Test Page

I am confident in my planned annual spending amount in retirement:

I am confident in my planned annual spending amount in retirement:(Required)

Yes – Excellent. You’ve completed what might be the most important step in designing your retirement.

Maybe – Well, this step needs some attention. This one is important!

No – Ooof! This one can be fundamental to your retirement success. This needs some work!

You likely know that the amount you spend annually is the driver of many other retirement decisions. Knowing how much you might spend each year will likely determine the following: when you should claim social security, how much you will need from your investments, and what is the subsequent withdrawal rate you will have from your investments, if married, how much either of you would need in the event of a premature death and if you can significantly reduce taxes over your retirement years with partial conversions to a Roth IRA over time.

You might want to know that getting an “accurate-as-you-can” number on how much you will spend each year in retirement drives many other decisions and advice. We recommend you write it down or request our retirement design worksheet here (email link) Here’s a short list of the benefits. There are more benefits to knowing your spending amount. Knowing how much you might spend each year in retirement will likely determine the following: when you should claim social security, How much will you need from your investments, the subsequent withdrawal rate, and the investment allocation that can sustain your withdrawals—reducing your risk of running out or depleting your investments? if married, how much either of you would need in the event of a premature death and if you can significantly reduce taxes over your retirement years with partial conversions to a Roth IRA over time. Allow additional tax moves that can further reduce taxes over time.

If you don’t know how much it will cost to be retired each year, how can you know if you can retire or stay retired? We recommend you write it down or request our retirement design worksheet here (email link) Knowing your annual spending amount also has some important additional benefits. Here’s a short list of the benefits. There are more benefits to knowing your spending amount. Knowing how much you might spend each year in retirement will likely determine the following: when you should claim social security, how much you will need from your investments, and the subsequent withdrawal rate you’ll have from your investments, if married, how much either of you would need in the event of a premature death and if you can significantly reduce taxes over your retirement years with partial conversions to a Roth IRA over time

I have a plan to manage and reduce taxes during retirement

Yes – It sounds like you’re on it! While taxes are often lesser in retirement, especially without FICA taxes any longer, there are still tax moves to make that can avoid social security taxation, massive required minimum distributions, and create more tax-free income. Nice work!

Kind of. -- Ok. But don’t you want to have an excellent plan for reducing taxes in retirement? There are steps you can take to reduce annual taxes.

No—I think you should add this to your list of “Financial Steps to Take” in the next three months. There are steps you can take to reduce annual taxes.

Adjusting your distribution order or where you take withdrawals from your investments each year can greatly impact you. Are you optimizing your distributions from taxable/capital gain accounts, IRAs, 401(k)’s, and Roth IRAs? You might be surprised how optimizing your distributions can impact your taxes over time. We can help you with this if you’d like. Consider social security taxation and how you might reduce your taxable portion. Considering partial conversions to Roth IRAs to increase your tax-free income over time, significantly reduce required minimum distributions at age 73, and create potentially massive tax savings for your heirs. If you’re not doing these and have dismissed the idea of these conversions, you might want to take a second look.

My Investment Strategy Has Me Prepared for Market Drops to Occur and For Funding Needs During a Drop

Yes – You are really on top of things. Answering “Yes” means you won’t have to sell any stocks/stock ETFs/Stock Mutual Funds when the markets are down significantly. And we mean “any” stock holdings.

Hopefully -- As they say (insert tongue in cheek here), “hope” is not exactly a plan. But it sounds like you’ve tried to avoid selling from your portfolio when markets are down. Let’s take a quick closer look at this:

No – You will want to have a solid plan for this.

You should have a source of funds that you can draw from when stock markets are down significantly, and you might need 1) monthly distributions from your investment accounts, 2) want to take a $20,000 trip, or maybe 3) you need $30,000 for a new HVAC. You want to be prepared. Having to “not sell” your stock investments while they are down means you also maintain your stock position through a downturn. If you had 65% stock before a downturn and must sell from your stock positions during the downturn, you might sell five or eight percent of your stock investments. If you sold eight percent of your 65%, your stock positions will only recover to 57% of your portfolio (65% minus 8% = 57%) as you sold some stock while they were down. Not good. More info: The importance of being ready for market drops can be summed up neatly as “sequence of return risk,” and here is a great article summarizing its risks: https://www.investopedia.com/terms/s/sequence-risk.asp So nice work being ready for a downturn.

We take this to mean you won’t have to sell any amounts from your long-term portfolio and investments when the markets are down. And we mean “any”. You should have a plan to avoid selling. You should have a source of funds that you can draw from when your investment portfolios might be down significantly because this does happen and can damage your portfolio's longevity. You might 1) want to continue monthly distributions from your investment accounts if you are taking them, 2) want to take an anniversary trip that costs $20,000 during a downturn, or maybe 3) need $30,000 for a new HVAC. You want to be prepared. The BIG REASON WHY: Having to “not sell” your stock investments while they are down means you maintain your stock position through a downturn. If you had 65% stock before a downturn and had to sell from your stock positions during the downturn, you might sell five or eight percent of your stock investments. If you sold eight percent of your 65%, your stock positions will only recover to 57% of your portfolio (65% minus 8% = 57%) as you sold some stock while they were down. Not good. More Info: The importance of being ready for market drops can be summed up neatly as “sequence of return risk,” and here is a great article summarizing its risks: https://www.investopedia.com/terms/s/sequence-risk.asp So add this to your to-do list and make sure you are ready and have a plan for a market downturn.

Selling from your portfolio during a market downturn, especially a long one, can significantly reduce the length of time your investment might last in your overall plan. The bottom line in investment planning in retirement is this: don’t run out of money! But also, not having to sell from your portfolio in down markets simply avoids selling at significantly lower prices, which mathematically increases your potential rate of return on your investments. I don’t think this can be overstated. The importance of being ready for market drops can be summed up neatly as “sequence of return risk,” and here is a great article summarizing its risks: https://www.investopedia.com/terms/s/sequence-risk.asp Add to your “To-Do in Next 3 Months” list: Get a Strategy to Avoid Selling at Market Lows