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Liz Weston’s To-Do List for New Retirees: She Says, Do These Three Tasks Now, and You’ll Reap Big Rewards Later On

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Are you recently retired? If so, then hopefully you’re starting to savor a newfound sense of freedom. A glance out toward the horizon shows nothing but carefree days ahead – right?

Well, probably not. We all know that the best-laid plans can hit a snag caused by health concerns, financial worries, or other speedbumps on the road of retirement living. For that reason, we’re bringing to your attention this recent Liz Weston column which we read in the Seattle Times (Weston is a regular contributor to the financial website NerdWallet). In her article, Weston has some sound advice for new retirees: before you settle back to enjoy retirement relaxation, there are three more tasks on your list of things to do. Take care of these now, she implies, and you’ll reap the rewards in years to come.

Before you dive in, however, it’s important to point out that Weston’s approach – just like that of most financial writers – is (we think) pretty disjointed. So, with that in mind, take a look at what she has to say, then see how Rajiv Nagaich’s LifePlanning approach takes a whole new approach to retirement planning.

Planning Ahead for a More Secure Retirement

“After a working lifetime of alarm clocks and meetings, you might be looking forward to a lot more unstructured time once you retire,” Weston begins. “But taking care of one more to-do list early on can set you up for a better retirement.”

Weston is quick to add – maybe a bit too optimistically – that she’s assuming you’ve already got some of the financial basics in place. She’s writing to people who have done some basic financial planning, created a retirement budget, and decided when to claim Social Security. She also targets her comments to people who have determined a sustainable withdrawal rate from retirement funds and figured out how to cover health care expenses. Based on our experience, she’s setting the bar pretty high!

“If any of those topics are still a mystery, consider talking to a fee-only financial adviser,” Weston writes. Those with limited resources may qualify for free or low-cost consultations through the Foundation for Financial PlanningNational Association of Personal Financial Advisors or the Association for Financial Counseling and Planning Education, among other organizations.

Weston spoken with Pennsylvania-based adviser Catherine Azeles, who told her that even longtime do-it-yourselfers should consider getting expert retirement planning advice. “Although your days may be simpler without workplace demands, your finances often become more complex,” Weston writes. As Azeles puts it, “There’s a lot more that goes into the distribution phase of retirement than the accumulation phase.”

We would add that one of the most important things an adviser can do for you is to assist with preparation of a financial dashboard. It’s a vital tool to help you monitor all aspects of your finances and make sound decisions concerning spending, saving, investing and giving. Contact us at AgingOptions so we can recommend the right financial planner for your situation.

To-Do #1: Tweak Your Spending Plan

“Inflation and volatile markets can be problematic for anyone,” Weston warns, “but they are particularly dangerous to retirees. If you’re not earning an income, you can’t ask for a raise to compensate for rising prices. Meanwhile, bad markets early in retirement can dramatically increase the chances of running short of money.”

She echoes the advice that we hear frequently: take a hard look at your discretionary spending. Not only can cost-cutting help you offset inflation, but it can also help you ride out bad markets: because you’re spending less, you will probably be able to reduce withdrawals from retirement accounts during times of market downturn.

Weston spoke with Katherine Roy, chief retirement strategist for J.P. Morgan Asset Management, who warns that the old rule of thumb for taking money from retirement accounts – 4 percent per year – may need to go out the window when inflation is running high, as it is today. “Traditionally, retirees were encouraged to withdraw a certain percentage of their investments the first year — 4 percent was a popular figure — and increase the withdrawal by the amount of inflation each year,” Weston writes. “J.P. Morgan research, however, shows people are less likely to run short of money if they forgo that inflationary increase when markets return less than 5 percent in a year, Roy says.”

To-Do #2: Get Good Tax Advice

The impact of taxes can come as a surprise to some retirees, especially when it involves Social Security benefits. “Many people’s tax situations change when they transition into retirement,” Weston writes, “and they may have unique opportunities to manage their tax bills.” That’s according to financial planner Catherine Azeles. Retirees often find themselves in a higher tax bracket once Social Security benefits and required minimum distributions (RMDs) from retirement accounts kick in.

“In some cases, it can make sense to do partial Roth conversions in your 60s to spread out and reduce that tax bill,” Azeles says. “A tax pro or financial planner can help you determine if conversions are a good idea, and if so, how much to convert each year to avoid triggering a higher tax bracket.” You also want to avoid the Part B premium surcharges that Medicare levies on higher income earners (generally those earning over about $182,000 per year for married couples in 2022).

