Retirement Planning Timeline

Hey, what's up with everyone, Bill, who's been here to learn about the evolution of money? In today's video I'm going to talk about the

retirement

planning

timeline

, so if you're someone who's started to get closer to

retirement

, maybe you're starting to think a lot more seriously about the

planning

you're doing there, what I'm going to do here in Today's video is simply to outline a brief outline of some of the key ages and milestones that you may want to keep in mind as you begin to put together some of your retirement plans and, indeed, your early years of retirement, some of the things you could expect there and real quick before we get into the video here, if this is something that sounds interesting to you, you want to learn a little bit more about what we do, we have a comprehensive financial plan that we call wealth vision.

If you go to Wealth Vision Plan com, it will take you to a page where there will be a lot of information about our process and how we present it. a financial plan for our clients, if that sounds interesting to you, just fill out the form on that page and you can schedule a time to talk to me one on one and we can see if good vision is right for you So now let's dig in here, let's start looking some key ages. The first thing we want to look at here is the age of 50, which tends to be the age at which we find most people get into serious financial trouble. planning stage maybe your kids have moved out of the house maybe you have a little more cash flow because of that maybe your house is paid off and you really want to start putting together some plans and say hey if I want to retire in maybe so As early as five years if you want to plan for a really early retirement or even if it's 10 or 15 years away, I think starting that planning phase at age 50 is a really good starting point because there's a lot of planning you can do, especially if you're still working and still contributing to retirement plans at work and what we're going to talk about a little bit towards the end of this video is some of the tax ramifications of saving for retirement that you're doing. and balancing what we call the three groups of taxes and how they can potentially minimize some of those taxes in the future, so age 50 is where that very serious financial planning phase begins.

The other key milestone we want to look at here is fifty-nine and a half and that's important because I think for most of us from the day we start putting money into retirement plans, whether it's an IRA or even your retirement plans. 401k, most of the time we have been taught that you can not touch that money until age 59 and a half without incurring an early withdrawal penalty. A 10% IRS penalty. Well, for those of you who have money in a 401k plan through work, there is something called the 55-year rule and you can get it without penalty. withdrawals from your 401k as long as you separate service on your 55th birthday or later, but that's just money that applies to withdrawals from your 401k plan.

If you move your 401k into an IRA, you don't get the same tax treatment there, so That something is very important to do and is one of the reasons we talked about why you may not want to roll over your 401k plan to an IRA. At age 59 and a half, that's where you can start taking your normal distributions and, by the way, just type. to back it up for a second if you have money in an IRA, there is a way to make penalty-free withdrawals from an IRA, we discuss it in more detail in some of our other videos, but that's something called 72 t like that which I'm going to write that here and it's for IRAs and that's one way around it and there are some strict guidelines for 72 t, basically, you have to accept equal payments, substantially equal payments for five years or until you're older. you turn 59 and a half, so if you become 72T, say at age 52, you'll have to hold on to that for about 8 years and you'll have to service the debt, you can't really do anything or change that.

In some significant way, 50 over 1/2 is our normal age. Now let's start thinking about some of the decisions you're going to make. Okay, depending on when you're retiring, one of the biggest problems will be. your cash flow and that's one of the things we focus on the most with our financial plan is looking at cash flow, it doesn't really matter, it does matter how much money you have saved for retirement, but I think a lot of times people focus too much in that number. Hey, I have a million dollars saved for retirement or I need three million dollars to live the lifestyle I want.

What you really want is to change your way of thinking a little and focus on not so much. like how much money do you have saved for retirement but how much money can I generate in a predictable way for your retirement and one of those sources of predictable retirement income for almost all of us will be Social Security and you can draw on Social Security Payments from the 62, but those of you who have already done some research on this probably know that if you activate your Social Security at age 62, your benefit amount will be substantially reduced and benefits will be locked at that lower amount for the remainder of your life. your life for some of you watching this your full retirement age that's the age at which Social Security considers you eligible for fully unreduced benefits for some of you it could be age 66 probably for most of you If you're watching this video, you will be 67 years old and we sometimes refer to that as full retirement age under Social Security and then you have the option with Social Security to delay Social Security payments beyond your full retirement. age and if you do that, they will increase your Social Security amount by about 8% each year you delay beyond full retirement age and you can do this up to age 70, beyond that you will not receive any increase. and by the way, if you're talking about a spousal benefit, if you're married, your spouse will also potentially be eligible for a spousal benefit outside of your work history, even if you didn't work or didn't work to earn as much benefit as you have, but That spousal benefit doesn't increase beyond your full retirement age, so age 70 is that and then the last thing that's going to be very, very important here and that I think a lot of people overlook is what happens at age 70. years and a half and that's where your RMDs come in and that means required minimum distributions and essentially it's the IRS is a way of saying, hey, you've already spent enough time with this money in IRAs or 401k plans. without paying us any taxes, so whether you want it or not, we are going to start forcing you to start taking some money out of those retirement accounts at age 70 and a half and it will be set on a schedule that starts at about 70. 4% of your total 401k IRA balances from December 31 of the year before the year you turned 70 and a half and then increases a little each year, so I think it's closer to six or seven percent of your account, but I want you to start withdrawing this money if you don't accept those very high RMD penalties, since it is a 50% tax penalty from the IRS and on top of that, you will have to retake the distribution you were supposed to withdraw and pay applicable taxes, so if you take that penalty into account along with your taxes, you could easily end up in a very, very, very high tax bracket or tax liability because of that RMD fog, so why is this important ?

