The best retirement plans start with a plan for a fulfilling life first, then match up the plan with money decisions. That's why good planners ask, what's the money for? For most, it's not to support boredom, stagnation and decline. If you define what an ideal retirement means first for you, then your retirement plan and your retirement life have far better chances of success.
The best retirement plans start with a plan for a fulfilling life first, then match up the plan with money decisions. That's why good planners ask, what's the money for? For most, it's not to support boredom, stagnation and decline. If you define what an ideal retirement means first for you, then your retirement plan and your retirement life have far better chances of success.
The Retirement Answer? A Blank Stare I had just asked a 59-year-old, "You said you can retire in 3 years. How will you spend your time after that?" Expressionless, all he gave was a blank stare. "I never thought about it," he replied. Unfortunately, he wasn't the first 59-year-old with that answer. "I don't know" is a more common answer than most think. More To Retirement Life Than Money According to a study by United Capital, when asked about their financial life stories, most people talked about working and spending, not saving and investing. Over the decades of our working lives, we tend to follow a formula: Work. Spend. (Save). Repeat. We do this knowing one day those (savings we try not to think about or touch) should equal a nice sum, hopefully enough to reach the nirvana of "financial independence." Along the way, we can get trapped into planning meals and vacations, but not a potential 25-year chapter of our life. If nothing trips up the formula (divorce, premature death, disability), then a milestone birthday, the loss of a parent, or the arrival of a new boss may cause one to dial up a financial planner and ask, "Am I there yet?" Are You "There" Yet? To which the answer is usually, "That depends." That depends...on where "there" is. "There" = how, with whom, and where you will find purpose, meaning, and happiness in life after your Work-Spend-(Save)-Repeat chapter. Once that's known, "there" can be translated into real financial goals. If you don't know what "there" looks like, then attempts to answer the question are merely rough guesses. More importantly, if you don't know, you're not likely to enjoy that supposed nirvana time nearly as much. There are many thought leaders contributing to discoveries about the time of life past "Working" and before "Old." That time of life, which will be 25 or 30 years for a lucky few, goes by many names: Your Third Age. The Third Stage. The Encore Years. Your Life's Next Chapter. Examples of such leaders include Dori Mintzer and Mitch Anthony. According to experts like these, retirement planned well has the potential to be a time of peak fulfillment and meaning. Not planned well, potential paths lead to boredom and, in the worst cases, clinical depression. Real Retirement Planning Many people think "retirement planning" means "IRA investments" or "401K rollovers" or "pension options." Those are certainly part of it. But the best, yet sometimes the most difficult, kind of retirement planning is not found on your retirement account statements. It's found inside of you. Begin with a blank stare, and build your "There." That's real retirement planning. Not sure where to begin? Check out this free download: https://www.hollydonaldsonfinancialplanner.com/wp-content/uploads/2018/11/Beyond-the-Numbers-Whats-Retirement-Money-For.pdf for a questionnaire about what kind of retirement lifestyle choices are ideal for you. Or subscribe to the award-winning monthly letter, "The View From the Porch," at https://bit.ly/3t2uwfn.
