Don’t Run Out of Money in Retirement

In this episode of Wealth Radio, Chris Heerlein talks about the top ways to ensure that you won’t run out of money in retirement. This is probably the number one fear for many retirees and those in the planning process. However, there are ways that you can be very proactive whether before, entering into or during your retirement.

Episode Introduction (00:00)

  • Wealth Radio introduction and welcome by the host, Chris Heerlein.
  • The show’s focus is on providing insights into building and living the retirement of your dreams.
  • Listeners are encouraged to call or text their questions for a chance to have them answered live.

Stealth Tax and Retirement (01:00)

  • Chris discusses the importance of being proactive in retirement planning to avoid running out of money.
  • He introduces the concept of “stealth taxes” in retirement, which includes taxes on social security benefits and Medicare premium surtax (IRMA).
  • Stealth taxes can increase income taxes without a direct tax rate increase, impacting retirees significantly.
  • The key to stealth taxes is “adjusted gross income” (AGI), which is used to compute most of these taxes.
  • Chris advises listeners to be aware of their AGI and consider actions to reduce their reportable income for the year.
  • Strategies for reducing AGI include coordinating living expenses from various accounts and potentially doing Roth conversions at historically low tax rates.

Listener Call (07:29)

  • Barbara calls in with a question about selling her home next year.
  • Chris explains the $500,000 exemption for married couples when selling a primary residence and the potential capital gains tax beyond that amount.
  • He also advises Barbara to be mindful of how selling the home may impact her tax bracket and Medicare premiums.

Creating a Retirement Income Plan (11:18)

  • Retirement income planning is crucial for a secure financial future.
  • Having a coordinated retirement income plan is essential, knowing which accounts to draw from, and how to do so in a tax-efficient manner.
  • We discuss the significance of income in retirement and coordinating distributions from IRAs and 401ks with Social Security benefits.
  • We emphasize the need to account for lifestyle choices and inflation when preparing for retirement.
  • Use a hundred to 110-year average of inflation rates when planning for the future.
  • Prepare for future tax rates and mitigating tax risks through tax diversification.

Understanding Social Security Claiming Strategies (18:53)

  • The voluntary suspension strategy allows for flexibility in claiming Social Security benefits.
  • Each individual’s unique financial situation should dictate the optimal timing for claiming Social Security.

Need for Coordinated Planning (22:18)

  • A listener, Sarah, expresses concern about having enough money for retirement, given inflation and healthcare costs.
  • We emphasize the necessity of a coordinated financial plan tailored to individual circumstances.
  • Without such a plan, even substantial savings may not guarantee a secure retirement.
  • Remember, there is no magic number for retirement savings.
  • The key to financial security is a well-thought-out, coordinated plan that adapts to changing circumstances.
  • Over-saving or under-saving can both be avoided with proper planning.

Mitigating Retirement Risks (26:05)

  • In retirement, various risks can impact financial security.
  • We discuss longevity risk, inflationary risk, interest rate risk, market and economic fluctuations, and unexpected expenses.
  • Long-term care expenses, in particular, can be significant in late retirement and should be budgeted for in advance.

Structuring a Diversified Portfolio for Retirement (36:04)

  • For those approaching or in retirement, a well-diversified portfolio is essential.
  • Consider a mix of principle-protected investments with yield, such as money market funds, CDs, and MYGAs.
  • Add layers of higher yields with longer duration bonds, preferred securities, and real estate.
  • For growth potential, look into dividend stocks, total return portfolios, and real estate investments.
  • To ensure lifetime income, consider guaranteed lifetime income annuities with income riders, understanding the pros and cons of each investment type.

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