendants in the future.

To summarize

Financial planning for retirement is essential for leading a calm and stress-free life. Furthermore, if you want to live a planned and pleasant retirement lifestyle, getting the guidance of an expert retirement counselor to safeguard your financial future is highly advised. When picking a planning and investment professional, caution should be exercised. If you are concerned about the expense of a financial advisor, be sure you are getting the best financial guidance for your needs by constantly evaluating the value they provide to your retirement planning.

For experienced and trusted Rochester Hills Retirement Planners, call Stoney Creek Advisors at (248) 266-2900 for more information.