Methods to Create a Retirement Spending Technique – San Francisco Bay Occasions

By Brandon Miller, CFP–

As a kid, I loved a board game called Stratego, which is different every time you play it. You are trying to protect your flag while exposing the other person’s. This requires that you move your stones just right to avoid the obstacles your opponent puts in front of you (miners can disperse bombs, for example).

I find retirement planning a bit like playing Stratego. They have many pieces of different values ​​- IRAs, 401 (k) s, social security, etc. – that you can move around in different ways. There are hidden bombs, like rampant inflation or serious illness, that can blow up part of your wealth. But there are also strategic ways to avoid or circumvent these challenges.

The first step in setting up your retirement plan is to determine how much money you will need. For this article, let’s say you’ve already calculated that total. Now you need to think about where that money is coming from every month.

A good rule of thumb is to spend your taxable accounts and savings first. Then turn to tax-privileged vehicles like IRAs and 401 (k) s and finally, tax-free Roth accounts. In this way, the tax advantages are retained for as long as possible.

Here are some other steps to consider:

Be strategic in taking social security income.

There is more to apply for SSI than we have room here, but these are some key points: By the age of 62, those of you who are eligible may begin to claim your benefit, although it is significantly less as if you were waiting. This reduced amount will last for the rest of your life. At full retirement age – 67 or 66 and a change for those born in the 1950s – you will receive your full benefit. Wait until 70 to take SSI and your monthly payment will be 32% higher.

Health, savings, marital status, and other factors all influence your timing. But in general, if you have additional sources of income to bridge the gap, waiting as long as possible to start earning SSI is a good move.

Install financial guard rails.

One tactic is to recreate your paycheck by bundling all of the income you get from various sources into one bucket and then taking out what is needed every month or two weeks. This provides the discipline and structure to help you spend what you should.

Also, knowing the market is volatile, you can create a shock absorber by funding an emergency account with expenses for 1 to 2 years. Use this account in ugly years instead of selling assets at a loss and then replenish the fund when the market recovers. Repeat this over and over and you can help ensure that your plans are not ruined when the market collapses.

Watch out for taxes.

Your retirement income can have a significant impact on your healthcare costs. Unlike tiered income taxes, Medicare spending is a steep cliff. For example, individuals earning $ 88,000 or less in 2021 ($ 176,000 or less for co-filing couples) will pay the standard $ 148.50 per month premium for Medicare Part B. Earn more than half / three quarters of a million for individuals / Pairs and now you’re paying $ 504.90 every month for the next calendar year – nearly 3.5 times that. So if you buy a large inheritance or sell your home, it can lead to significantly higher healthcare costs.

Also, at 72, Uncle Sam gets impatient and demands that you withdraw some money from tax-privileged instruments. These Minimum Payouts Required (RMDs) are based on your account balance and life expectancy. Note that tax-free Roth money will not have RMDs in your lifetime – since the government already has their money – although your beneficiaries may have to pay RMDs to avoid penalties.

RMDs for high balance IRAs could put you in an expensive tax bracket. Instead, you could convert to a Roth IRA or significantly reduce your traditional IRA before deploying RMDs. Those planning to donate pots of money to charities can use Qualified Charity Payouts. This will give all or part of your RMDs to charities you designate. You will not count the gift as taxable income and your charity will not pay any tax on it. Win win!

In a nutshell, Stratego is a game; Your retirement isn’t. But in either case, smart planning can help protect what is most precious – your flag on the board and your dreams in real life.

Brio does not provide tax or legal advice, and nothing in these materials is to be construed as such. The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or any particular security. It only serves to educate people about the financial industry. To determine which investments might be right for you, consult your financial advisor before investing. Past performance discussed during this program is not a guarantee of future results. All benchmark indices are not managed and cannot be invested directly. As always, remember that investing involves risk and the potential for loss of capital. Please seek advice from a licensed specialist.

Brio Financial Group is a registered investment advisor. The SEC registration does not constitute endorsement of Brio by the SEC, nor does it indicate that Brio has achieved any particular level of skill or ability. Advisory services are only offered to clients or prospective clients for whom Brio Financial Group and its agents are properly licensed or exempted from approval. Brio Financial Group is not allowed to provide advice unless there is a customer service agreement.

Brandon Miller, CFP®, is a financial advisor with Brio Financial Group in San Francisco specializing in helping LGBT people and families plan and achieve their financial goals.

Published on September 9, 2021