Tag Archives: retirement

Happy Birthday to You!

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I have a number of clients turning 65 this year and along with all the personal birthday greetings they will get, the Government has a few presents for them too.

When you turn 65 you get to apply for Medicare. If you have started taking Social Security benefits prior to age 65, you are already signed up for Medicare, otherwise, you have to sign up yourself. Three months before you turn 65 you can either go to www.medicare.gov or call 1-800-772-1213, but make sure you do it or you will have a lifetime of penalties.

The IRS has a present for you also. Upon turning 65, your standard deduction goes to $7100 from a current deduction of $5700. That is a potential tax savings of $616/year.

Many of my clients are still working at age 65, after all it is still young in my book, but retirement planning is important. Many people looked at age 65 as the marker for starting Social Security – it used to be the “full retirement” age. That may not be true for you. For most people, full retirement for Social Security is either age 66 or 66 + 4 months. You can go to www.ssa.gov to check your status.

So celebrate big for your 65th! Have cake and ice cream and accept your presents from wherever they may come.

You have crunched some numbers – how about some “lifestyle” planning?

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We know that you can afford to retire financially, but what about the day-to-day activity and mental aspect of retirement. Here are a few things that I would like you to do:

Envision your future: You need to address such questions as; where will you live? How will you spend your time? What is your new routine?

Do a test drive of your retirement: Is your ideal retirement one that you can handle? For example, if you have always dreamed of that small beach house with the slow paced life, try renting a beach house for a month or two and see if you can handle that lifestyle. That slower pace may be perfect or may drive you perfectly batty.

What is your “social” capital? People who are more socially connected feel much better in retirement. Retirees who are happy with their number of friends were three times more likely to be happy than those who were not. Retirees who volunteer or attend some type of worship also tend to be more content.

So as you track your balances, make sure you keep track of your lifestyle planning as well.

I turned 70 1/2 last year and I have to take my first RMD by April 1st. How do I calculate what I need to withdraw?

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April 1 is the date of your first withdrawal the year after you turn 70 1/2. After the first year, your annual RMD must be withdrawn by 12/31. If you are still working and contributing to a 401k, you do not need to take withdrawals from the 401k until you do retire.

If you go to www.irs.gov and look for publication 590 you will find the withdrawal tables to be used.

How much do you care about your future self?

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If you care a lot about your future self, you will save more. If you care a little, not so much. The question then becomes – how can you save more than you already are? In the past we have discussed the “Latte Factor.” If you cut back the premium drinks you buy each week from one a day to 3 a week, you can save $10/week or $520/year. While this small change may not seem like much it does add up.

Another trick to keeping your savings is to open up an account with a banking institution that is not close to work or home. It is a chore to deposit into this account and a chore to withdraw. You pat yourself on the back for going out of your way to save for your future and give yourself another big pat for not making the trip to withdraw. Accounts that are not convenient make us think twice about withdrawing from them until we really need to.

Saving is what we have after we finish spending. If we can control spending we will be much better off

When I rollover my 401k to an IRA, can I keep the holdings I currenlty have?

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A: It depends on what your plan document dictates. It may allow you to transfer the holdings you currently have intact or it may require that all holdings be cashed out and a check for the account value will be sent to the new IRA.

Q: How do I pay myself from my retirement accounts once I have retired?

A: There is no fixed method to use when paying yourself from your retirement accounts. You need to pick the best method for you to manage your cashflow. You can pay yourself monthly,  quarterly, in random lump sums, whatever works for you.

Why will you be getting out of bed everyday?

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This is the question I posed to Mike, who at age 58 is getting ready to retire from the fire department. Mike’s wife has been a stay at home Mom and now they will be together 24/7 for the first time in their married life. Mike sorta stared at me – this was not the type of question he expected from a CFP®practitioner.

To me, this is one of this most important questions to ask when you are getting ready to retire. You have to have a plan for how you will spend your time as well as a plan for how long your savings will last. There are only so many “honey-do” items to fill the void. There are many charities that can use the expertise and extra hands that a retiree can provide.

Having a reason to get out of bed each day keeps you sharp mentally and physically fit, and allows you to participate in life. I’ll worry about your finances for you – you need to figure out what you will do with all of your time.