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Retirement Planning Timeline

Retirement Planning Timeline
hey what's up everyone bill that's been here for money evolution in today's video I'm gonna be talking about the

retirement

planning

timeline

so if you're somebody that started to get closer to

retirement

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

planning

that you're doing there what I'm gonna do here in today's video is kind of just outline a brief sketch of just some of the key ages and milestones that you might want to be aware of as
retirement planning timeline
you're starting to put together some of your

retirement

plans and actually your first few years of

retirement

some of the things that you might be able to expect there and real quick before I 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 we call wealth vision if you go to wealth vision plan com it'll take you to a page where there's gonna be a bunch of information
there about our process and how we lay out a financial plan for our clients if that sounds like something that's interesting for you just fill out the form on that page and you can set up a time to talk with me one-on-one and we can see if well vision is a fit for you so now let's dive in here let's start looking at some key ages the first thing we want to look at here we put on is age 50 and that tends to be the age when we find most of the people kind of come into the serious
financial

planning

stage maybe your kids have moved out of the house maybe your have a little bit more cash flow because of that maybe your house is paid off and you want to really start to put together some plans and say hey if I want to retire in maybe as early as five years if you want to plan for a really early

retirement

or even if it's 10 or 15 years down the road I think starting that

planning

phase at age 50 is a really good place to start because there's a lot of

planning

that
you can do especially if you're still working 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 the saving that you're doing for

retirement

and kind of balancing out what we call the three tax buckets and how they can maybe potentially minimize some of those taxes down the road so age 50 is where that very serious financial

planning

phase begins the other key milestone that
we want to look at here is age fifty nine and a half and that's important because I think for most of us since the day we started putting money into

retirement

plans whether it was an IRA account or even your 401k plans well most of the time we've been taught that you can't touch that money until 59 and a half without incurring an early withdrawal penalty a 10% IRS penalty well for those of you that have money that's in a 401k plan through work there's something called the
age 55 rule and you can get penalty-free withdrawals from your 401k as long as you separate service on or after your 55th birthday but that is only money that applies to withdrawals from your 401k plan if you move your 401k to an IRA account you don't get that same tax treatment there so something very important to do and it's one of the reasons we talk about why you may not want to roll your 401k plan over into an IRA account so age 59 and a half that's where you could start taking
your normal distributions and by the way just to kind of back up for a second if you do have money that's in an IRA account there is a way that you can take penalty-free withdrawals from an IRA we get into that in more detail on some of our other videos but that's something called 72 t so I'll just going to write that up here and that is for IRAs and that's a way to avoid that and there's some strict guidelines for 72 t basically you have to take equal payments substantially
equal payments for the greater of either five years or until you turn 59 and a half so if you turn on as 72 T let's say at age 52 you're gonna have to keep that for about 8 years and you got to stick to that debt payment you can't really do anything or change that in any any significant way there so 50 on 1/2 that's our normal age now let's start thinking about some of the decisions that you're gonna make ok so depending on when you're gonna retire one of the biggest
issues is going to be your cash flow and that's one of the things that we focus on most with our financial plan is looking at the cash flow it doesn't really matter it does matter how much money you have saved up for

retirement

but I think a lot of times people focus too much on that number hey I've got a million dollars saved for

retirement

or I need three million dollars to live the lifestyle that I want what you really want to kind of change your mindset on a little bit is
focusing on not so much as how much money you have save for

retirement

but how much money can I generate in a kind of a predictable fashion for your

retirement

and one of those predictable

retirement

income streams for pretty much all of us is going to be Social Security and you can turn Social Security payments on as early as age 62 but for those of you that have already done some research on this you probably know that if you turn your Social Security on at 62 it's gonna be at a pretty
substantially reduced benefit amount and that benefits gonna be locked in at that lower amount for the rest of your life for some of you watching this your full

retirement

age that's the age where Social Security deems you to be qualified for fully unreduced benefits for some of you it might be age 66 probably for most of you watching this video it's going to be age 67 and that's sometimes we refer to as the f ra that stands for full

retirement

age according to Social Security and
retirement planning timeline
and then you do have the option with Social Security to delay Social Security payments beyond your full

retirement

age and if you do that they're going to increase your Social Social Security amount by about 8% every year that you delay beyond full

retirement

age and you can do that all the way to age 70 beyond that you don't get any increase and by the way if you're talking about a spousal benefit which if you're married your spouse is also gonna be eligible potentially for a
spousal benefit off of your work record even if they didn't work or they didn't work to earn as much of a benefit as what you have but that spousal benefit does not grow past your full