5 top books read in 2023: What books made an impact on you last year? Each year a few selections from the prior year's reading are highlighted here. For 2023, below are 5 favorites (actually, 4 books and 1 app) from finance and retirement, self-help, and fiction. Finance and Retirement The finance and retirement book recommendation this year is Get What's Yours: The Secrets to Maxing Out Your Social Security, by Lawrence Kotlikoff, Paul Solomon, and Philip Moeller. Although published in 2016 it's been updated for current changes to the claiming rules. Do you really need to read a book about Social Security? Isn't filing pretty straightforward? Maybe, maybe not. It's easier to say who would not necessarily benefit from the book than who would. The book might not be for you if: you already filed for Social Security more than 12 months ago (because, did you know everyone gets a one-time filing do-over in the first 12 months?); or you are not yet 62 and you and your spouse have never been divorced, disabled, widowed, or worked for an employer who opted out of participating in Social Security (generally this would be certain railroad companies or municipal governments). These rule out a few million people, but for the other tens of millions, there is probably something useful inside this book that could save anywhere from a few thousand to a few hundred thousand dollars over the rest of their lives. Life Improvement: (also known as "self-help") Fierce Self-Compassion: How Women Can Harness Kindness to Speak Up, Claim Their Power, and Thrive by Kristen Neff, Ph.D.. Neff's specialty reminds me of Brene' Brown's - a narrow niche of psychological research for which she has chosen to become a deep expert. In Brown's case it's empathy while in Neff's case it's self-compassion. I didn't even know what self-compassion meant when I began reading and studying Neff's work about three years ago. Lest it be confused with becoming a tender-hearted wuss, Neff makes clear that self-compassion requires a ferociousness that is societally frowned upon in women. How to act on that feeling while also expressing self-compassion is the balancing act which she skillfully examines and explains. Not a book, but an app: Insight Timer. I keep this one in my Mental Health folder on the first screen of my phone. It's my go-to app first thing in the morning for a guided meditation or simple calming wake-up music (try for example, "A New Day," by Wakes/Ada and Nathan). Later I consult it again when I need to get to (or get back to) sleep. The teachers are well-vetted by IT and then rated by worldwide listeners. Guided practices span the gamut of spiritual and religious traditions. There are musicians in varied stress-relieving genres to choose from (calming piano - try Chris Collins; cello - try The Wong Janice; recorded nature sounds - Insight Timer Earth). Currently IT claims 28 million listeners. Fiction On the fun side, here were 2 picks for fiction.…
Roth: to convert or not to convert. Converting to a Roth IRA might be worth consideration if you have been saving for retirement in a traditional IRA (TIRA) As you may know, when it's time to take the money out of your TIRA, you will owe tax on the amount you withdraw (called a "distribution"). So when you think of the balance in your TIRAs, give that number a haircut of 10% - 40% (using current tax rates) that will be sent to Uncle Sam. Further, when you reach age 73 or 75 (depending on your birth year) whether you need money or not, you will be required to take an IRS-calculated required minimum distribution (RMD). The RMD income can push you into the next tax bracket or, more commonly, into a higher bracket for Medicare premium surcharges. Surcharges mean you could pay up to several hundred dollars more per month for Medicare. Finally, if you are married and leave TIRAs to your spouse, he or she must eventually take RMDs. When they start filing as single the year after you die, there is a greater likelihood the RMD will push them into the higher income tax or Medicare surcharge brackets. Review of Roth Advantages Roth's have several advantages over traditional retirement accounts (TRAs). 1) When you think of the balance in a Roth IRA, there is no tax haircut. Money in a Roth grows tax-free forever. That's a bigger balance to spend on world cruises, grandchildren, or a Winnebago. 2) Your heirs will have to withdraw the Roth money if you don't, but they won't owe tax then, either. 3) Roths have no RMDs. So that might save you from Medicare surcharges and other additional taxes such as the Net Investment Income tax (NIIT). 4) If you are married and die before your spouse, your spouse will not have to take RMDs from them. 5) If you have a trust, it may be much more beneficial to leave a Roth to the trust than a TIRA. Ask your CPA or tax attorney about this one. What's the Catch with Roths? What's the catch? The amount of TIRA that you convert to a Roth gets taxed in the year you make the conversion. If you convert $100,000 this year, that's $100,000 added to your income. So if you are still working, and you convert some or all of your retirement money to a Roth, you will be paying tax on the converted amount at today's tax rates, hoping/betting that the growth in the Roth will make the extra tax bite today worthwhile later. For the hope/bet to have the best chance to work, a few things help: - You expect to be in a the same or higher tax bracket after you quit working. Otherwise you could wait and pay less tax on the conversion at a lower tax bracket later. - You don't expect to need the money in the Roth for many years. To reap the biggest benefit,…