Why is it important to understand it? Some of these key dates, well, I think one of the biggest things that we've been talking a lot about with our clients is when it comes to taxes and if you think about the money that you've saved in your retirement accounts, probably during the Most of us, because we've been around longer, tend to have most of our retirement savings in what are called traditional retirement accounts and those are money that we have to deduct from our income taxes, such Sometimes when that money went into an IRA or if it was a 401k plan, the money went into the 401k plan before that money was taxed, so it's what's called tax deferred and when you start withdrawing that money during In retirement you will have to start paying some taxes. that or when they force you to withdraw that money after age 70 and a half, they will force you to start taking those distributions and start paying taxes on that, okay, so now let's start talking about why some of these ages are It's going to be important and by the way, I forgot a very important one: 65, that's the age at which you're eligible for Medicare and it's going to be very important because, as we've talked about in a lot of our other videos here, Medicare. and general health care for retirees will be one of your biggest expenses in many cases there, so at 65 you are entitled to Medicare, if you retire before that you will have to go out to the exchanges and buy some type of policy insurance through the Affordable Care Act or perhaps check with your employer, perhaps your employer has some options for continuing to receive those retirement health care benefits in retirement and you will also want to make sure you are planning for your spouse. also and make sure that they will be covered if you retire or they retire at 65 there, so one very important thing is to know what those health care expenses are for Medicare and what those expenses will be before Medicare and the possibilities .

Are they going to be much higher on that before Medicare? And like I said, we have other videos where we go into a lot more detail on that, so one of the most important things I talked about at the beginning of the video is understanding our cash. flow and so on for most of us and we're not going to get into how we get to this number here, but we're going to have some kind of target retirement amount that we're going to try to achieve. our lifestyle goal will include all of our expenses to maintain our home, maybe it's our housing expenses, maybe you have a mortgage, maybe you don't have a mortgage, your healthcare expenses that we just talked about there, your hobbies, travel expenses.

A lot of retired people are going to be a big number, so we have this lifestyle number in our heads that we need to achieve and as we retire, we start thinking, well, you know, how are we going to get there? If we start talking about our predictable sources of income first, we know that we can activate Social Security benefits as early as age 62, and for many people, even according to Social Security, we know that most people just will charge them. Social Security benefits as soon as possible at age 62, but again they will be in a reduced amount and I'm going to share with you some insight into why you might not want to just jump in and collect those social benefits.

Safety benefits early because when you take those Social Security benefits early, the thought process that I think a lot of people have is that I have some cash flow coming in and I can leave that money that I have in my IRAs or my 401k plan. I can let that money grow and I don't have to touch that money. I can save it more or less for a rainy day and what ends up happening as we talk about those traditional accounts, like we said that at 70 years old. In a year and a half we're going to have to start taking some distributions of that and if it's not controlled, we want to make some projections about how far those accounts will grow and, for a lot of people, what we're looking at right now when to start doing these financial plans with their current weight structure in which they have this money by the time they reach 70 and a half, which will literally elevate them, in many cases, to a very high tax bracket and not only that, not only are they going to pay higher taxes on that money, but it's also going to change the amount you have to pay for Medicare because if you don't already know, your Medicare premiums will be dictated by your adjusted gross income and the higher your adjusted gross income, the higher your Medicare premiums will be for both you and your spouse, so we really want to keep this number in check here, so we talked again about what we say the three main taxes. types and we have the traditional bucket and again that's where I think most people probably have most of their savings.

