Episode #81: Matt’s Planning Process Part 02

Today’s Smart Money Question:

People ask us what our retirement planning process looks like. Join us for part two of our series detailing one couple’s journey through retirement.

(Click the featured times below to jump forward in the episode)

Here Are Just A Handful Of Things You’ll Learn:

5:20 – Changing Things Up.

This couple had initially planned to keep their current home and vacation at their home in the south. However, at the end of 2017, they decided they wanted to move. They wanted to sale their house up north, and we determined the move would add to their monthly expenses. However, their new home would grant them a much better quality of life, as they decided to move to a senior living community. In order to make the move happen, we needed to create additional income.

8:24 – Social Security Planning.

We’d originally planned for him to start drawing Social Security at the end of 2018. In turn, she would start drawing Social Security at the end of 2019. However, as we engaged in income planning, we determined they needed a new Social Security strategy. We decided he’d begin collecting Social Security at the beginning of 2018. She would collect a spousal benefit for the year and then begin withdrawing her own Social Security benefit at the beginning of 2019. As a result, they both saw a 26 percent increase in the amount of Social Security they received.

9:55 – IRA Planning.

We also decided to reduce their IRA withdrawals. IRA withdrawals are taxed by Uncle Sam, and we needed a way to lower their tax burden. As we were already growing their income through Social Security, we realized we’d be able to lower the amount of money they’d need from their IRA. Furthermore, the husband would begin taking his required minimum distributions in 2019, so he’d still be getting some level of income from his IRA to supplement Social Security. This process is all about increasing your income without increasing your tax bill. Qualified retirement accounts like IRAs are taxed by the government when you withdraw from them, so if you can create income in other ways, you stand to save in taxes.

Other Smart Money Points:

00:50 – Recapping The Story.
11:50 – Reducing The Tax Burden.

The Answer:

Retirement planning involves growing your income, managing your tax burden, and equipping you to face healthcare issues as you age. Work with an advisor who uses a multi-faceted planning approach that prepares you in each of these areas. - Smart Money Questions

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