5 myths about 401(K) rollovers: Should 401Ks (or 403bs, 457s, or TSPs) always be rolled over? Often, soon-to-be retirees are led to believe their impending retirement forces a deadline or urgency to “do something” about their retirement plan account. Several understandable myths surround the mystery of what actually happens to your money when leaving your employer. Below are five of them. Myth 1: When you separate from your employer, you must take your retirement plan account (401K/403B/457/TSP) with you. Actually very few employer plans require employees to leave the plan upon retirement. You have a choice to leave the account right where it is. This includes if you are widowed and your spouse was the employee. More than likely, you can stay with the retirement plan if you want to. The rules for your employer can be verified by checking with your human resources department, or obtaining a copy of your plan’s complete document, usually available at your account’s website. Myth 2: When you separate from your employer, it’s always best to take your retirement plan account with you. Some people might not have the greatest level of fondness for their employer and want to sever ties with anything having to do with the company. While understandable, it’s important to separate facts from feelings about your money. Due to tighter ERISA and Department of Labor regulations, it’s very unwise for employers to have their employees’ retirement plan limited to only high-fee, high-risk, or self-serving fund options. Chances are that what’s available there is worth taking a more in-depth look. On the question of where you are best served with your retirement funds, here is where you will get a wide range of answers. You can ask friends, family, the internet, co-workers, and even ChatGPT and go in circles. Whether rolling over your retirement plan account is in your best interest depends on a few different factors. Keep reading to myths 3, 4, and 5 to find out more. Myth 3: Retirement plan accounts have no impact on the ability to do a Roth conversion. False. This particularly applies to people who have IRAs outside of their employer retirement plan. If you are considering converting part of an IRA you already own outside of a retirement plan to a Roth, the amount you can convert is subject to an arcane concept called the “pro-rata rule.” In general, under this rule, the amount you can convert is subject to a ratio that includes all IRAs, but does not include monies in employer retirement plans. Therefore, if you roll over your retirement plan before doing a Roth conversion, you will likely limit the amount of outside IRAs you can convert. For many people retiring in their 60s and delaying Social Security, Roth conversion opportunities abound. It might very well make sense to wait to roll over at least until age 70 so that you can leave the Roth conversion option more open. Conversely, if all of your retirement money is in the employer…
The best retirement plans start with a plan for a fulfilling life first, then match up the plan with money decisions. That's why good planners ask, what's the money for? For most, it's not to support boredom, stagnation and decline. If you define what an ideal retirement means first for you, then your retirement plan and your retirement life have far better chances of success.
“Who will take care of you when you’re old?” someone once asked me when I told her I had no children. It seemed like an old-fashioned kind of question. Nevertheless, it caused a mini panic attack. Knowing the statistics, I had made the vague assumption that I would need to make arrangements for care, but something about her question made that statistical probability more real. About 14 percent of 40- to 44-year-old women had no children in 2018 – up from about 10 percent in 1980, U.S. Census data shows. This is and will be an issue for millions of Americans. As anyone who has served as a caregiver knows, there are four main questions to ask from the beginning. Answering these can lead to the formation of an elder care support team. The team members may come from two areas - friends and family, professionals, or both. Where will I live? Who will make medical decisions for me? Who will handle my finances? How will I get transportation? Team Member 1: Where will I live? The first part of figuring out the team is to know where you will be living. The vast majority of Americans want to age in their homes. For some people that home might be the place they have lived for several decades. If so, then the team member will likely be a home health care company. For others, home might be a place they move to - with a supportive community, but not a facility (perhaps at first). If that's you, building a network of friends and professionals in the community can be one of the best ways to reinforce your support team. Although it's not in many people's plans, sometimes aging at home isn't an option. For people aging without children, it's more important to get to know assisted living and continuing care facilities, and figure out how you would pay for them. (For myself, I purchased a traditional long-term care policy. But that doesn't mean that is the right solution for everyone.) Team Member 2: Who will make medical decisions for me if I can’t? Preferably someone close by. Ideally this person could be available at a moment's notice and will not have to travel far to attend appointments with you. Having a strong primary care physician relationship is also highly beneficial. Some doctors, especially those who specialize in concierge medicine, can and will serve as your legal health care surrogate. Team Member 3: Who will handle my financial affairs? Many attorneys recommend having a different person named for financial matters than for health care decisions. As aging progresses, it's a lot to ask of one person to handle bill paying, money management, and doctor appointments (as anyone who has served as a sole caregiver can attest). Money management involves several duties. To name a few, Paying bills and making renewal decisions (such as memberships, subscriptions, and/or insurance policies) Making gifts Making transfers between accounts, such as taking IRA withdrawals Managing investments…