retirement

age so age 70 is that and then the last thing that's going to be very very important here that I think is really overlooked by a lot of people is what happens at 70 and a half and that is where your RMDs kick in and that stands for required minimum distributions and essentially it's the
IRS is way of saying hey you've gone long enough with this money in IRA accounts or 401 k plans without paying us any taxes so whether you want to or not we're gonna start forcing you to start taking some money out of those

retirement

accounts at age 70 and a half and it's going to be set up on a schedule starts off roughly at about 4% of your entire 401k IRA account balances from December 31st of the year before the year you turned 70 and a half and then it goes up a little bit
every year so I think it does approach six or seven percent of your account balance but they want you to start taking this money out if you don't take that RMD very very steep penalties for that it's a 50% IRS tax penalty plus you're still gonna have to go back take the distribution that you were supposed to take out and pay the taxes on it so if you factor in that penalty along with your taxes you could easily end up in a very very very high tax bracket or tax liability from that
mist RMD so so why is this important why is it important to kind of understand some of these key dates well I think one of the biggest things that you know we've been talking to a lot with our clients is when it comes to taxes and if you think about the money that you have saved in your

retirement

accounts probably for most of us because they've been around the longest we tend to have the bulk of our

retirement

savings in what are called traditional

retirement

accounts and those are
monies that we either got to deduct off of our income taxes maybe as that money went into an IRA account or if it was a 401k plan the money went into the 401k plan before that money was ever taxed so it's what's called tax deferred and when you start to pull that money out in

retirement

you're gonna have to start paying some taxes on that or when you're forced to take that money out after age 70 and a half they're gonna force you to start taking those those distributions and
start paying that taxes on that okay so now let's start talking about why some of these ages are gonna be important and by the way I did forget one very important one when it's age 65 that's the age that you're entitled to Medicare and that's gonna be very big because as we've talked about in a lot of our other videos here Medicare and health care in general for retirees is going to be one of your biggest expenses in many cases there so at age 65 you're entitled to
Medicare if you retire prior to that you're either going to have to go out into the exchanges and buy some type of insurance policy through the Affordable Care Act or maybe check with your employer maybe your employer has some option for continuing to get those

retirement

healthcare benefits into

retirement

and you'll also want to make sure that you're

planning

for your spouse as well and make sure that they're going to be covered if you retire or they retire at age 65 there so
one very important thing is you know what are those healthcare expenses for Medicare and what are those expenses going to be before Medicare and chances are they're gonna be a lot higher in that before Medicare and we like I said have other videos where we get into a lot more detail on that so one of the most important things as I talked about early in the video is understanding our cash flow and so for most of us and we're not going to get into you know kind of how we come up with this
number here but we're gonna have some type of a

retirement

target amount that we're gonna try to achieve that's gonna be our lifestyle goal that's going to include all of our expenses for maintaining our household maybe that'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 eating your hobbies travel expenses for a lot of people in

retirement

are going to be a big number so you know we
have this lifestyle number in our heads that we need to achieve and as we go into

retirement

we start thinking about well you know how are we going to get that and if we start talking first of all about our predictable sources of income we know that we can turn on Social Security benefits as early as age 62 and for a lot of people even according to Social Security we know that most people will go and just collect those Social Security benefits as early as they possibly can at age 62 but again
retirement planning timeline
it's going to be at a reduced amount and I'm gonna share with you kind of an idea here of why you may not want to necessarily just jump in and collect those Social Security benefits early because when you take those Social Security benefits early the thought process I think a lot of people have is that I've got some cash flow coming in and I can let that money that I have in my IRA accounts or my 401k plan I can let that money grow and I don't have to touch that money I can kind
of save that more or less for kind of a rainy day and what ends up happening as we talk about those traditional accounts as we said that at age 70 and a half we're going to have to start taking some distributions from that and left unchecked we want to make some projections as to what are those accounts going to grow to and for a lot of people what we're seeing right now when we start to do these financial plans with their current structure of weight where they have this money by the
time they get to age 70 and a half that is going to literally kick them up into in many cases a very high tax bracket and not only that not only are they going to pay higher taxes on that money but it also is going to change the amount that you have to pay for Medicare because if you don't know it already your Medicare premiums are going to be dictated by your adjusted gross income and the higher that adjusted gross income is the higher your Medicare premiums are going to be for both you and
for your spouse so we want to really kind of keep this this number in check here so we talk again about what we say the the three main tax types and we have the traditional bucket and again that's where I think most people probably have the bulk of their savings there's also something called a Roth bucket and that hasn't been around nearly as long and for maybe many of you watching this video you might even be saying hey well I don't qualify for making a Roth contribution and we
made a video about that too here just not too long ago called the backdoor Roth IRA and there are three specific ways that you can possibly get money into a Roth IRA account or Roth 401k plan even if you're over and above those income levels here but for many people here even if you do qualify for a Roth it tends to not be as much of a balance as the traditional accounts because again they just haven't simply been around as long and then for a lot of us we have what we sometimes calls
non

