Submitted by Tim Whisler, CRPC®, CLTC®, CAASM, Certified Financial Fiduciary® President of The Whisler Agency, Peoria IL
Here we are again; summer has ended, fall is approaching, and suddenly the holidays are right around the corner. Before we know it, another calendar year has come and gone. For those who are retired or approaching retirement, don’t let the final few months of the year pass by before you review your retirement plan. Not because you necessarily need to make major changes, but because life changes. And some financial planning opportunities have a December 31 deadline.
Before the calendar turns, here are five questions to address.
1. Has anything changed in my financial life this year?
A retirement plan should reflect where you are today, not where you were a few years ago. Perhaps your spending has changed. Maybe you’ve paid off a mortgage, experienced a change in health, received an inheritance, lost a spouse, or simply changed your thoughts about what you want retirement to look like. Changes in your life can affect decisions involving income, investments, taxes, and your estate plan.
Ask yourself: Does my retirement plan still reflect my life today?
2. Am I taking withdrawals from my retirement accounts in the most tax-efficient way?
Once you retire, the question is no longer just how much you’ve saved. You will likely now have to begin taking withdrawals to fund your retirement lifestyle.
Your income might come from several sources, including:
- Social Security and pensions
- IRA or 401(k) withdrawals
- Roth IRA distributions
- Investment accounts
- Annuity income
The important question isn’t only whether you have enough income. It’s also how much of that income you get to keep after taxes.
Different sources of retirement income receive different tax treatment. Where your income comes from, and the order in which you use different accounts, can affect the taxes you pay throughout retirement.
3. Am I overlooking a year-end tax planning opportunity?
December 31 matters because some retirement and tax-planning opportunities disappear when the year ends.
One important item to review is your Required Minimum Distribution, or RMD. If you have reached the age when RMDs apply, make sure the required amount has been withdrawn from your traditional IRA and other retirement accounts subject to the rules before the applicable deadline. Don’t forget about your pre-tax 401(k) account, as it too will require you to take RMDs.
Inherited IRAs deserve special attention. The rules can vary depending on when you inherited the account and your relationship to the original owner. Some beneficiaries may be required to take annual distributions while also being required to completely empty the inherited account within a certain period.
Other year-end opportunities might include a Roth conversion, a Qualified Charitable Distribution from an IRA, or reviewing capital gains and losses.
4. Is the amount of investment risk I’m taking still appropriate?
Markets change. But so do we. The investment strategy that made sense while you were working and accumulating money may not be the same strategy you want when those investments are helping provide your retirement income. Consider what would happen if the market experienced a significant decline. Would your retirement income be affected? Would you be comfortable waiting for your investments to recover?
The goal is to understand how much risk you’re taking and why you’re taking it. Does it make sense to recklessly chase yields or to eliminate volatility?
5. If something happened to me tomorrow, would my family know what to do?
This may be the easiest question to postpone, but it’s an important one.
Take a moment to review:
- Beneficiary designations
- Wills, trusts, and powers of attorney
- Account ownership
- Life insurance
- Where important financial documents are located
Estate planning isn’t only about transferring money. It’s also about making things easier for the people you care about during what may already be a difficult time.
A Good Time to Ask Better Questions
If you’re approaching retirement or are already retired and aren’t sure how these pieces fit together, I invite you to schedule a Get Acquainted conversation with me. We’ll talk about where you are today, what you want your retirement to look like, and the questions your retirement plan should be helping you answer. Having a written financial plan in place can address these questions and many others.
To learn more about Tim and The Whisler Agency, go to www.thewhisleragency.com. You can watch episodes of his weekly TV show at www.IncomeIsTheOutcomeTV.com
Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC Registered Investment Advisor. The views, statements, and opinions expressed are those of the author, and not necessarily of Foundations or their affiliates. The content provided is for educational purposes only and the views reflected are subject to change at any time without notice. No investment, legal, or tax advice is provided. Always consult with a professional. Foundations deems reliable any statistical data or information obtained from third-party sources that is included in this article, but in no way guarantees its accuracy or completeness.
