The Delicate Decade- Getting Retirement Right
Posted May 14, 2020
What you need to know before retirement
Preparing for retirement can be a fun yet challenging process. The biggest issue that I encounter with new clients is that they have spent the last thirty years building their businesses, investing in their retirement accounts (401k’s, IRAs, etc.), and now that they are retiring, they are going to have to start producing income from those assets. In many respects, the asset accumulation phase of life is simple; you put part of your paycheck each week into your retirement account, pick the right investment, and thirty years later, poof! You have a very sizable nest egg.
Retirement planning requires a major shift in mindset because the retiree will have to start spending those assets they have worked hard for decades to build. Creating a retirement income plan is challenging because between the ages of 62 and 72, there are critical steps that have to be planned for carefully to maximize the retiree’s income while not blowing up their legacy goals, to minimize the taxes that they will have to pay over their lifetime, and give them the best chance of success.
I like to call this period the delicate decade because the choices made during this timeframe can make or break a successful retirement plan. Starting about five years before retirement is the time to start getting a retirement plan in place and mapping out the key decisions that will be made between the ages of 62 and 72. Some of these decisions are when to take Social Security (take it at age 62 or wait till age 70), how to pay for healthcare before Medicare and how much will that cost, how much can be distributed from the retirement accounts each year, and should an annuity be purchased (These things are advertised constantly on TV, so they have to be great right?), should a Roth conversion be done, what is going to be the long-term care strategy, and these are to name a few of the decisions.
And I say this not to scare anyone, but many of these decisions made during this time can be irreversible, so it is important to get it right the first time. This is where working with a fee-only financial advisor really comes into play. Putting together a comprehensive plan that considers the client’s unique retirement objectives and investment needs, a fee-only financial advisor will be able to make recommendations without the usual conflicts of interest that come from the sale of investment or insurance products. Now don’t get me wrong; I love insurance and work with my clients to ensure they are properly insured with the right products. Still, I don’t actually sell those insurance products or receive compensation from those recommendations, and I only use low-cost non-commissionable investments.
This is because insurance products (annuities, life insurance, and long-term care) can pay exorbitant commissions and inject a massive conflict of interest into the advisor/agent/client relationship and the recommendations that are being made. Anyone that says there is no conflict of interest in an annuity recommendation when the sale of a large annuity will pay the advisor’s kid to go to Harvard for a year is fooling themselves. Advisors are human beings, and human beings fall victim to temptations. It is for this reason that Thayer Financial and all other fee-only financial advisors (don’t mistake this for fee-based advisors… watch my video here) have chosen not to carry insurance licenses, don’t accept commissions from the sale of any products, and are LEGALLY held to a fiduciary standard.
Getting retirement right is important and working with a fee-only financial advisor is the right first step to ensuring that you navigate the delicate decade correctly. If you want to discuss if Thayer Financial might be the right fit for you and your retirement planning needs, please feel free to schedule an initial phone call here.
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