Not Such Bad Shape

Will I Ever Be Able to Retire?

Many Baby Boomers are intimidated about the prospect of ever being able to retire. Having lived through the Great Recession, they have lost faith in the future.

They read about the large sums of money required for decades of retirement and the prospect of accumulating that seems daunting.

What they don't think to do is add up their assets and look at how those match up against their retirement needs.

Many boomers own a home. Most will qualify for Social Security, often with a spouse. Often they have a pension, a 401-K, an IRA. Some have a small business, a valuable collection, some investments. They also might plan to transition into retirement with a part-time job.

Next they have to figure out where they will live in retirement and what kind of lifestyle they'd like. Most people have reasonable expectations and often these are achievable, perhaps with some modest tradeoffs.

While many people are in bad shape, most Americans  are better prepared for retirement than we generally believe. Nothing pleases us more than showing people that their fears are overdone and that they can look forward to a good retirement.

Secure Retirement Planning

The Right Choices

Recently I talked to someone nearing retirement. The timing wasn’t totally his choice and he was nervous. As he talked I realized he didn’t grasp what critical choices he has to make now or understand the options. He didn’t see where he needed to put the most thought and energy.

Often we sweat the small stuff and don’t grasp the big picture. He couldn’t tell whether he was in good financial shape or not and he didn’t have a way to measure it.

Eventually, I identified the most important choice that he will have to make soon. That choice could determine the comfort and security of his wife for decades if he dies first. Statistically, that is likely to be the case. And yet many people don’t think of this as a real choice or anything important. Or even whether to involve her.

This item is couched in technical language and not flagged in big or bold type. It’s easy to gloss over and down the road you may even forget you had a choice. But its impact could be profound.

Those are the things I like to help people with. Get the big things right and the rest generally falls into place.

Tax Planning

More Than An Afterthought

In the last minute rush to finish their taxes, many people throw in an IRA contribution without much thought. Tax planning in general and IRAs in particular deserve more care and attention. In growing our assets and preparing for retirement, we have four major levers: increasing income, spending less, improving investment results and minimizing taxes. IRAs can be useful in two of those four categories. Since the huge bear market, it is generally advisable for most people nearing retirement age to try to increase their savings. Correctly using the best retirement vehicles is one of the easiest steps to do this. Choosing which types of accounts to use is important and varies with each person’s needs. For starters, using a Traditional IRA provides a front end tax deduction for those eligible. Establishing a Roth IRA doesn’t provide the initial deduction, but in most circumstances earnings from the Roth come out tax free.  Traditional IRA distributions are taxed at the ordinary income tax rate.  Further, Roths don’t have a required minimum distribution after age 70 ½ as do Traditional IRAs. Getting these choices right and not running afoul of the complex rules can make a huge difference in how much money you accumulate.