How to let go of money self-doubt: What is money self-doubt Money self-doubt is an inner belief that one cannot trust themselves with a decision about money. Sometimes these beliefs operate in the background, quietly driving decisions when we don't realize it. Other times they're front and center. What does money self-doubt sound like? Money self-doubt beliefs often sound like critical messages: "I knew I'd screw it up." "I'll never be good with money." "If I can't manage my own finances, I'm a failure." "Why am I so stupid with money?" Money Self-Doubt Origins Where does money self-doubt come from? It could be a single traumatic event or a repetition of harmful moments that lead to flawed beliefs about our financial capabilities. One time being taken by a scammer, or many times being told by an abuser we aren't capable. Without counterbalancing mantras like, "You're still OK." "You just made a mistake." "You can do this." the self-doubt can take hold. Society and media also don't help, offering a choice of money self-image as either, "good with money," or not. Individual instruction is rarely given in school, or in families, much to our society's detriment. While financial professionals are often proficient in finance, many are not good educators. A few even try to make money more complex than it is, to keep clients feeling less than sure about themselves. Case Study: Sondra (not her real name) is a highly educated and accomplished professional. Her parents came from Depression-era families where money was tight in their younger years. Money was never talked about in Sondra's home, although she was given everything she needed. She grew up with the belief that her parents didn't discuss it with her because they believed money was something she was not capable of handling. When she went to talk with a financial advisor, he threw so much jargon at her that she was too uncomfortable to admit she didn't understand what he was talking about. Money Self-Doubt Results Without realizing these beliefs exist, we can allow them to influence what actions we take or fail to take. Self-doubt can affect who we allow into our lives, and who we don't. It can affect our choice of career. Or how we spend, or choose not to, on our own needs, wants, and wishes. Ironically, money self-doubt can lead to overspending with some people, and over-deprivation with others. Sondra chose a career where she was assured a salary and the chance of a bonus if she worked hard enough. She worked longer hours than she wanted to. She lived minimally, foregoing many comforts and rewards of her hard work. Her dreams of having more work-life balance were put on hold because she never felt financially secure. In her personal life, she chose friends and partners who also didn't talk about money, leaving a gap in her closest relationships. How To Let Go of Money Self-Doubt If you've been operating under flawed assumptions, and now you know it,…
The Retirement Answer? A Blank Stare I had just asked a 59-year-old, "You said you can retire in 3 years. How will you spend your time after that?" Expressionless, all he gave was a blank stare. "I never thought about it," he replied. Unfortunately, he wasn't the first 59-year-old with that answer. "I don't know" is a more common answer than most think. More To Retirement Life Than Money According to a study by United Capital, when asked about their financial life stories, most people talked about working and spending, not saving and investing. Over the decades of our working lives, we tend to follow a formula: Work. Spend. (Save). Repeat. We do this knowing one day those (savings we try not to think about or touch) should equal a nice sum, hopefully enough to reach the nirvana of "financial independence." Along the way, we can get trapped into planning meals and vacations, but not a potential 25-year chapter of our life. If nothing trips up the formula (divorce, premature death, disability), then a milestone birthday, the loss of a parent, or the arrival of a new boss may cause one to someday dial up a financial planner and ask, "Am I there yet?" Are You "There" Yet? To which the answer is usually, "That depends." That depends...on where "there" is. "There" = how, with whom, and where you will find purpose, meaning, and happiness in life after Work-Spend-(Save)-Repeat. Once that's known, "there" can be translated into real financial goals. If you don't know what "there" looks like, then attempts to answer the question are merely rough guesses. More importantly, if you don't know, you're not likely to enjoy that supposed nirvana time nearly as much. There are many thought leaders contributing to discoveries about the time of life past "Working" and before "Old." That time of life, which will be 25 or 30 years for a lucky few, goes by many names: Your Third Age. The Third Stage. The Encore Years. Your Life's Next Chapter. Examples of such leaders include Dori Mintzer and Mitch Anthony. According to experts like these, retirement planned well has the potential to be a time of peak fulfillment and meaning. Not planned well or planned at all, potential paths lead to boredom and, in the worst cases, clinical depression. Real Retirement Planning Many people think "retirement planning" means "IRA investments" or "401K rollovers" or "pension options." Those are certainly part of it. But the best, yet sometimes the most difficult, kind of retirement planning is not found on your retirement account statements. It's found inside of you. Begin with a blank stare, and build your "There." Not sure where to begin? Check out this free download: https://www.hollydonaldsonfinancialplanner.com/wp-content/uploads/2018/11/Beyond-the-Numbers-Whats-Retirement-Money-For.pdf for a questionnaire about what kind of retirement lifestyle choices are ideal for you.