If you’re over 70 ½, Weston writes, you might want to consider reducing your tax bill by donating directly to qualified charities from your IRA. While you won’t get a tax write-off for your charitable gift, you’ll also avoid paying taxes on the withdrawal, so long as it goes straight to the non-profit organization. Make sure you get good financial advice if this is part of your plan.

“Even if you’re not awash in cash,” Weston summarizes, “your taxes may be higher than you expect. Most retirement income — including Social Security, pension payouts and retirement fund withdrawals — is potentially taxable. If you don’t have taxes withheld from these payments, you may need to file and pay estimated quarterly taxes to avoid penalties.” Translation: the IRS wants what’s coming to it.

To-Do #3: Tend to Your Health

It’s not uncommon, sadly, for otherwise wealthy retirees to overlook their greatest asset: their health. “Too often, preventable diseases cut lives short or limit what people can do in retirement,” Weston observes. “Consider investing some of your newly free hours in maintaining or improving your physical health.” This should start with a medical checkup with your doctor to help you identify any conditions that need treatment. Make sure you’re current on immunizations and health screenings.

“You also can discuss how to start or increase an exercise plan,” says Weston. “The Centers for Disease Control and Prevention recommends 150 minutes of moderate exercise — such as brisk walking — every week, plus at least two weekly sessions of muscle-strengthening activities for all adults. People ages 65 and older should also consider balance exercises.” After all, what good is it to protect your money if you allow your health to deteriorate?

But good health goes beyond the physical. “Your mental and emotional health are important, as well,” Weston writes.  “The people who struggle the most in retirement are often the ones who don’t have a plan for replacing some of the rewarding aspects of work, including a sense of purpose, structure and social interaction.” It’s essential for retirees to avoid lapsing into social isolation, which has been shown to reduce both life expectancy and happiness. Stay engaged with others through social engagements, volunteer work or other activities.

Weston’s final advice is apt. Relax, and don’t think you have to have all the answers the moment you embark on your retirement journey. “Cut yourself some slack,” Weston urges. “Retirement will have its challenges as well as rewards, and you may need some time to get used to this new phase of life.” As Katherine Roy of J.P. Morgan advises, “Be kind to yourself, because it’s such a big transition.”

Rajiv: Advice May Be Good, but Seriously Incomplete

We often share Rajiv’s viewpoint at the end of articles we spotlight here on the AgingOptions blog, so this time we wanted to alert you to his take on some of the missing pieces in Weston’s advice. While money and health are vital parts of a retirement plan, they’re not the whole story, a point which many financial writers chronically overlook. Like all aspects of a solid retirement plan, the key elements need to be woven together.

“There’s a reason we use the term LifePlan,” says Rajiv, “and this article is a useful illustration. Like many of her peers, Liz Weston tends to present these ideas in a disconnected, almost disjointed fashion. Here she talks about cutting expenses, preserving your health, and avoiding unpleasant tax surprises. That’s all well and good,” he adds, but there’s no connective tissue to link these pieces together into a common strategy. That, to me, is a crucial oversight.”

That connection, we suggest, is done by LifePlanning – blending together elements health, housing, finances, legal strategies, and family dynamics into one overarching retirement plan. Read on and we’ll suggest some helpful next steps.

My Life, My Plan, My Way: Get Started on the Path to Retirement Success

At AgingOptions we believe the key to a secure retirement is the right retirement plan – yet statistics show that 70 percent of retirement plans fail. That’s why for nearly two decades we’ve been dedicated to the proposition that a carefully-crafted, fully comprehensive retirement plan is the best answer to virtually any contingency life may throw your way as you age.  Our slogan says it all: My Life, My Plan, My Way.

When it comes to retirement planning, most people focus on one fairly narrow issue: money. Financial planning is an important component of retirement planning. However, people heading towards retirement often make the mistake of thinking that a little financial planning is all that’s required, when in fact most financial plans are woefully inadequate. What about your medical coverage? What if you have to make a change in your housing status – will that knock your financial plan off course? Are you adequately prepared legally for the realities of retirement and estate planning? And is your family equipped to support your plans for the future as you age?

The best way we know of to successfully blend all these elements together – finance, medical, housing, legal and family – is with a LifePlan from AgingOptions. Thousands of people have discovered the power of LifePlanning and we encourage you to the same. Simply visit our website and discover a world of retirement planning resources.  Make certain your retirement planning is truly comprehensive and complete with an AgingOptions LifePlan.  Age on!

(originally reported at www.nerdwallet.com)

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