Retiring

There is ongoing academic research regarding how much money it takes to be happy, or at least satisfied, with one’s financial life.  While the numbers vary, at a certain point, studies show that increases in annual income no longer seem to bring greater happiness.

When you turn 65 you become eligible for Medicare.  Part A is free, but Medicare Part B is based on the income reported on your tax return from 2 years ago.  But is that a fair way to determine the cost when your income level may have changed in the meantime?

While you are working, you add money to your investments to build a nest egg.  In retirement, it’s time to start taking that money back out.  The income goal in retirement is to mimic the paycheck you were receiving while you worked.  This new “paycheck” often comes from several sources, including Social Security and/or pension payments, and perhaps rental incom

When MFP builds financial plans, we usually create a model that assumes clients maintain their current standard of living throughout their life.  Our models adjust for: kids moving out, loans paying off, post-retirement projects, big purchases, and/or travel.

When investments are down, one financial strategy is to convert your traditional IRA to a Roth while the value is reduced so you pay taxes on the decreased value. If and when the market rebounds, that rebound will be in the Roth’s tax-free environment.

If you do a quick Google search to find out how much you can contribute to your 401k, you’ll usually find that the most you can defer from your salary is $19,500*. In reality, the maximum that can go into a 401k is $57,000*.

*If you’re over 50, add $6,500 to both of these numbers.

COVID-19 UPDATE:  As of 3/28/2020, RMDs (Required Minimum Distributions) can be suspended for 2020 for those who prefer to leave that money invested.  Roll-back and Roth conversions are available for distributions already made in 2020.

Balance in retirement is important – not just finding a balance between spending too much money and being afraid to spend, but also how to spend time. How much alone time do you prefer? How much would you like to engage with friends, family, or former colleagues? What is the right blend of relaxing and being active for you? 

If you find the thought of taking retirement distributions stressful, you’re not alone.  Time after time our clients at Mission Financial Planning are surprised to find themselves struggling to dip into their retirement savings.

As I discuss estate planning with my clients, I inevitably think about my personal estate plan.  My kids will inherit what will seem like a lot of money to them, considering how frugally they were raised (downside of being brought up by a financial planner!).  I want them to manage it well, understand why I made the estate planning decisions I did, and I have some ideas about ways the