There's also something called a Roth bucket and that hasn't been around for that long and maybe a lot of you watching this video might even say, "Hey, well, I don't qualify to make a Roth contribution and we also made a video about that here no. a long time ago, called a backdoor Roth IRA, and there are three specific ways you can possibly put money into a Roth IRA.” Roth 401k account or plan even if you're above those income levels here, but for a lot of people here, even if you qualify for a Roth, you tend not to have as much of a balance as traditional accounts because, again, they just don't have it. existed for so long and then, for many of us we have what we sometimes call non-account accounts.retirement and therefore separating them, this will be the tax bucket now and you know this because if you have money and no retirement accounts usually you get that form every year at the beginning of the year January February will be that 1099 will have your dividends your interest your short term long term capital gain and all of that will be itemized and that's what you have to file the income tax for that year and pay taxes on the money that you have earnedmoney this year, any money that you earn here in the bucket Traditional continues to be deferred until you withdraw that money or are forced to withdraw it at age 70 and a half, so anything this account forces you not to do.

You don't have to pay taxes today, but you will have to pay taxes in the future or if you die, your children will pay taxes, so one way or another the IRS will get their money and that's the text. then the bucket and then the last bucket is the Roth bucket, you pay taxes when that money comes in, but sometimes we say it's not the tax ever, but you know, we just say it's not taxed when it comes out again, you pay taxes on money. before you get in there, but again, having a little bit of diversification between these three tax groups, we think that's going to be very important, it just gives you more options, okay, so let's take a scenario here, so we talk about the person which takes Social Security Benefits immediately at age 62, what that means in any situation is that you are not taking money or you have to take out much less money from traditional accounts and that just increases those numbers and is This will equal RMD higher in the future and we want to understand what the impact of that is.

Number two is you're also locking in those lower Social Security benefits, so one strategy is you can delay taking Social Security benefits, maybe you can delay that to age 67, maybe in some cases you have It makes sense to delay it until age 70 and actually earn those delayed retirement credits, they really maximize that Social Security benefit, but what it's going to do is create sort of a segment of years there. where we sometimes call them low tax years because you may not actually be coming in much at that time and it gives you the opportunity to take some more money out of these traditional accounts and spend it to live on or in some cases if you're still in low enough tax bracket, you could do some Roth conversions and take some of that money that's in those traditional accounts and maybe all the way to the top of the next tax bracket, literally move some money from that traditional bracket into the Roth. cube and that not only maybe helps your situation for RMDs, but it will also reduce those Medicare premiums and it really has a nice effect, if you have a lot of money here in non-retirement accounts, there will be some opportunity there like Well , one is that you can use some of the money that's in the non-retirement accounts, also use it to pay the taxes by doing those Roth conversions because you have to pay the taxes now to have that opportunity to never have to pay taxes. that money again, so that's something you could do.

You can also look for opportunities to maybe save more money in those traditional accounts or Roth accounts and again, if you want to learn more about that, we have a really great video that I talk about. on how to get more money into Roth accounts and just to give you a little spoiler on that if you're in a 401k plan through your employer and your employer allows what are called after-tax after-tax contributions to your employer-sponsored plan In some cases, if you are under 50, you can save up to fifty-six thousand dollars a year in one of these tax-advantaged accounts, and if you are 50 or older, you can save up to $62,000. a year, so you might say, well, I can't afford to save that much.

What you can do again is if you have money here in this non-retirement account, you can use some of that money to subsidize your living expenses while you're transferring that money, so we're basically changing things from what we call the Advantage plan with less taxes, a slightly better tax advantage to the best Advantage plan with taxes and anyway, that's just kind of a quick summary. to think about things in terms of the retirement planning

timeline

and again, if you want to learn more about this, you know we do a comprehensive financial plan again, we have very sophisticated software where we map all this out and analyze your cash flows, we help you identify the gaps so that we can see specifically in retirement where some of that money is going to come from, how it's going to cover some of those lifestyle expenses, but also, very importantly, we have the ability to also trace your tax situation. so we can see what that tax situation is today, what it will be during retirement, and what the projection will be at 70 and a half when you have to start taking required minimum distributions. because for a lot of people, a lot of our clients, as you know, again unchecked, they're in a higher tax bracket to seven and a half than they ever were while they were working and it's because of those IRA distributions that they're going to be pushed out.

Anyway, I hope you got some great value from today's video, if you liked it please hit the like button, subscribe, also share this if you have people within your social media circles who you think could benefit from this, ya you know, share the video and we. I'd love to hear some feedback, so have a great day and I'll see you in one of my next videos. Hello, thank you very much for watching this video. If you found this helpful and you're thinking, this makes sense and you'd like us to help you make a plan for your retirement, go to Wealth Vision Plan com or click the link below.

When you get there, you'll see information about our comprehensive Well Vision financial plan, if you like that. If you see that website, click the Start Now button and we'll set up a time to talk. Thank you and see you in one of our next videos. Have a great day.