retirement

accounts and so to kind of separate these this is going to be the tax now bucket and you know that because if you have any money and non

retirement

accounts you generally get that form every year in the beginning of the year January February it's gonna be that 1099 it's gonna have your dividends your interest your capital gain short term long term and all that's gonna be spelled out and that's how much you have to declare for that year's income tax and pay
taxes on that money you've earned that money this year any money that you earn over here in the traditional bucket just continues to get deferred until you either take that money out or you're forced to take that money out at age 70 and a half so anything this account makes you don't have to pay taxes on it today but you will have to pay taxes on in the future or if you die your kids will pay taxes on that so one way or the other the IRS is going to get their money and and so
that's the text later bucket and then the final bucket is the Roth bucket you pay taxes when that money went in but sometimes we call that the it's not the never tax but you know we just say not taxed when it comes out again you do pay taxes on the money before it goes in there but again having a little bit of a diversification between these three tax buckets we think is going to be very important it just gives you more options okay so let's take a scenario here okay so we talked
about the person that takes the Social Security benefits right away at age 62 what that does in any situation is it's gonna mean that you either are not taking any money or you're having to take a lot less money from the traditional accounts and that's just growing those numbers out and it's gonna equal higher RMDs down the road and we want to understand what is the impact of that going to be number two is it's also locking in that 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 that makes sense to delay that all the way to age 70 and really earn those delayed

retirement

credits they really maximize that Social Security benefit but what it's going to do is it's going to create kind of a segment of years there where we sometimes call those the low tax years because there's really not a lot maybe coming in at that time and it gives you an
opportunity to maybe take some more money out of these traditional accounts and spend that to live on or in some cases if you're still in a low enough tax bracket you could do some Roth conversions and take some of that money that's in those traditional accounts and maybe up to the top of that next tax bracket literally shift some money over from that traditional bucket over to the Roth bucket and that's going to not only maybe help your situation for the RMDs but you know lower
those Medicare premiums and it really just has a nice effect if you have a bunch of money here in the non

retirement

accounts there's going to be some opportunity there as well one is that you can use some of the money that's in the non

retirement

accounts use that too pay the taxes on doing those Roth conversions because you have to you have to pay the taxes now to get that opportunity to never have to pay taxes on that money again so that's one one thing that you could do you can
also look at opportunities to maybe save more money into those traditional accounts or Roth accounts and again if you want to learn more about that we do have a really great video where I talk about how to get more money into a Roth accounts and just to give you a little spoiler on that if you're in a 401 k plan through your employer and your employer allows for what are called after-tax dish after-tax contributions to your employer sponsored plan in some cases if you're under 50 you can
get up to fifty six thousand dollars a year saved in one of these tax advantaged accounts and if you're 50 years old or older it can be as high as 62 thousand dollars a year so you might say well hey I can't afford to save that much well what you can do again is if you have money over here in this non

retirement

account you can use some of that money to kind of subsidize your living expenses while you're shifting that money over so we're getting things basically shifted from what
we refer to as the least tax Advantage plan slightly better tax advantage to the best tax Advantage plan and anyway that's just kind of a real quick wrap-up here kind of thinking about things in terms of the

retirement

planning

timeline

and again you know if you want to learn more about this you know we do again comprehensive financial plan we have a very sophisticated piece of software where we map all of this stuff out we look at your cash flows we help you identify the gaps so we can see
specifically in

retirement

where some of that money is going to be coming from how you're going to meet some of those lifestyle expenses but also very importantly we have the ability to kind of map out your tax situation too so we can see what is that tax situation today what is that going to be in

retirement

and what is that even going to be projection wise out at 70 and a half when you have to start taking those required minimum distributions because for a lot of people a lot of our
clients you know again left unchecked they're in a higher tax bracket at seven and a half than they ever were while they were working and it's because of those IRA distributions that are gonna be forced out so anyway I hope you got some great value out of today's video if you liked it hit that like subscribe button also share this if you have people within your social networking circles that you think might benefit from this you know share the video and we'd love to hear a little
bit of feedback so with that have a great day and I'll see you back in one of my next videos hey thanks so much for watching this video and if you found it helpful and you're thinking hey this makes sense and you want to have us help you put together a plan for your

retirement

then go to wealth vision plan com or click on the link below when you get there you'll see some information about our well vision comprehensive financial plan if you like what you see on that website then click
on the get started now button and we'll set up a time to talk thanks and I'll see you back in one of our next videos have a great day you