On the Money: Retirement Planning

(0:57) New Tax Rules and Refunds, Tax Withholding During Retirement

“One of the complexities in retirement planning that stirs in client minds during the transition to retirement – how do I handle withholding and taxes?  That’s something we have to monitor and help clients with at all times.”

Paul A. Ruedi

“For most people it’s pretty simple because you can withhold from IRA withdrawals; you can withhold from Social Security and pensions.  So hopefully through your tax withholding you don’t have a big tax bill at the end of the year.”

David Ruedi, CFP®, RICP®

(17:30) Investing During Retirement

“A couple years or 5 years within retirement, you’ve probably never had more money than you have today because you’ve been accumulating all these years.  Now instead of accumulating you are spending down those assets.

A few years before retirement and a few years into retirement we are going to recommend a lower allocation to the stock market than we are during the first part because of sequence of returns risk.”

Paul A. Ruedi

“I always try to explain sequence of returns is just the order you get your returns.  The returns in the first few years have a much bigger impact than the rest of the years of retirement.  You can come up with strategies to deal with that.”

David Ruedi, CFP®, RICP®

(22:37) Immediate Income Annuities in Retirement

“A lot of researchers are eloquently arguing immediate income annuities, payments for life for a lump sum of money, should be a big part of retirement strategies.  Turns out, for whatever reason people don’t want to trade away the upside and the potential flexibility.”

Paul A. Ruedi

“When I went and priced (annuities) and looked at how much money I have to trade to get a certain income stream for life – my opinion was they don’t compete well with even the most conservative portfolio.  But this is an area where I think there will be huge improvements, and though we aren’t using them now, I suspect in the next 5 years I’ll be surprised if they aren’t a significant component of retirement plans, they just need to be more competitive than they are.”

Paul A. Ruedi

(30:11) Top Fears of Clients Planning for Retirement

“The American Institute of CPA’s did a survey and found running out money is the number one financial concern of clients preparing for retirement. 48% of clients expressed concerns about outliving their money.”

Paul A. Ruedi

“I think health care costs are a big concern for people but most of the time health care costs are not as big of a problem as they think because they generally don’t have a lot of out-of-pocket expenses.   The big one that can really derail people’s financial plans is long-term care.”

David Ruedi, CFP®, RICP®

“Having a financial plan is so important because sure there are things you can’t plan for, but the big risks to retirement are things you can plan for and hedge against.”

David Ruedi, CFP®, RICP®

(34:25) Planning for Long-Term Care

(40:00) Dealing with Unexpected Costs in Retirement

“You need to have a margin of error in your financial plan. If you look at your expenses and find you need $50,000 in retirement spending, your plan should probably say it can support $55,000 or $60,000 in retirement spending.  So if you get a bad sequence of returns and have to reduce your spending a bit you have room for that.  If you have unexpected expenses you have room for that.”

David Ruedi, CFP®, RICP®

(42:15) Balancing Conservative Financial Planning vs. Spending Too Little

“You don’t want to end up the richest person in the graveyard.  It is a delicate balancing act, and it is something you can revisit each year.  You can look at how you are living and whether you have enough to possibly spend a little more.  We have to have these conversations with clients to make sure they aren’t sacrificing the one retirement they get.”

Ryan Repko